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Exclusive: A&F’s New Ruehl

A&F chief executive officer Michael Jeffries lays out the strategy for Ruehl, the firm’s latest chain aimed at post-college shoppers, set to open next...

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NEW ALBANY, Ohio — The chairman wears jeans and flip-flops to work and his 650 associates follow suit at the sprawling, campus-style Abercrombie & Fitch headquarters here.

That’s just the veneer, though, because for Michael Jeffries and the youthful army of workers he greets informally more like a big man on campus than the company chieftain, the approach to brand-building is anything but casual. The intensity is as evident as ever with A&F’s latest retail brand and its Teutonic-sounding name, Ruehl.

And Ruehl is just the first of three new retail concepts being developed by the group, Jeffries disclosed.

The first Ruehl store opens Saturday in the International Plaza in Tampa, Fla., followed by one Sunday in the Woodfield Mall in Chicago and a third on Tuesday at the Garden State Plaza in Paramus, N.J. A fourth unit will open in time for Christmas selling at the Twelve Oaks mall in Detroit.

In an exclusive preview of Ruehl, WWD was led through a model-store setup at A&F headquarters that totally replicates the real Ruehl store environment.

“Ruehl is the fantasy of college kids of America moving from Indiana to the big city. What do you want to do after college — move to New York and make it there,” explained Jeffries during the tour. The Ruehl concept is based on a fictitious story, conceived by Jeffries, about a German leather goods family that decades ago emigrated to America and opened a studio in a sophisticated town house in Greenwich Village. “They’re lovers of art, literature and music,” Jeffries said.

The store, which bears the official logo RUEHL No. 925, has the trappings of that town house, with a brick facade, wrought iron fence, antiqued windows (mannequins verboten) and a cement sidewalk. Inside, there are 10 800-square-foot rooms, each merchandised with different categories, and a corridor of artwork, which will give customers a sense of discovery as they move from one area to the next.

Ruehl is aimed at women and men ages 22 to 30. A&F’s other divisions target younger audiences: A&F for 18- to 22-year-olds, Hollister for 14- to 18-year-olds and abercrombie for seven- to 14-year-olds. There’s a lot of overlap — they all sell casual sportswear and are all high energy with loud music, sexually suggestive posters and youthful, good-looking staff that closely reflects the demographics. “There is cannibalization bound to happen, which will affect your comps, but what’s your long-term strategy?” Jeffries asked. At A&F, “It’s to own the casual sportswear business, by age.”
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For Jeffries, creating brands is also a lot like creating movies. Both have stories built in, and an important part of the story relates to “sex and attraction.”

Ruehl, like other A&F formats, emphasizes casual sportswear and is sprinkled with suggestive posters on the walls. The stores will generally be 9,500 gross square feet in size, with 8,500 square feet for selling, which compares with Abercrombie & Fitch stores at about 10,000 square feet gross. The left side of the store is devoted to women’s products and the right side features men’s, with some shelves stacked with antique books — all for sale — and there’s a gallery for art in between.

But that’s where the similarity stops. The mood at Ruehl is more seductive than sexually raw, with softer music, subdued lighting and posters with partial nudity and couples embracing.

Also, the merchandise is priced 22 percent higher than Abercrombie & Fitch (which raised prices 10 percent this year compared with 2003) and the Ruehl assortment is anchored in denim, with a variety of fits, washes and price points, and long wood tables or “bars” to place the jeans on to help customers examine them. It’s a category where the company’s other brands have sometimes fallen short, though this year, A&F launched Ezra Fitch, a venture into the premiere denim realm.

Whether it’s the “Barrow” straight-leg, the “Jane” boot-fit, or the “Waverly” flair-leg model (notice the Greenwich Village references), the jeans are offered in three washes priced from $78 to $88. There’s also the hand-painted Studio jean, priced at $148.

Other categories are women’s and men’s casual sportswear, including woven shirts from $58 to $68 and cashmere sweaters. There are also leather jackets at $398, accessories, outerwear, intimate apparel and accessories, as well as a Ruehl men’s and women’s fragrance for $58 in a 3.4-oz. bottle shaped like an antique ink flask. There are no shoes or tailored clothing, products the other divisions also exclude because Jeffries considers them very difficult categories to master, much less to make a profit on.
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The store also sells limited-edition art T-shirts, priced at $50, signed by the artist. This month, Eric

Lebofsky is the artist and the shirts include whimsical, cartoon-like illustrations. Each month a different artist will create T-shirt designs.

There’s a section with a black, white and gray theme that groups men’s and women’s jackets, cardigans, tanks and knit boxers — all geared to be layered with the jeans.

Attention to detail is prevalent throughout the assortment, from burgundy stitching for a splash of color on less bright apparel, French cuffs on shirts, antique ticking, leather jackets that are hand-buffed for an aged look, and logos with New York references, such as Village Meat Packing District track jackets. Even the shopping bags have canvas handles for a unique touch.

The new division is being run by senior vice president and general merchandise manager Carole Kerner, considered a strong, creative merchant with a range of experience at high-profile brands including Donna Karan and J. Crew, who was instrumental in launching Hollister four years ago. Alisa Durando is vice president for women’s design and Lisa Axelson is vice president of men’s design. The stores are designed by Anderson Architects, and interior design firm Schaefer Studio, working with A&F.

Jeffries said Ruehl has been in development for three years, and will undergo a year of testing at the initial handful of stores, before deciding on a rollout. “We decided we had to go after the 22- to 30-year-old that we weren’t addressing.”

Ruehl, with its more sophisticated attire, is also geared to capture customers who may have tired of or outgrown the look of A&F, which has shown lackluster sales lately.

Other customer segments or categories will be targeted through the new formats beyond Ruehl, although Jeffries declined to detail the demographics they will pursue or what they will sell.

Then, hinting that retirement is in the back of his mind, Jeffries said he wants to get all of the new retail concepts up and running before he decides to leave the A&F campus for good. But the 59-year-old Jeffries gave no timetable for his retirement, and there’s no sign he’s slowing down. As far as creating a succession strategy, he said, “It’s one of my big emphases,” and that bringing in Robert Singer as president and chief operating officer in May was part of it. Singer previously was chief financial officer at Gucci Group under Domenico De Sole.
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Apparently, Jeffries is not one who believes it’s absolutely necessary that a merchant runs a fashion retailer. Asked if he would select one as his successor, he replied, “Not necessarily.”

What is necessary is that whomever Jeffries hands off the baton to adheres to his brand philosophy — and it’s a rigid one. It comes to light as Jeffries shows off the model stores for all of the A&F brands. They’re not just used to launch prototypes, like Ruehl, but function as ongoing laboratories to develop store presentations. All stores must adhere strictly to the presentations at headquarters, from the decibel level of the music to the roll of a shirt sleeve on a form.

From headquarters, a 12-building complex sequestered on a 350-acre park-like plot of land where no cars or homes can be seen, the visual marketing teams send out “floor set” documents or photos detailing how the stores should be presented. The documents are sent via the point-of-sale system to all the stores, and store teams move fast to get things just right.

District managers visit the stores every week, and cover about eight stores each. They are equipped with Sprint camera phones to photograph their store presentations to show regional managers and other superiors that they are in sync with the fashion dictates from headquarters. “We run this company like the military, there are no local options,” Jeffries stated.

Each store typically gets updated once a week, primarily with new front fixture displays featuring the latest merchandise, while the older merchandise and markdown items get shifted toward the back of the stores.

The intense “branding” strategy includes “impact teams” and “mystery shoppers” who rate stores by presentation as well as effectiveness and friendliness of associates. And if a store fails to meet the grade, “rehab” teams come in to overhaul it, Jeffries said.

“The coordination is intense in terms of how much time it takes,” he said. “New merchandise goes into every one of our stores every week. Men’s wear on Wednesday, women’s on Thursday. There is so much detail in running our business, such a team effort from the design, marketing, merchandising, planning and allocation and the smell of our stores,” which get a spritz of the Abercrombie home fragrance. “There’s no variation by geography.”
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Unlike other retailers, Jeffries refuses to run frequent price promotions (only two are held annually to clear merchandise). It’s his nature not to kowtow to Wall Street when it comes to comparable-store sales gains, preferring to focus on the bottom line and long-term strategy. He considers a strategy built on promoting price and markdowns to attain those higher comps “brand destructive,” and says of Wall Street analysts: “All they want to happen is to make the stock move.”

He pointed out that the nonpromotional pricing strategy preserves margins and that, as a percent of sales, A&F’s operating margins are among the highest among specialty stores. First and foremost, “You design a garment, put everything into it you can and then get the best price you can. We don’t look at it from the bottom line and back, we look at what we are building, what we are doing.”

And so what if he takes heat from conservative groups for sexually suggestive catalogue imagery, or from Wall Streeters who worry about the impact of provocative marketing, as well as A&F’s recent lackluster comp-sale performances. “You have to learn to shrug it off,” Jeffries said.

A&F insulted an entire state by selling T-shirts this season that read: “It’s all relative in West Virginia.” But there’s a reason for it. “We do it because it’s fun,” Jeffries said.

“Here’s the point: If you are focused on a customer, that’s who you care about.”

Fourteen years ago, Jeffries joined A&F, then a quirky and confused 30-store division of Limited Brands. He reinvented the format to focus on private label, better quality casual sportswear for teens and college kids. Jeffries kept the masculine ambience because he felt it would be cool for women to shop in a men’s store, but reversed the merchandise ratio to 65 percent women’s, 35 percent men’s, falling in line with most other dual-gender chains.

A&F was spun off from Limited into its own public company in 1996. Two years later it launched abercrombie and in 2000 introduced Hollister.
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The core A&F brand, with 360 stores, is close to maxing out on expansion. Only about 40 additional stores are envisioned, for a ceiling of around 400 units, including one at 720 Fifth Avenue where Fendi is moving out. However, Jeffries said there is no new urban strategy for A&F involving seeking additional highprofile, prime locations. The company has not adopted a flagship strategy, which isn’t surprising since Jeffries is a confessed “mall rat” and he believes malls are still drawing the hordes.

At the other divisions, abercrombie has over 170 units operating and a perceived ceiling of 400 units. Hollister, however, has a longer way to go before max-ing out on expansion, and is performing the strongest. Hollister has almost 200 units and 600 to 800 are contemplated. Hollister has a loyalty program, rewarding good shoppers with concerts, whereas the other divisions haven’t developed loyalty programs yet.

“The in-store experience drives our marketing more than other marketing,” said Tom Lenox, director of investor relations and corporate communications. “It’s the merchandising, the images, the smell, the music. We’re putting palm trees in some stores. Hollister, at six stores, is also experimenting with live Web cams of a pier at Huntington Beach in California showing the surfers.”

Online is an opportunity, with Internet sales currently representing about 5 percent of the business, with 30 percent of that conducted through overseas sales. Last year, the company reported an 8.8 percent gain in sales to $1.77 billion and a 6.1 percent increase in earnings to $209.2 million.

Despite the increased complexity of the company, Jeffries said it’s not really harder to manage. “I don’t think you can say that. We don’t operate our brands in silos, in terms of control. Casual trends transcend age,” so trends in one division can be applied to others.

“Many parts of our business are integrated, that is different from Gap, Old Navy and Banana Republic. It’s a different strategy that enables us to have a lot of control.”

It’s Jeffries’ key ingredient to building brands. “I never imagined the potential here. It keeps opening up. We’ve always got something in development.”
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