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CEO: Belt-tightening fashion shoppers find Maurices a good fit

David Jaffe (from left), CEO and president of Dress Barn, meets with Lisa Rhodes, Maurices' chief merchandising officer; and George Goldfarb, chief financial officer of stores for Maurices. The three participated in a question-and-answer session with the News Tribune for Business Monday. Clint Austin/

For Maurices, growth was aided by the recession.

The reason? The Duluth-based women's clothing company is positioned to capitalize as consumers spend more wisely.

Maurices, which was purchased by Dress Barn of Suffern, N.Y., in 2004, has remained profitable, gained market share on more expensive competitors and continued to open more stores.

We caught up with David Jaffe, president and CEO of the multibillion-dollar Dress Barn enterprises, during a visit to Duluth last week to learn about how and why Maurices has come out ahead in this tough economy.

Also in on the conversation were Maurice's chief merchandising officer Lisa Rhodes and chief financial officer George Goldfarb.

Q: How often do you get to Duluth?

Jaffe: I'm here a week a month. And we've been doing it for five years. I have more points at the Holiday Inn than you can shake a stick at.

Q: In 2007, three years after Dress Barn acquired Maurices, you said that recreating this team, the one in Duluth, wasn't going to be possible. What makes this workplace culture so unique?

Jaffe: The culture of any company is all about the people. When you think about this company, it has been around for 78 years and we have a few people that have been working here the whole time. [Laughs] So, because everyone here is virtually homegrown ... there is so much knowledge that has been developed.

If you say you are going to transplant this team to Suffern, New York, where Dress Barn is based, many if not most of those people would not move, so you would lose all that and you would have to recreate that. Why try to fix it if it ain't broke?

We had a terrific team here when we came in and merged. We don't talk about acquiring; it's a partnership. When we merged, I spent a lot of time getting to know the team here and we didn't hire any new people at an executive level and we didn't fire anybody. So I came in as a replacement for the former owners. I'm the CEO here, but I'm not here all the time. We have a great team here, and they don't need me here.

Q: Why have a headquarters for a women's fashion company in Duluth, Minnesota?

Jaffe: If you start with a blank piece of paper, I'm not sure you would say, 'This is the best place for it.' But the fact that it grew up here, and it's well-established here, it has worked and to change it means tremendous disruption with no added value.

Rhodes: I think there is this paradigm that exists in the United States that fashion retailers are based in New York or L.A. I really believe that was 20 years ago, 30 years ago. If you look at specialty store retailers or retailers in general that have had the best results over time, it's when they are in a place that culturally fits. You can get to New York. My merchant team is there a week a month, and I'm there a week a month with them. We see the same manufacturers and we see the same amount of product, but the heart of the company is here. ... There are many retailers that are successful that are not based in New York. It's about accessibility.

Jaffe: You ever hear of the Buckle? They are based in Kearney, Nebraska.

Rhodes: Abercrombie is based in Columbus [Ohio]. What's the difference between Columbus and Duluth? What's the difference between Kearney and Duluth?

Q: What goes on in this 150,000 square feet of office space? Are there people designing and coming up with the next women's fashions? Or how does that come about?

Rhodes: We don't operate as a brand with a design team. What we operate here is all the buying, planning, allocation, trend and color. We gather information, but we don't design.

We do trend boards and then buy to those trend boards, so that is how we fill the store. It's augmentation of designs, but I don't have a design team that sits here and sketches.

Jaffe: [Rhodes] and her team have a vision of what they want in the store. Then they can go in the market and shop 20 different people and adapt that product to exactly fit their vision. So, I don't know what percent, but the majority of the goods in the store are really unique to us.

We might say we like that, but we like it with long sleeves and instead of buttons, we want a tie. We want it 2 inches longer, and we want it in these colors or those colors. So, Lisa and her team make it really uniquely Maurices.

Q: Is Duluth representative of the market Maurices wants to attract in the young woman?

Goldfarb: When you look across the United States, we are really a small-market player for the most part. And Duluth fits that portfolio really well. When you look at the base of our stores, it's really in markets of college towns from anywhere from 25,000 to 150,000 people. That is what Duluth is.

Jaffe: For a good example, we opened in Cloquet just a year ago, and it's doing great. In its own isolated market -- with hundreds like it -- the women have no other choice. If they want to go to a mall, they have to get in a car and drive an hour, some cases, two hours. Instead of doing that or shopping at Target or Wal-Mart, there is a Maurices store. They say, 'I'll just pop in.' So you get those local customers, and in those markets, you become the fashion destination.

Q: Dress Barn had a stronger third quarter of 2009 than expected. How is your company able to kick the recession with products that fall into the discretionary spending category?

[Note: Dress Barn and Maurices recently finished its fiscal year, but has not yet submitted its financial statements to the SEC, so the executives were barred from detailed comments on financial specifics, Jaffe said.]

Jaffe: What has happened in the last nine months as we've gone into this recession is people have stepped back and re-evaluated their priorities. ... It's about values. As people do that, they are not shopping at necessarily the fancy store because they want that label.

They are thinking that, 'I still need to buy clothes, and I still think it's important to look fashionable. But my attitude has changed. I'm looking for more value, so I'm shopping the sales. I'm shopping with coupons, but I'm considering other stores that I wouldn't have considered before.'

At Maurices and Dress Barn, we have always been what we call value players, so our prices are lower than the Abercrombies of the world. ... As a result, the ones that used to shop American Eagle or Abercrombie [& Fitch] are shopping us.

Rhodes: One thing that I would add to that is versatility. When she buys something, she can wear it three different ways. The versatility of it is what makes it a great value to her -- along with the pricing. The multi-wear goes a long way. She doesn't have to go out and buy another outfit.

Q: When Dress Barn merged with Maurices, you set out on an ambitious growth initiative of adding many stores. Is that initiative still being realized and living up to its potential?

Goldfarb: In the last five years, we've added 250 stores. We've gone from just shy of 490 stores when the partnership commenced to about 750 at the end of this fiscal year, which is July 2010. The potential is there to be a 1,000-plus store chain. It's about quality rather than quantity, so we are taking a close look at that. Obviously, with the economy the way that it is, a lot of development has stopped. But as more and more retailers fall off, we've seen retail space become available and we'll open 30 to 35 stores this year, coming off 49 stores last year.

Q: What are the challenges that Dress Barn and Maurices face in the coming year?

Jaffe: At some level, women's apparel is a discretionary good. A woman doesn't have to go out; she has lots of clothes in her closet. If the economy stays tough, how is that going to impact us? I think we are well positioned, but on the other hand, when the tide goes out all the ships go down a little bit. ... I'm not sure that the economy is recovering. If it is stable, which I think it is, I just don't know when we see the uptick.