COVER STORY n another year of uncertainty and Ieconomic hardship, the companies that made Apparel’s Top 50 list of most profitable companies were all, unlike last year’s, actually profitable. Given the state of the economy, the success of these top 50 is testimony to their flexibility and innovation, but it’s also the result of quick and often painful cuts to their organizations. The past year saw a major shift toward right-sizing everything from retail store locations and inventory to human resources and vendors, with companies adjusting to a contracting retail environment that despite some recent gains continues to be plagued by the effects of high unemployment, rising raw materials costs and lagging consumer confidence. As might be expected, many of the industry’s best performers held strong, but as always, the jostling created Striking a fine balance Wet Seal’s developments in mobile e-commerce and social media have between caution and tapped directly into its digitally savvy customer base, kicking up sales and aggression, this year’s Apparel Top 50 companies interest in the brand. are carefully managing costs and inventories while continuing to invest in their strongest brands and Buckle’s extreme focus on making the customer happy no doubt gets businesses, going social and expanding internationally, some of the credit for its record- setting year that included a 21.9 to drive growth and gains in market share. percent increase in earnings. 8 JULY 2010 • www.apparelmag.com some rising stars and some that fell out of the rankings entirely. In the latter category were No. 1 The Wet Seal dELiA*s, Hampshire Group, Destination It certainly has an air redolent with “turnaround,” but the specialty Maternity and New York & Co. retailer’s No. 1 positioning on the Top 50 is nonetheless a bit deceiving: the 209 percent spike to its net income and the soaring profitability Charlotte Russe, bought by private equity firm numbers that it produced were the result of the reversal of a valuation Advent International, exits the Top 50, as does allowance against net deferred tax assets, to the tune of $71.3 million. Tween Brands, bought by Dress Barn. Still, the retailer of fashion apparel to teen girls is one to watch: Wet Seal’s phenomenal developments in mobile e-commerce and social media have tapped directly into its digitally savvy customer base (see The awards for the biggest leaps upward go to Apparel, April 2010, for more on the company’s mobile strategy), while Wet Seal (up 24 places to No. 1), J. Crew (up recent focus on improved assortments and more fashion items is show- 19 places to No. 12) and G-III (up 17 places to ing results, with first quarter 2010 comp-store sales up 1.5 percent at No. 33), while Chico’s, Phillips-Van Heusen, Wet Seal and 4.8 percent at Arden B over the same period last year. Limited Brands, The Warnaco Group and The company also deserves kudos for maintaining a strong cash position Carter’s all moved up in the rankings by at ($170 million) and a low level of debt. least 10 places. It’s a tough time to be a retailer, but it’s also No. 2 an exciting time. Particularly for companies True Religion Apparel with cash in the bank and little or no debt, I used to think “True Religion” was about praying that you’d have some opportunities abound, and we find many of our money left over after purchasing a pair of the brand’s jeans, but now it’s Top 50 seeking new markets for their brands become eminently clear that the gods of consumerism are squarely on in Asia, Europe, Brazil and the Middle East, or the side of this phenomenally and consistently profitable company. seeking to expand their portfolios through Maybe it’s the huge, thick thread stitches, which impart a unique look to the denim while adding to the garment’s strength. But whether it’s strategic acquisitions. Technology, too, the fit, the distinctive styling, the store experience, the brand cachet, or continues to open possibilities like never some combination of it all, the brand continues to please — in depart- before, as apparel companies implement ever ment stores and boutiques and across 50 countries. This year True Reli- more capable systems to refine merchandise gion continues to spread the Word, opening its first store in the United planning and allocation, or to track consumer Kingdom last month with a location in London’s Covent Garden shop- behavior in real time. ping district, to be followed by stores in Tokyo and Toronto. Perhaps most importantly, the accelerated pace of technology development and adoption has wrought a sea change in the way people, No. 3 The Buckle and businesses, communicate with each You might say the buckle stops here, as the 412-store (and growing) other. As companies try to truly engage the Nebraska-based specialty retailer locked down another record-setting consumer through loyalty programs, daily year on many fronts, including a 13.4 percent increase in sales over fis- blogs, mobile commerce and social media, the cal 2008 and a 21.9 percent increase in earnings. Composing 43 percent whole idea of what it means to shop is of total sales, denim remains the cornerstone of the business, with sales undergoing a drastic transformation. in this category increasing for the 10th year in a row (by 17.5 percent) with record-level sales of 4.3 million pairs of jeans. No doubt Buckle’s extreme focus on creating a positive shopper experience gets a lot of the In recognition of the way in which the virtual credit. Its new “Get Fitted” program offers customers the opportunity world continues to transform the global retail to schedule personal shopping appointments with its denim specialists; scene, Apparel for the first time this year also free hemming, complimentary gift wrapping and layaway services don’t has ranked its Top 50 based on their hurt either, a fact not lost respective number of Facebook fans on the company’s 20 dis- and Twitter followers. Is there a trict managers, who aver- correlation between profitability and age 21 years with the engagement in social media? You company. Sales on can find the answer online this month Buckle.com were up 45 in “features” at apparelmag.com. percent to $52.3 million, spurring expansion of its And in the following pages, starting online fulfillment center, with Wet Seal, Apparel’s Top 50 while the company also report explores some of the broke ground on a new strategies that led each firm to DC equipped to serve profitability. more than 600 stores. www.apparelmag.com • JULY 2010 9 THE TOP 50 No. 4 lululemon athletica Rounding out the fiscal year with the launch of a youth-focused brand, ivivva athletica, the Vancouver-based retailer of yoga-inspired technical apparel continues to thrive by bringing its grassroots, community-based approach to its mission of providing people with the com- ponents needed to live a longer, healthier and more fun life. Its 115 lululemon stores offer a distinctive retail — and workplace — experience of free in-store yoga classes and well- trained “educators” who develop personal connections with each “guest.” It’s an environ- ment that fosters passion, personal enrichment and $1,318-per-square-foot average comp-store sales (in corporate-owned stores) — with virtually no advertising. Ever ready with an aphorism (“the pursuit of happiness is the source of all unhappiness”), lululemon doesn’t let science take a backseat to philosophy as it remains heavily focused on differenti- ation through technology-enhanced fabrics and performance features. Look out for new categories such as bags, undergarments and outerwear, expansion of its men’s business and a greater presence outside North America. Lululemon’s 115 stores aren’t just retail venues, they’re community hot spots that bring people together for yoga, friendship and personal enrichment. No. 5 Guess? No. 6 Urban Outfitters Guess who continues to perform as if they’d never even heard If you’re a fan of the lifestyle specialty retailer you’ve probably the word “recession?” You got it. Known for a distinctive, fun observed the company’s leadership in creating two-way con- and sexy fusion of American lifestyle with European fashion versation — and inspiration — with its customers through sensibility, Guess? achieved record revenues and earnings — social media, blogs and regular online updates, and you’re for the seventh consecutive year — quickly streamlining oper- likely familiar with its highly visible store locations, operating ations, reducing inventory exposure and preserving capital in under the Urban Outfitters, Anthropologie, Free People and response to the economic downturn. Its North American Terrain brands, where creativity of store design and visual pre- retail business was the most significant contributor to earn- sentation complement an attractive assortment of merchan- ings growth in fiscal 2010, with operating earnings up 42 per- dise. (Who can help but take home a meowing cat keychain cent. The year also saw the rebranding of its GUESS? by whose eyes double as a flashlight? Not me.) But behind the MARCIANO concept and the launch of the PULSE loyalty scenes the company has been busy putting technology in ser- program in its G by GUESS? stores, which resulted in expan- vice of its successful enterprise, completing construction on a sion of its loyalty membership to 2.8 million customers. 100,000-square-foot addition to its company-owned DC in Guess? continued to expand its sales and retail stores globally, Lancaster County, PA, and beginning a warehousing software opening 81 free-standing stores in Europe along with its part- implementation for its retail segment there.