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COVER STORY By Jordan K. Speer

12 JULY 2012 • www.apparelmag.com aking a look at the most profitable apparel companies each year is quite revealing, not only about each individual business T and the apparel industry at large, but also about the economy in general, global trends, technology shifts and the overall zeitgeist. Last year found the Top 50 slowly unbundling themselves after the winds of the Great Recession. They were pulling off their scarves, unbuttoning the top few buttons and easing into a somewhat sunny Recovery, focusing on right- sizing their enterprises by examining everything — including brands, products, stores, distribution centers, real estate, people, messaging, social media, inventories, partners, suppliers, third-party providers and technologies — to figure out what sizes and combinations of these assets would best allow their businesses to grow and prosper.

welve months on, we might call this the Year of Apparel Yin-Yang (we might call it that for two reasons, actually — see T No. 1 below) because of the balance that apparel companies are starting to achieve, most notably in the forms of: • Physical-Digital: Omni-channel is pushing the way to digital displays in stores and 24/7 shopping from mobile devices everywhere • International-Domestic: Global expansion, particularly in the BRIC countries, is set against slowing, but more strategic U.S. store growth, bringing us to • Refurbishment-New Construction: Some shuttering, a flurry of remodels and relocations is set against very considered new openings, including in smaller markets • Outlet-Full-line: The value-oriented economy is fueling a rise in outlet stores, even as the luxury customer is alive and well • Heritage Brands- National Labels: A thinning of legacy brands is making room for iconic, global best-sellers, and • Technology-People: Deployments ranging from behind-the-scenes IT systems to customer-facing mobile technologies are balanced by the increasing comprehension that without well-trained, enthusiastic, happy and engaged employees at all levels, the technology will prove fruitless.

#1 Zuoan What else should you expect in the Year of the Dragon? Whether its the auspicious powers and good luck brought on by this mythical creature; the “fashionable elegance” of its lifestyle brand and a design team led by chairman and CEO James Hong, nominated one of the top three fashion design- ers by the China Fashion Association in 2009; a manufacturing base close to its consumer base in a country of 1.3 billion people whose levels of disposable income are on the rise; or a different government and business environment from that of the United States that most contributed to Zuoan’s mete- oric debut on the chart after going public on the U.S. stock exchange last year, one thing is not debatable: This design- driven brand (Zuoan means “left bank” in Chinese, referring to Paris’ sophisticated Left Bank) has not only taken the top spot, but done so with a profit margin higher than any ever reported on Apparel’s Top 50. The company, which targets fashion-minded, upwardly mobile males ages 20 to 40 with a mix of casual apparel, footwear and lifestyle accessories, sells its products in 1,295 stores (most of which are run by distrib- utors) throughout 29 of China’s 32 provinces and municipali- ties. It outsources almost 95 percent of production but also maintains its own facility to control quality and also to pre- vent unauthorized disclosure of its most new and fashion- forward products.

www.apparelmag.com • JULY 2012 13 THE TOP 50

#2 lululemon athletica If lululemon’s soaring profits are any measure of its stated mission to “elevate the world from mediocrity to greatness,” then it must be doing a bang-up job. The yoga and running wear specialty retailer took its profit margin from an already astounding 17.1 percent to 18.4 percent in fiscal 2011, but to listen to its executives or take a turn around lululemon.com, you wouldn’t know profits even figured into its corporate strategy. CEO Christine Day talks about helping guests, communities and educators “to build the lives they love to live,” while the web site offers words of inspiration, information about lululemon’s inaugural half marathon The SeaWheeze (Aug. 11 in Vancouver, for all you runners out there) and tips on “how to do a side crow” yoga pose. While focusing on elevating the world, this Wall Street darling opened 33 stores in the United States and Canada for a total of 155, and grew its direct-to- consumer business from 8 percent to 11 percent of net revenue. In 2012, the company will open approximately 30 new stores in the United States and Canada and five in Australia and New Zealand. In January, founder and chairman Chip Wilson left his post as chief innovation and branding officer, but continues as chairman.

#3 The Buckle No need to buckle up for this ride, as this denim specialty retailer easily holds steady in the top three while surpassing $1 billion in sales for the first time, increasing average transaction value 5.3 percent to $103.45, increasing average price point 4.6 percent to $48.00 — and selling more than 5 million pairs of jeans. The 431-store chain remodeled 24 stores, opened 13, and redesigned buckle.com to offer enhanced resolution and navigation, also adding online product ratings and reviews to its fashion videos, tips and blog — contributing to online sales growth up 25 percent, to $78 million. With its emphasis on personalized attention to its customers, individual services including free alterations, layaways and a frequent shopper program — and more than 1,000 styles from more than 20 brands, including its own private label, which accounted for approximately one-third of fiscal 2011’s sales — The Buckle clearly is fulfilling its mission “to create the most enjoyable shopping experience possible for [its] guests.” It also doesn’t hurt that The Buckle’s leadership — chairman of the board Dan Hirschfeld, president and CEO Dennis Nelson and vice president of sales Kari Smith — have a combined tenure of more than 102 years with the company!

#4 Francesca’s Collections Debuting at the top of the chart after going public last year seems to jive with the first part of its motto, “Think Big, Act Small.” Targeting the 18- to 35-year-old, fashion-conscious female, the specialty retailer, which grew revenues by 51 percent, comps by 10.4 percent and turned in an operating margin of 22.7 percent, is “delighted when a customer is surprised that there is more than one francesca’s.” That’s because the company — which added 76 locations last year for a count of 283, plans to add another 75 this year and looks to triple the count to approximately 900 in the next seven to 10 years — doesn’t have stores; it has “boutiques,” each of which is designed to offer a unique and “locally owned” atmosphere that is not at all suggestive of a national chain. That’s a tall task to accomplish, but one that francesca’s seems so far to be mastering by offering a broad but shallow, eclectic and differentiated assortment of merchandise ranging from apparel to gift items; carefully selecting its boutique locations; and empowering managers to use their creativity. Meanwhile, behind the scenes, francesca’s recently replaced its merchandise management system with a new scalable platform, and this year begins implementation of a new point-of-sale system while also relocating and expanding its current DC and corporate offices.

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#5 Casual Male Retail Group Taking the award for the biggest leap up the Top 50, 31 places from No. 36 last year, the largest specialty retailer of men’s big and tall apparel successfully expanded its new superstore concept, DestinationXL™, to 24 locations, and launched its e-commerce site. Launched in 2010, DXL houses merchandise from Casual Male XL, Rochester Clothing, B&T Factory Direct and Shoes XL, and fig- ures centrally in the company’s strategy to capture closer to 17 percent vs. its current approximate 11 percent share of the $3.5 billion to $4.0 billion big and tall market by offering more variety in one place. Specific opportunity has been flagged in the lower-size range of its market — men with 42” to 46” waist sizes, who fall in the high end of the size range for most traditional retailers, but have been reluctant to shop at Casual Male stores. In offering a greater selection and more brands than are typically found else- where in this “smaller” size, the company is looking to capture this niche audience. Casual Male expects its first franchised DXL store to open in Kuwait in April 2012.

#7 Nike Grabbing the No. 7 spot two years running, this sports powerhouse pulled in almost $21 billion in revenue and president and CEO Mark Parker revised its 2015 goal upwards to $28 billion to $30 billion. Citing a volatile economic recovery and challenges ranging from nagging unemployment, high levels of government debt and rising costs of raw materials, energy and labor, Parker nonetheless notes that “external forces do not control our destiny.” In the spirit of its most recent campaign and film, “My Time Is Now,” Nike continues its relentless pursuit of innovation and opportunity. Just a few highlights from fiscal 2011: 1) significant growth in its apparel business, with NIKE Pro becoming the #6 True Religion leading women’s base layer brand in the United States; Another chart-topping veteran, True Religion continues to lead the 2) the launch of the GPS Sport Watch; 3) the opening faithful with its innovative and distinctive product designs and atten- of a state-of-the-art, sustainable, 120,000-square-meter tion to fit, style and quality. With the 2011 average sales price for a DC in China; 4) e-commerce up 25 percent; 5) contin- pair of its denim pants at $255, the company’s success also reflects ued expansion in China, India and Brazil; and 6) the larger societal and fashion trends, namely: 1) the luxury market is reclamation of 13 million bottles from landfills in alive and well; and 2) if fashion were a religion, its god would be Japan and Taiwan that it turned into its lightest ever denim. In 2011, True Religion’s U.S. consumer direct segment gener- high-performance football (soccer) jerseys. More ated sales of $251.3 million (59.9 percent of sales), while its interna- recently, as part of its new campaign, Nike launched tional segment — which includes stores in the U.K., Germany, the Football Stadium in Warsaw, Poland, where fans Canada, Japan and the Netherlands as well as wholesale operations can immerse themselves in football products, services on six continents — generated net sales of $79.0 million (18.8 percent and digital experiences, and also experience the energy of sales). The U.S. wholesale segment generated sales of $86.3 mil- of “The Chance,” Nike’s global football talent search, lion (20.5 percent of sales), with the remaining one percent of rev- which gives young amateur footballers the chance to enue generated from its licensing business, in the categories of prove themselves on an elite stage. In May, NIKE footwear, fragrances, headwear, sunglasses and swimwear. announced that it will divest its Cole Haan and Umbro brands.

#8 Jos. A. Bank Clothiers Also holding its spot, the men’s specialty retailer of tailored and casual clothing continued its strong performance, driving sales through a strong combination of high quality “updated classic” clothing and heavy promotions that kept men buying through the recession and positioned the company to be top of mind moving into the recovery. With suits representing 25 percent of its direct marketing sales (up 14.7 percent), it’s clear that Jos. A. Bank’s consumers are confident purchasing traditional business attire online and via catalog, and that bodes well for its new Factory store and Big and Tall websites, launched in 2010 and expanded last year to add or broaden offerings — and also for last year’s expansion into international shipping online. To support its continued growth — the addition of 53 full-line, factory and franchise stores brought the total to 556 as the company marches toward its goal of approximately 650 to 675 stores — Jos. A. Bank added space to one of its two DCs, and opened a third.

16 JULY 2012 • www.apparelmag.com

THE TOP 50

#9 Polo Ralph Lauren Ralph Lauren takes center stage in London this month as the outfitter of the 2012 U.S. Olympic Team. The uniforms for the closing ceremonies and the village were revealed on the “Today Show” in April, and you too can be a part of history and look like an Olympian (well, maybe) by creating your own Olympic apparel online, cus- tomizing your colors and adding your name, while counting down to the opening ceremonies and “meeting the athletes” online through their stories, stats and more. Or, if the Olympics aren’t your thing, take a turn through the Hamptons via Ricky Lauren’s book, “The Hamptons: Food, Family and History.” You can buy the book — or you can “shop” the book online. You might like to peruse RalphLauren.com’s Style Guide, read RL Magazine or take a peek inside the global flagship stores — online. Whether Ralph Lauren is curator of style, media mogul or retailer extraordinaire is hard to pin down these days, and that’s just the point. The company long ago perfected the art of lifestyle merchandising, and behind the scenes its tech savvy has been groomed to match — online, in-store and across its global supply chain.

#10 Guess Celebrating “30 sexy years” in 2011 with a Guess 1981 collection that commemorates the styles of such icons as Marilyn Monroe, Guess slid four spots in the rankings but turned out a solid performance as it continues to execute its global sourcing and product development plan to support its expanding retail, wholesale and e-commerce channels (see “Guess Who’s a Sourcing Innovator” in the June issue of Apparel). In streamlining its vendor base and achieving greater geographic balance, the company is gaining crucial flexibility to better get the jump on market changes and growth opportunities — which it sees as particularly strong in Europe and Asia, where it believes the GUESS? brand is well recognized but still under-penetrated. Just a few of last year’s key initiatives in its march to tech supremacy: the company developed several mobile-based initiatives, relocated its U.S. data center, implemented an assortment planning system as a tool to tailor assortments to store clusters and optimize buy quantities, implemented a new POS system in its European stores, upgraded ERP systems in Europe and Korea, and tapped into new functionality in its PLM system.

#11 VF Corp. With revenues up 22.8 percent, income up 55 percent and profit margin up 26.6 percent, this apparel and footwear powerhouse that annually produces more than 400 million units across 36 brands climbed three spots, inching ever closer to the Top 10, which it last hit in 2000. VF, wholesaler, retailer and manufacturer — the company still produces 31 percent of its units in VF-owned facilities — operated 1,053 stores (including 188 it acquired with its recent purchase of Timberland) at the end of last year and saw revenues from its retail and e-commerce climb to 19 percent of business in 2011. This year, investments in stores of approximately $86 million will be concentrated in brands with higher retail growth potential (Vans, The North Face, 7 For All Mankind) and in international store expansions. Mean- while, its Jeanswear Coalition, including the Lee and Wrangler brands, has seen a compounded annual revenue growth rate in excess of 25 percent over the past three years in Asia, with India growing at a rate of 45 percent in 2011. Last year, VF’s Ella Moss brand opened the first of 12 planned stores, in Newport Beach, Calif.

Pictured here are Vans jeans and Timberland® Earthkeepers® hookset handcrafted fabric oxford in blue canvas, representing just two of the seemingly endless number of brands in VF’s portfolio.

18 JULY 2012 • www.apparelmag.com

THE TOP 50

#12 Limited Brands Victoria’s Secret has launched a new bra, and it’s a showstopper. No, really. That’s what it’s called, or, if you prefer, “summer’s hottest multi-way,” because, you know, you can wear it five ways. Limited Brands owns retail lines La Senza, Henri Bendel and its flagship brands Bath & Body Works and Victoria’s Secret, but the majority of sales come from its sexiest side, with Victoria’s Secret racking up $6.1 billion out of $10.4 billion in 2011 total company revenues, up 11 percent over the previous year. Overall, Limited Brands turned in a good year, with comp-store sales up 10 percent and a record adjusted operating income rate of 14.9 percent. The company maintained a focus on its domestic business while expanding internationally in a “deliberate and disciplined” manner, including in Canada and the Middle East. As it has done in the past — eliminating businesses such as Express and The Limited to focus on core strengths — this year the company divested 50 percent of its third-party apparel sourcing business, Mast Global Fashions. It also announced the closing of 38 underperforming La Senza stores.

#13 Urban Outfitters Sales were up 8.8 percent but net income plummeted 32.1 percent and profit margin took a dive of 37.6 percent, which dropped the company nine spots from last year’s position at No. 4. Following four straight quarters of declining net income — after which CEO Glen Senk left his position and Urban’s cofounder Robert A. Hayne took up the reins — first quarter results for fiscal 2013 look somewhat encouraging, with sales driven in part by positive regular- price comp sales, a reflection that the company is getting its creative groove back and product is striking a chord with the consumer, although profit margin over the same quarter last year is still down by 131 basis points. Continuing to expand its store base here and in Europe, the company plans to open approximately 55 to 60 new stores this year, including 23 Urban Outfitters, 16 Free People and 14 Anthropologie stores. It also recently opened a second BHLDN, its bridal store, in Chicago, and will open a second terrain garden center this year as well.

#14 Cato Taking a significant leap from No. 21 last year, Cato’s 10 percent increase in net income hit a record level of $64.8 million — its second consecutive year of record net income and fourth consecutive year of strong earnings performance — yet the sobering facts of the economy run like a rough undertow beneath its smooth sail- ing. Straight talk from chairman, president and CEO John P. D. Cato in his letter to shareholders: “Although we have read stories and have seen glimpses of improvement in overall economic conditions and in certain segments of the retail industry, many of our customers remain in a difficult and uncertain situation with slow job growth and the price of gas and food taking an even larger piece of their disposable income.” While facing lower customer demand and, like most retailers, higher prices from increased labor and material costs in 2011 — Cato is debt- free and using its approximately $245 million in cash to invest in new concepts and stores. It opened 38 in 2011, including the first 10 of its Versona Accessories, aimed at customers with higher income levels than shoppers at its other stores — a new concept that will allow Cato to expand its customer base while also diversi- fying its real estate.

20 JULY 2012 • www.apparelmag.com A ranking of apparel companies (with at least $100M in annual sales) that are publicly THE TOP traded on the U.S. stock exchange by their profit margin for the most recent fiscal year. SALES NET INCOME % % % Profit Profit Last Most % Most Change Margin, Margin, 2012 Year’s50 Recent Previous Change Recent Previous Net Most Previous RANK Rank Company FY FY FY Sales FY FY Income Recent FY FY 1 New Zuoan Dec. $193.9 $137.3 41.22 $40.3 $28.8 39.93 20.78 20.98 2 1 lululemon athletica Jan. $1,000.8 $711.7 40.62 $184.1 $121.8 51.15 18.40 17.11 3 2 The Buckle Jan. $1,062.9 $949.8 11.91 $151.5 $134.7 12.47 14.25 14.18 4 New Francesca’s Collections Jan. $204.2 $135.2 51.04 $22.5 $16.0 40.63 11.02 11.83 5 36 Casual Male Retail Group Jan. $397.7 $393.6 1.04 $42.7 $15.4 177.27 10.74 3.91 6 5 True Religion Jeans Dec. $419.8 $363.7 15.42 $45.0 $43.5 3.45 10.72 11.96 7 7 Nike May $20,862.0 $19,014.0 9.72 $2,133.0 $1,907.0 11.85 10.22 10.03 8 8 Jos. A. Bank Clothiers Jan. $979.9 $858.1 14.19 $97.5 $85.8 13.64 9.95 10.00 9 7 Polo Ralph Lauren Mar. $6,859.5 $5,660.3 21.19 $681.0 $567.6 19.98 9.93 10.03 10 6 Guess? Jan. $2,688.0 $2,487.3 8.07 $265.5 $289.5 (8.29) 9.88 11.64 11 14 VF Corp. Dec. $9,459.2 $7,702.6 22.81 $888.1 $571.4 55.43 9.39 7.42 12 10 Limited Brands Jan. $10,364.0 $9,613.0 7.81 $850.0 $805.0 5.59 8.20 8.37 13 4 Urban Outfitters Jan. $2,473.8 $2,274.1 8.78 $185.3 $273.0 (32.12) 7.49 12.00 14 21 The Cato Corp. Jan. $931.5 $924.7 0.74 $64.8 $58.9 10.02 6.96 6.37 15 18 Express Jan. $2,073.4 $1,905.8 8.79 $140.7 $127.4 10.44 6.79 6.68 16 13 UniFirst Aug. $1,134.1 $1,025.9 10.55 $76.5 $76.4 0.13 6.75 7.45 17 28 Zumiez Jan. $555.9 $478.8 16.10 $37.4 $24.2 54.55 6.73 5.05 18 New Body Central Dec. $296.5 $243.4 21.82 $19.7 $9.8 101.02 6.64 4.03 19 20 Under Armour Dec. $1,472.7 $1,063.9 38.42 $97.0 $68.5 41.61 6.59 6.44 20 19 Nordstrom Jan. $10,500.0 $9,310.0 12.78 $683.0 $613.0 11.42 6.50 6.58 21 22 Cintas Corp. May $3,810.4 $3,547.3 7.42 $247.0 $215.6 14.56 6.48 6.08 22 23 Chico’s FAS Jan. $2,196.4 $1,905.0 15.30 $140.9 $115.4 22.10 6.42 6.06 23 27 Columbia Sportswear Dec. $1,694.0 $1,483.5 14.19 $103.5 $77.0 34.42 6.11 5.19 24 25 Ascena Retail Group July $2,914.0 $2,374.6 22.72 $170.5 $133.4 27.81 5.85 5.62 25 31 HanesBrands Dec. $4,637.1 $4,326.7 7.17 $266.7 $211.3 26.22 5.75 4.88 26 11 Gap Jan. $14,549.0 $14,664.0 (0.78) $833.0 $1,204.0 (30.81) 5.73 8.21 27 12 Maidenform Brands Dec. $606.3 $556.7 8.91 $33.2 $45.3 (26.71) 5.48 8.14 28 10 Carter’s Jan. $2,109.7 $1,749.3 20.60 $114.0 $146.5 (22.18) 5.40 8.37 29 Back PVH Corp. Jan. $5,890.6 $4,636.8 27.04 $317.9 $53.8 490.89 5.40 1.16 30 32 rue21 Jan. $760.3 $634.7 19.79 $39.0 $30.2 29.14 5.13 4.76 31 24 The Warnaco Group Dec. $2,513.4 $2,295.8 9.48 $127.5 $138.6 (8.01) 5.07 6.04 32 42 The Men’s Wearhouse Jan. $2,382.7 $2,102.7 13.32 $120.6 $67.7 78.14 5.06 3.22 33 33 American Eagle Outfitters Jan. $3,159.8 $2,967.6 6.48 $151.7 $140.6 7.89 4.80 4.74 34 30 The Children’s Place Jan. $1,715.9 $1,674.0 2.50 $77.2 $83.1 (7.10) 4.50 4.96 35 29 Ever-Glory International Dec. $215.8 $134.1 60.92 $9.6 $6.7 43.28 4.45 5.00 36 43 Destination Maternity Sept. $545.4 $531.2 2.67 $23.0 $16.8 36.90 4.22 3.16 37 26 G-III Apparel Group Jan. $1,231.2 $1,063.4 15.78 $49.6 $56.7 (12.52) 4.03 5.33 38 39 G&K Services July $828.9 $833.6 (0.56) $33.2 $28.6 16.08 4.01 3.43 39 37 Ann Inc. Jan. $2,212.5 $1,980.2 11.73 $86.6 $73.4 17.98 3.91 3.71 40 3 Oxford Industries Jan. $758.9 $603.9 25.67 $29.4 $78.7 (62.64) 3.87 13.03 41 38 Superior Uniform Group Dec. $112.4 $105.9 6.14 $4.1 $3.8 7.89 3.65 3.59 42 45 Delta Apparel June $475.2 $424.4 11.97 $17.3 $12.2 41.80 3.64 2.87 43 34 Abercrombie & Fitch Co. Jan. $4,158.1 $3,468.8 19.87 $127.7 $150.3 (15.04) 3.07 4.33 44 9 Aeropostale Jan. $2,342.3 $2,400.4 (2.42) $69.5 $231.3 (69.95) 2.97 9.64 45 40 Levi Strauss & Co. Nov. $4,761.6 $4,410.6 7.96 $135.1 $149.4 (9.57) 2.84 3.39 46 44 Perry Ellis International Jan. $980.6 $790.3 24.08 $25.5 $24.5 4.08 2.60 3.10 47 47 Wet Seal Jan. $620.1 $581.2 6.69 $15.1 $12.6 19.84 2.44 2.17 48 46 Stage Stores Jan. $1,511.9 $1,470.6 2.81 $31.0 $37.6 (17.55) 2.05 2.56 49 35 Stein Mart Jan. $1,160.4 $1,181.5 (1.79) $19.8 $48.8 (59.43) 1.71 4.13 50 Back Wacoal March $2,002.5 $2,075.4 (3.51) $33.3 $32.1 3.74 1.66 1.55

*NOTES: New = The company is appearing in the Apparel Top 50 for the first time. Back = The company has been ranked in the Apparel Top 50 in previous years but was not ranked last year because of its performance, because it was not publicly traded, etc. Dollar amounts are in millions of U.S. dollars. Levi Strauss & Co. is a privately held company that releases financial data publicly. Apparel does not include department stores in its Top 50 rankings (see Top 10 department store rankings in next month’s issue). Nordstrom files with the SEC under “Retail - Family Clothing Stores” (SIC code 5651). THE TOP 50

#15 Express Making a strong debut at No. 18 last year after going public in May 2010, Express — divested by Limited Brands in 2007 — this year climbs another three spots with strong growth in sales (including comps), net income and profit margin. The company has emerged from a combo of 30 years of retail- ing experience and new owners with a trendy vibe offering the 20- to 30- year-old gal and guy a fresh, spirited style that crosses from work to play. Meanwhile, its web site features EXPRADIO (webtunes for listening or purchase); EXPLIFE (music videos, fashion shoots and news); and EXPMOBILE (an app for your smartphone). Last year, the company tested and introduced a new store design which it will continue to roll out, and this spring it launched a new loyalty program, Express NEXT, which should help build a closer bond with consumers. But a connection clearly has already been established — last year, the company’s customers and fans helped Express set the Guinness World Record for Most People Modeling on a Catwalk!

#16 UniFirst #17 Zumiez Despite the sluggish economy and The Washington-based 444-store boardsport-apparel high U.S. unemployment, the retailer is up 12 spots on the Top 50, with a remarkable large workwear and textile ser- 54.6 percent increase in net income and a 33.1 percent vices company celebrated its 75th increase in profit margin, to 6.73 percent. With 33 anniversary in 2011 with record straight years of profitability, Zumiez has succeeded revenues of $1.134 billion and where some competitors have not by creating a unique record net income of $76.5 mil- customer experience with the look and feel of an inde- lion. Drilling down, the company’s pendent specialty shop (think couches and video games), core Laundry Operations, which shelves stocked with an extensive array of distinctive represents the majority of UniFirst merchandise (including its own private label at 17.7 per- business, reported a 9.8 percent cent of sales), and sales associates who share their cus- revenue increase to a record tomers’ passion for activities that include skateboarding, $997.0 million, while its Specialty surfing, snowboarding, BMX, motocross — and the music Garments segment, which provides products and services to the and lifestyle that go along with them. This year the com- nuclear and cleanroom industries, hit record revenues and operat- pany plans to open approximately 50 stores and relocate ing income, up by 17.4 percent and 10.1 percent over the previous its e-commerce fulfillment center from Washington to year, respectively. UniFirst cites its leading position in the U.S. Kansas to help speed product to the consumer. Recently, nuclear market, major reactor rebuild projects in Canada and new Zumiez engaged CrowdTwist to develop an innovative decommissioning initiatives in Europe as contributing to this rise, loyalty program, dubbed The Zumiez Stash, which allows and you can’t help but assume that Japan’s earthquake, tsunami customers to earn points for rewards including limited- and subsequent Fukushima nuclear power plant disaster are con- edition apparel, skate decks autographed by celebrated tributing to greater diligence when it comes to managing these athletes, and even vacation packages. Last month, the facilities globally. UniFirst’s third operational division, First Aid, company announced it will acquire Austrian action sports also hit a record, reporting revenues up by 12.5 percent. retailer Blue Tomato for $75.3 million.

#18 Body Central Making its debut on the Top 50 after completing an IPO in October 2010, the 241-store ladies’ wear specialty retailer offers on- trend, quality apparel and accessories at value prices under the Body Central and Body Shop banners and via bodyc.com. Most products are sold under its private labels, Body Central® and Lipstick®, and are presented to emphasize coordinated outfits in four major lifestyle categories: casual, club, dressy and active. The company’s “test-and-reorder strategy” — testing small quantities in its stores before placing larger purchase orders for a broader rollout — allows it to respond rapidly to changing trends and this year contributed to record sales and earnings, comp-store sales up 11 percent and, for the first time in its 40-year history, an operating margin of more than 10 percent. The company made key hires in finance, store operations, merchandising, information technology and real estate while also implementing new systems including store labor scheduling, sales audit and loss prevention and collect- ing nearly 1 million customer addresses for its CRM database. This year, the company will add a new merchandise allocation system, hand-held scanners and at least 35 new stores.

22 JULY 2012 • www.apparelmag.com THE TOP 50

#19 Under Armour Under Armour’s (UA) first $1 billion in net revenues was built largely on synthetic materials, but chairman, president and CEO Kevin Plank believes last year’s introduction of Charged Cotton will open the path to quadrupling its market in “active use” apparel. UA continues to expand far beyond its core compression apparel heritage, last year also introducing the UA Charge RC lightweight running shoe and the E39™ shirt, whose integrated biometric and athletic performance monitor communicates data at up to 100 times per second and provides sport-relevant actionable feedback to the wearer. To support its direct-to-consumer business, which grew 62 percent to represent 27 percent of revenue, the company initiated a major upgrade of its e-commerce site, while globally, UA grew 35 percent outside North America and took a big step toward capturing a larger share of the sportswear market in China (expected to grow from $13 billion in 2010 to $30 billion by the end of 2013) by opening its first shop there. Meanwhile, UA’s new partnership with the Tottenham Hotspur Football Club of the English Premier League should widen the market for its soccer products — the club boasts more than 20 million fans and an audience of more than 4 billion UA Highlight cleat featuring CompFit ankle people — bringing Under Armour that much closer to its stated goal of doubling net construction for a locked in fit, and Under revenues to more than $2.1 billion by 2013. Armour’s proprietary MPZ material.

#20 Nordstrom The master of the customer experience has been trying to bring its renown service skills to Manhattan shoppers for about 10 years now, and while it still hasn’t located real estate for a full-size department store, the luxury chain made a footprint of a different sort, opening a philanthropic shop in the city’s SoHo district. Dubbed treasure&bond, the store gives Nordstrom a feel of the pulse of the New York shopper through their reactions to an eclectic mix of apparel and home décor, and donates profits to local charities. In another atypical — and somewhat controversial — move, the company began selling its returned and worn shoes at its Nordstrom Rack stores, which some critics feel cheapens the brand’s image but others see as capitalizing on the thriving market for pre- owned couture among today’s youth. Also in 2011, the 111- year-old retailer hit record revenues of $10.5 billion, up 12.7 percent, saw same-store sales increase 7.2 percent, increased direct sales by 29.5 percent while launching everyday free shipping and returns, deployed more than 6,000 mobile POS devices and 1,300 tablets across its 117 full-line stores, hit a record $2 billion-plus in sales at its Nordstrom Rack stores and added 850,000 members to its Fashion Rewards program for a total of 2.6 million. In April, the company made a $16.4 million investment in online pants- maker Bonobos, and will begin selling its clothing in stores and online.

#21 Cintas Revenues are up in all four of its operating segments — Rental Uniforms and Ancillary Prod- ucts, Uniform Direct Sales, First Aid, Safety and Fire Protection Services and Document Man- agement Services — as the company climbs one spot with a 14.6 percent increase in net income and a 6.7 percent increase in profit margin to 6.5 percent, and business is looking even brighter for fiscal 2012. For the first three quarters ended on Feb. 29, revenues are up 8.9 percent and net income is up 24.2 percent for a profit margin of 7.2 percent, which is a 14.1 percent increase over the same period last year. In ongoing efforts to promote sustainability, Cintas introduced what it says it the hospitality industry’s very first machine-washable tuxedo — partially composed of recycled polyester made from recycled plastic bottles — which protects the environment from the chemicals used in dry cleaning while saving businesses approximately $1,000 per employee annually by eliminating that expense.

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#22 Chico’s In just three years, the 1,250+-store retailer has turned around an operating loss of $40 million to an operating income of $222 million, continuing its steady climb up the Top 50. The owner of Chico’s, White House | Black Market, Soma Inti- mates and the newly acquired Boston Proper (a direct-to-consumer women’s apparel retailer) turned out record sales up 15.3 percent to $2.2 billion (its third consecutive year of double digit sales growth) and comp sales up by 8.2 percent. The company also drove a four-wall profit in Soma for the first time. As part of its growth strategy, the company plans to open at least 120 new stores each year for the next several years — including test stores for Boston Proper in 2013 — while focusing on its trademark “Most Amazing Personal Ser- vice,” innovative marketing plans, leveraging expenses through shared services and brand optimization.

#23 Columbia Sportswear Climbing four spots as its profit margin increased 92 basis points to 6.1 percent, the company’s continuing momentum in technology and design innovation for “keeping people warm, dry, cool and protected in the outdoors” is paying off as the Columbia Sportswear brand hit a record $1.39 billion in sales, up 10 percent from 2010 and 30 percent from 2009. Most recently, the company introduced technology that retains the wearer’s own sweat to keep the body cool. It’s called Omni- Freeze® ZERO under the Columbia banner, and Cool.Q under its Mountain Hard- wear brand.

Speaking of, that brand’s sales grew 17 percent in 2011, total- ing $142 million. The brand also worked with leading alpin- ists, including Swiss speed-climber Ueli Steck, to develop an assortment of high-performance apparel and equipment that reduced the weight of the typical ascent kit by more than 50 percent. Meanwhile, the strategic repositioning of Sorel two years ago as a premium brand targeting young, fashion-forward female consumers proved successful, with Sorel the company’s fastest growing brand in 2011, posting a 68 percent increase in global sales to $150 million.

24 JULY 2012 • www.apparelmag.com THE TOP 50

#24 Ascena Retail Group The company ended its fiscal year in July 2011 up one spot, with sales up 22.7 percent, net income up 28 percent and profit margin up 23 basis points to 5.85 percent, results that included the first full year of operations for tween specialty retailer Justice. The owner of dressbarn, maurice’s and Justice ended the year debt-free and with cash and investments of $436 million, which came in handy for this year’s acquisition of plus-size women’s retailer Charming Shoppes. The corporate name change from dressbarn to Ascena Retail Group in December 2010 is part and parcel of the company’s fundamental shift from a single chain to a family of retail brands, each serving its own niche yet benefitting from greater strategic options, operational efficiencies and additional financial flexibility, such as last year’s consolidation of its dressbarn DC operations with the scalable, leading-edge Justice facility in Etna, Ohio. Results for 2012 look promising — for the nine months ended April 28, revenue is up 10.3 percent and net income is up 12.9 percent over the same period last year.

#25 Hanesbrands #26 Gap This Apparel 2012 Sustainability All-Star (see last Now you too can dress like “Mad Men’s” Don Draper or Peggy Olsen with month’s issue for the full story) climbed six spots the new limited collection from Banana Republic, show your spirit by pur- on the Top 50, demonstrating that environmental chasing licensed NFL products at “Superfan Nation” shop-in-shops at Old stewardship can go hand-in-hand with rising Navy or pay with Google Wallet (and get a 15 percent discount) in stores in profits. Since 2007, the company, which operates San Francisco. Although Gap Inc. dropped 15 spots with disappointing finan- 43 manufacturing facilities, has reduced carbon cial results, including an earnings decline for the first time since 2006, the emissions per garment produced by 27 percent, 3,263-store company is making major strides on multiple fronts. Internation- reduced water use by 33 percent per garment ally, the company continues to branch out — everywhere. Customers can produced and has used renewable sources of now experience Gap brands and touch products in 39 countries, up from just energy for more than 33 percent of its worldwide six countries in 2007, including 14 (soon to be 45) in China and its first in needs. Meanwhile, $47 million went toward South America, in Chile. In its goal to optimize across multiple brands, chan- design, research and product development, keep- nels and geographies, the company brought together its outlet and specialty ing its brands holding steady at either the No. 1 divisions, brought its creative talent together under one roof in New York and or No. 2 U.S. market position by units sold, in shifted to one international division, led out of London. This year, Gap will most product categories in which the company close nearly 200 U.S. stores while focusing on reviving fashion at home and competes, according to the NPD Group. Wal- expanding globally; Old Navy will open its first store outside North America, mart, Target and Kohl’s took the prizes for largest in Japan; Athleta will open about 50 more U.S. stores; and Piperlime will open customers, accounting for 25 percent, 16 percent its first brick-and-mortar store, in New York. Direct business was up more and 6 percent, respectively, of total sales in 2011, than 20 percent to more than $1.5 billion, with the company shipping to 90 while international sales represented 13 percent countries. Since launching an e-commerce site in China last year, online and direct-to-consumer 8 percent of total sales. orders have been logged from more than 330 cities in that country!

#27 Maidenform Brands #28 Carter’s While revenues were up 8.9 percent company-wide — with A look at the CIA’s “World Factbook” shows that in rankings of notable increases across shapewear (up 25 percent), mass the top 25 countries by fertility rate, only one — Afghanistan — merchants (24 percent), international markets (23 percent), is not in Africa. Sounds like a challenging, but potentially fruit- Donna Karan brands (41 percent), panties (26 percent); and ful, opportunity, if you’re looking for kids to clothe… Here in online sales (31 percent) — gross margin pressures the US of A, Carter’s increased its leading share of the young depressed the company’s net income, lowering its profit children’s wear market to 16 percent but struggled with the margin and dropping Maidenform 15 spots on the Top 50. spike in cotton prices, which sent its product costs soaring by The company also saw a 22 percent decline in its private- about 20 percent (or nearly $200 million), ultimately taking a label business and a slower growth rate of approximately 5 chunk out of its net income, which fell by 22.2 percent. With its percent across its department and national chain store busi- profit margin down 297 basis points, the company dropped 18 nesses — trends that CEO and director Maurice S. Resnik spots on the Top 50, but Carter’s forged ahead by strengthening says he expects will reverse this year. Founded by entrepre- products, raising consumer prices, curtailing spending and neurs Ida Rosenthal and Enid Bissett in 1922, the company increasing investments in its high-margin retail, e-commerce celebrates its 90th anniversary this year with its innovative and international growth initiatives, which resulted in record spirit alive and well — and still focused on women and their sales; increased U.S. sales of its Carter’s and OshKosh B’gosh curves. This year will see the introduction of three new col- brands by 17 percent and 7 percent, respectively; e-commerce lections for shaping, lifting, smoothing, slimming and pro- sales up by more than 200 percent to $73 million; and interna- viding extreme comfort. tional sales up from $35 million to $136 million.

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#29 PVH Corp. Flying back onto the Top 50 after just missing the cut in 2011, PVH was led by global designer lifestyle brands Calvin Klein ($7.6 billion in global retail sales) and Tommy Hilfiger ($5.6 billion in global retail sales), both of which put up double-digit growth and together represented approximately 75 percent of the company’s business. In 2011, the company focused on product, sourcing, infrastructure and new marketing programs while enhancing platforms globally, including in Asia, where it established joint ventures in China and India for its Tommy Hilfiger brand, which it acquired in 2010. Although it maintained a leading market position in the U.S. dress shirt and neckwear categories, PVH was challenged by cost pressures on its moderately- priced Heritage brands and is streamlining its portfolio by exiting its licenses for Timberland men’s sportswear and Izod women’s wholesale sportswear. The year also marked the corporate name change from Phillips-Van Heusen to PVH, a reflection of both its roots and the company’s tremendous growth beyond the Van Heusen brand.

#30 rue21 Targeting “anyone who wants to look and feel 21” (and I think that’s just about everybody, although everyone on its website appears to be just hitting legal drinking age), the specialty retailer opened 120 stores and converted 38 existing locations into its rue21 etc! format, which typically is more profitable, featuring an expanded area for categories that offer even higher margins than apparel, including accessories, intimate apparel, footwear, jewelry, beauty products and fragrances. By fiscal year end, approximately 80 percent of its 755 stores were in the rue21 etc! layout, and plans are to open another 120 new stores and convert 30 this year in the small-town and middle-market locations where it does business and which the company says are “starved for fashion.” Appar- ently that’s a big opportunity: rue21 is marching toward an expected base of 1,500 locations.

#31 The Warnaco Group Calvin Klein, with an appeal that new CEO Helen McCluskey says “transcends geography, gender and age,” continues as the driver of growth in Warnaco’s portfolio and was up 12 percent to $1.9 billion, accounting for 75 percent of total revenue, while its heritage brands, led by Speedo, were profitable and returned to a high-teen operating margin, despite a soft year in its Chaps brand. Overall, international business grew by 17 percent, accounting for 60 percent of total revenue, with sales from Asia and Latin America up 28 percent. Its U.S. and European business presented more of a challenge, with Southern Europe in particular turning in a disappointing performance. Direct-to-consumer growth was up by 28 percent to $726 million, with that division reporting a four-wall operating margin up to a whopping 22 percent. Wholesaling is 71 percent of its business, but Warnaco also goes direct-to-consumer online and through more than 1,750 of its own Calvin Klein retail stores. One of the goals set forth in its new five-year plan is for direct-to-consumer sales to drive two-thirds of its growth, with full-price stores leading the way. To accomplish this, the company has reorganized its Calvin Klein management into two groups: one focused on creative and the other on commercial execution.

26 JULY 2012 • www.apparelmag.com THE TOP 50

#32 The Men’s Wearhouse Up 10 spots, the company experienced one of its best years ever with revenues up 13 percent to $2.4 billion and net earnings up 78 percent, marking the largest growth rate in its nearly four-decade history. Men’s Wearhouse sold a record-breaking 3 million suits, driven in part by the growing demand for the flattering, slim-fitting silhou- ette of its modern fit styles, whose sales reached $300 million in 2011, while its Canada-based Moore’s nameplate hit a record $268 million in sales. Other standouts include: 1) a partnership between Men’s Wearhouse and Vera Wang to launch Black by Vera Wang, a collection of modern, sophisticated rental tuxedos; 2) The opening of 25 smaller-format stores; enabled by the growth of its tuxedo business, the company is entering smaller markets than it could otherwise profitably operate in, including in Billings, Mont.; Rapid City, S.D.; Idaho Falls, Idaho; and Cheyenne, Wyo. 3) continued courting of big and tall customers, who com- prised half of all meanswearhouse.com sales; 4) New online initiatives, a mobile app for booking appointments, in-store wireless; and 5) complete redesign of its management training program, and the hosting of 55 employee black-tie holiday parties.

#33 American Eagle Outfitters The teen specialty retailer experienced a nice lift in sales (including comps up 3 percent) and earnings and a slight bump in profit margin, holding steady at No. 33 on the Top 50 as it tries to find the sweet spot when it comes to right-sizing its stores, inventories and nameplates and carving out its place between rivals including value-priced Aeropostale and higher-priced Abercrombie & Fitch. The company hasn’t been shy about testing new retail concepts, but it’s also willing to cut its losses quickly when they don’t pan out, as it did in 2010, closing its Martin+Osa brand, and in May, announcing plans to exit its 22- store 77kids concept, which posted a loss of $24 million on sales of $40 million last year. Under new CEO Robert Hanson, a former Levi Strauss executive, the company is revamping its sourcing and merchandising strategy to focus on faster fashion turns and selling out of merchandise each season, to avoid offering deep discounts on dated merchandise. The 1000-plus-store retailer remodeled 106 AE stores in 2011 and will take on another 100 in 2012. It also continues to expand globally, this year opening its first flagship outside the United States, in Japan.

#34 The Children’s Place #35 Ever-Glory International The largest pure-play children’s specialty apparel retailer in North Adding 174 La Go Go stores in just 12-months for a America slips four spots in a year that was productive despite a dis- total of 467, the company is flexing its retail muscles as it appointing fourth quarter whose unseasonably warm weather transforms itself from supplier to Chinese fashion chain, forced the company to take aggressive markdowns to clear its winter offering fashion designs at lower prices than similar apparel. That, coupled with record-high apparel costs, took a toll on global brands. In its expanding reach, mostly in China’s margins and earnings. Still, comp-store sales increased in the sec- Tier-2 or Tier-3 cities such as Zhengshou and Taizhou, ond half of the year in U.S. stores, and its e-commerce business but also in Tier-1 cities including Beijing and Shanghai, grew by double digits, to approximately $176.2 million, accounting the company’s retail growth is reflective of macro- for about 10 percent of total sales. demographic and economic trends in China, including To reduce operating costs, in the the continued rise of the middle class beyond the first quarter fiscal 2012 the 1,062- biggest cities, the growing prominence of Chinese store company consolidated from brands and the decreasing reliance of Chinese apparel three to two U.S. distribution cen- makers on the export market. Although retail operations ters, streamlined its field workforce racked up sales of $53.5 million in 2011, wholesale oper- and restructured corporate head- ations still accounted for the lion’s share of $162.2 mil- quarters while also tightly manag- lion in sales, with Ever-Glory’s full-package operations ing inventories. Meanwhile, there’s offering casual wear, sportswear and outerwear to cus- been a lot of movement in the C- tomers in China (53.5 percent of wholesale revenue), Suite, as former Kellwood execu- Germany (14.5 percent), the U.K./Europe (12.6 percent), tive Steven Baginski took the reins United States (10.1 percent) and Japan (9.4 percent). as CFO in April, while COO Eric Bauer left the company last month.

28 JULY 2012 • www.apparelmag.com THE TOP 50

#36 Destination Maternity #37 G-III Apparel Pregnancy is big business, but when you’re confronting a 7 One of the warmest winters on record contributed to an 11- percent dip in the U.S. birth rate from 2007 to 2010, on top of spot slide down the Top 50 for G-III — whose core business an already tough macroeconomic environment — and selling remains in outerwear — proving its decision to diversify into in a niche characterized by limited repeat business — connect- other categories all the more prescient. As it is for PVH and ing with the customer is all the more important. Destination Warnaco, Calvin Klein is playing a major role, driving its bet- Maternity has developed a real community online and off to ter sportswear and becoming the cornerstone of its depart- help mothers and mothers-to-be, with stores offering preg- ment store business in that category, a position that G-III is nancy classes, and online community boards covering topics using to drive sales in all of its brands, including Jessica Simp- ranging from “trying to conceive” to “blended families.” It son, Vince Camuto, Eliza J, Kensie, Andrew Marc and Guess. must be paying off, as record earnings and a rising profit mar- Calvin Klein is also behind the success of its suit and separates gin must surely be a measure of the company’s success in division and, along with Tommy Hilfiger, its new handbag building relationships. Although it did not meet its stated sales, and luggage business, which generated approximately $50 earnings or comp-store goals, the world’s largest designer and million in sales in 2011. Spurring G-III’s performance apparel retailer of maternity apparel continued to pay down debt, initi- business? You guessed it. And while its wholesale customers ated a regular quarterly cash dividend, and accomplished a sig- are allocating more floor space for the fast-growing perfor- nificant nationwide expansion with Macy’s. It continues to mance trend, G-III is getting a piece of the action, adding to grow through new licenses, leased departments, franchises its retail segment — including Wilson, Andrew Marc and and U.S. and international stores. Most recently, it opened its Vince Camuto outlet stores — by opening its first Calvin Klein first Destination Maternity store in India, launched online Performance store in April, in Scottsdale, Ariz., with plans (via shopping in South Korea and announced an exclusive licens- joint venture) to open another 12 locations throughout main- ing agreement to design, produce and distribute a new Jessica land China and Hong Kong in the coming year. Simpson maternity collection.

#38 G&K Services Although it began the year with shrinking sales, its earnings and profit margin took a healthy climb, and the provider of branded work apparel and facility services programs ended fiscal 2011 with 4.5 percent growth in quarterly organic rentals, despite a weak economy still struggling with high unemployment. The company generated $67 million in cash from operations which it used to pay down debt by $39.7 million and to fund its dividend, which it increased for the sixth consecutive year. The game plan continues to call for: 1) redoubling focus on customer satisfaction, which is up more than 25 percent, along with customer retention, which equaled its best level in six years; 2) improving execution, to build on new account sales up nearly 30 percent over the previous year; 3) continuing to manage costs aggressively; and 4) addressing underperforming locations, whose improved 2011 results contributed to a boost in operating income. Operating margin expanded to 7.4 percent over 5.9 percent the previous year.

#39 Ann Inc. Actress Kate Hudson is the new face of Ann Taylor, and small is the new face of higher profits, as its smaller new concept stores turned in 50 percent higher productivity than the balance of the chain. It opened 17 and downsized or converted another 23 existing stores to the new format, and on the strength of their results will open another 40 this year, as it aims to get its mojo back in its store channel, which did not meet expec- tations in 2011. Nonetheless, Ann turned in a strong year, with increases in sales (including comps), net income and profit margin driven by strong growth in its factory and e-commerce channels — which should get another boost from its new e-commerce platform, designed to improve the online shopping experience and give consumers better access to inventory across channels. In 2012, LOFT will continue to expand into small- to mid-sized markets, which have proven successful for the brand; grow its LOFT Outlet stores (it added 38 in 2011 for a total of 74) and its Ann Taylor Factory stores; and expand globally, adding international shipping capabilities online, followed by stores in Canada.

www.apparelmag.com • JULY 2012 29 THE TOP 50

#40 Oxford Industries #41 Superior Uniform Group Its rollercoaster ride on the Top 50 (No. 3 in 2011, No. 43 in 2010) is likely more related to acquisitions accounting than a reflection of its strength. Sales were up 26 percent and operating income was up 63 percent, attributable in part to its first full year of ownership of Lilly Pulitzer. It’s instructive to pull up and take a bird’s-eye view of Oxford’s timeline: seven years ago, branded apparel accounted for less than half of its sales; today, it represents more than 95 percent, with private-label manufacturing comprising the balance. By distribution, Its three-spot slide belies the growth in the company’s sales, earnings and profit margins, not to mention its gain in market share, due in part to the heavy investment in raw material inventories it made to hedge against the cotton shortage. Although that initially proved fruitful, the company was hurt by its investment when raw-material prices began declining in the latter part of 2011, and the company still held three to six months of inventory, which cut into margins in the fourth quarter and will affect 2012 as the company works through its higher- priced stash. A $580,000 detailed market analysis consulting project conducted last year also cut into earnings but should prove beneficial in capitalizing on future opportunities. Meanwhile, its remote staffing business, The Office Guru, continues to pay off, with net sales up to $2.93 million compared to $1.02 million the previous year. The company’s strong financial position leaves the door open for new ventures, such as its everyBODY media division launched last year, as well as for strategic acquisitions and stock buyback programs.

#42 Delta Apparel The company recorded its eighth consecutive year of record sales for fiscal year end- ing June 2011, driven by organic sales growth, the 2010 acquisition of The Cotton Exchange and new license agreements, but for the most recent nine months saw a net loss of $7.3 million. This drop is attributable in large part to 2011 record-high cotton prices, which continue to cause turmoil particularly in its blank T-shirt business, as customers continue to destock inventory sales are split 50/50 between wholesale and while holding off on making speculative buys in anticipation of lower future direct-to-consumer (retail and e-commerce), prices. Additionally, continued weakness in the economy and slower call-outs for with direct-to-consumer tripling in sales military gear have taken a toll on its Soffe business, which comprises about half since 2004. Tommy Bahama, with double- of its branded business, offsetting gains in Junk Food, To the Game and Art Gun. digit growth fueled by strong comps and While the company projects an earnings loss for fiscal 2012, CEO Bob rapid growth in e-commerce and its Humphries, in an April earnings call, expressed “cautious optimism” for a return women’s business, opened its first company- to normal growth patterns in 2013, citing normalizing cotton costs, as well as owned international store in March, in internal measures that are incurring short-term costs but should pay off in the Macau, to be followed by stores in Singa- long run. A few examples: it just completed the conversion of The Cotton pore, Hong Kong and Tokyo, and expects to Exchange and To The Game to BlueCherry, putting all branded business on the surpass $500 million in sales this year. Lilly, same ERP; is moving some private-label functions to El Salvador; modernizing its with sales up 30 percent, is a social media decoration equipment; investing in new capabilities for mobile and tablet devices; maven boasting 400,000 Facebook fans and developing microsites for its brands; and recently opened a Salt Life flagship 500,000 consumer emails. store. Fun fact: Junk Food teamed up with Rock the Vote to create a T-shirt that, when scanned with your phone or wireless device, allows you to register to vote!

30 JULY 2012 • www.apparelmag.com THE TOP 50

#43 Abercrombie & Fitch #44 Aeropostale The teen specialty retailer made big headlines (so, what else is new?) last Just two years ago the company hit historic highs year when it offered to pay “Jersey Shore’s” Mike “The Situation” Sor- but tumbles 35 spots as difficult macroeconomic rentino not to wear its clothes. In its statement, considered by many to be conditions, fashion missteps and competition from a marketing ploy vs. a genuine expression of dismay, the company its rivals pummeled Aeropostale from all sides. Its expressed concern that Sorrentino’s association with the brand could decline coincides with its first few quarters under cause “significant damage” to its image and might be “distressing” to the leadership of new CEO Thomas Johnson, who many of its fans. Regardless, the company’s sales were up 19.9 percent set forth the following initiatives as keys to getting on the strength of its direct-to-consumer and international growth, the company back on track: 1) evolving the mer- although earnings were down by 15 percent and profit margin fell by 126 chandise assortment with fresh fashion; 2) focusing basis points. CFO and executive vice president Jonathan Ramsden told on brand messaging and marketing including via investors last month that the company will close 180 underperforming mobile and social channels and a newly designed U.S. stores, primarily its A&F and kids brands, as it shifts its focus to store format; 3) investing in infrastructure and overseas markets, especially in Europe and Asia, where sales are growing technology, to include the continued implementa- and profit margins are higher. With just four global locations three years tion of its workforce management tools and the ago, it now boasts 107, with 81 in Europe, seven in Asia and 19 in first phase of implementation of its assortment Canada. By brand, Hollister has the lion’s share (84), followed by planning and PLM tools; and 4) regaining market A&F/kids (20) and Gilly Hicks (3). Even here in the United States, the share while investing in future growth, including majority of shoppers in its flagship Fifth Avenue store are international the expansion of its P.S. concept (which should tourists — primarily Europeans, but also Latin Americans, particularly reach the 100-store mark by the end of this year) from Brazil, and a small number of Asians. and its e-commerce business.

#45 Levi Strauss President and CEO Chip Bergh says he joined the company last year because it has 1) “what it takes to be the best,” including great brands; claim to the title of the original jean; talented people; and a global footprint operating in more than 110 countries; and 2) for the challenge. “Despite all of the ingredients to be a top performer, this company could have done better over the last decade,” he stated in his letter to shareholders. While Levi’s has gained positive momentum — with 8 percent compound annual revenue growth in the past two years spurred by innovations including its Levi’s® Curve ID jeans, its Water

#46 Perry Ellis The company slid two spots and its profit margin dropped 50 basis points as it faced challenges in the second half of fiscal 2012 driven by the difficult holiday season (including requests from retailers for later deliveries of goods and a significant increase in promotional markdowns and sales allowances) and product setbacks within its Perry Ellis and Rafaella collection businesses. Sales of $123.3 million in its Rafaella business, which it acquired in 2011, contributed to a 24 percent increase in revenue; organic revenue growth came in at 8.5 percent. In launching a strategic review of its brands and businesses with a goal of focusing on those that offer the best potential for profitable growth, Perry Ellis reports that it will focus on golf, men’s and women’s sportswear and swim, capitalizing on its strengths in wholesale and direct-to-consumer as well as international expansion, while it also continues to create exclusive brands for retailers. It has identified some smaller brands and businesses whose combined revenue is approximately $30 million to $40 million and which it plans to liquidate and close by the end of fiscal 2013. It has also identified approximately $5.5 million in annual cost savings it will achieve by streamlining its infrastructure.

32 JULY 2012 • www.apparelmag.com THE TOP 50

#47 Wet Seal #48 Stage Stores At year end, 65 percent of this small town and neighborhood retailer’s 813 stores were in towns with a market area population below 50,000, across 40 states. The company added 37 new stores, 28 under its Goody’s nameplate, and the first three of its newly launched Steele’s off-price stores, a concept it will expand to 25 to 30 locations this year. With e-commerce growth its top priority in 2011, the retailer increased its presence on social media, expanded its brand name and private-label offerings online and created a more customer-friendly online shopping experience — The company put a twist on its celebrated smart use of mobile and social all of which contributed to an increase in visitors, technologies by offering free Android-powered mobile phones (with the and e-commerce sales of $8.6 million. Its finan- purchase of a two-year wireless plan) to shoppers who tried on jeans at any cial results — earnings down 17.6 percent and of its stores as part of a back-to-school promotion of its new Denim Shop. profit margin down by 51 basis points to 2.05 Each smartphone was equipped with iRunway, Wet Seal’s mobile applica- percent — reflected the economic pressures faced tion for download, which allows users to browse outfits on its website and by its core moderate-income customer. Like purchase directly from the phone. Wet Seal continued the focus on denim other retailers, it was forced to fight for wallet with the opening of its second BLINK store, at the Walt Disney World share in a highly promotional business environ- Resort in Florida. The concept was developed out of the retailer’s strong ment which led to lower merchandise margins. denim focus and offers a wide variety of fits, lengths and washes under Blue Controlling what it could, the company focused Asphalt, Wet Seal’s exclusive label. The company plans to open approxi- on carefully managing expenses and inventory, mately 25 to 30 Wet Seal stores (net of store closings) in fiscal 2012, bring- which resulted in, respectively, a 50 basis-point ing its total to approximately 500, while maintaining its existing Arden B drop in its SG&A rate and comp-store invento- store count (86) as it focuses on improving merchandising and marketing ries up 1.7 percent. strategies in that business.

#49 Stein Mart #50 Wacoal Like so many retailers, Stein Mart started the year well The Japanese manufacturer, wholesaler and retailer of women’s foun- but struggled in the second half, slipping 14 spots on dation garments and lingerie and other apparel and textile products is the Top 50. Jay Stein, who has stepped back into the growing closer to its goal of helping women the world over “to role of CEO as the company searches for a replace- express their beauty” as it continues to expand internationally. It ment, faults the proliferation of coupon use at the already has 30 operating companies overseas, and is accelerating company as diluting its brand message of “delivering expansion in China and the United States, using the latter as a base high-quality, fashion merchandise at everyday low from which to launch into new markets including Canada, Brazil and prices.” In the fourth quarter Stein Mart began a major Mexico. Wacoal inched back on the Top 50, but results after one year initiative to reduce its reliance on coupons, achieving a of its “medium-term management plan” launched in April 2011 were decrease in their usage of more than 20 percent in that mixed: domestic sales were down partly due to Japan’s earthquake quarter over the same period in 2010. Its ultimate goal and tsunami, although promotions highlighting the results of its is to reduce coupon usage by 50 percent, mostly by research on aging led to brisk sales of brassieres; international sales eliminating their use on regular-priced merchandise. were good but operating income remained flat because of significant While it has been on a mission to increase comp-store investments in China; its subsidiary, fabric manufacturer Lecien, did sales for some time now, the year saw another dip of not reach operating income goals, while a sales drop of more than 10 1.1 percent, but the company holds a strong, debt-free percent at its Peach John lingerie retail stores took a major toll on financial position and has a number of merchandise- overall financial results. In 2012, international expansion and re- based initiatives on tap intended to reverse that slide, growing Peach John will rank among the company’s highest-priority as well as a new merchandise information system. tasks as it also focuses on wholesale operations in its mainstay Meanwhile, store remodels — 40 in 2011 and 50 department-store channel, reducing inventory per item but adding planned for this year — have met with positive cus- SKUS and turning inventory faster; right-sizing sales personnel at tomer feedback. Its systems infrastructure also got a stores; tapping Lecien to help expand into the lower end of the mar- facelift in 2011 with new registers, servers and commu- ket in China; and strengthening collaboration between Wacoal and nications links installed in all stores. newer Group members Lecien and Peach John.

Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected].