Mervyns Has Good Start on Remaking Itself
By George Anderson
“If you live to be one hundred, you’ve got it made. Very few people die past that age.” – George Burns
While it is still a long way before Mervyns reaches 100 from the day in 2004 when the department store was acquired by a group of investment companies (Sun Capital Partners, Cerberus Capital Management, Lubert-Adler and Klaff Partners), it is beginning to show signs that it might be around for a while.
Under the leadership of retail industry veteran Vanessa Castagna (J.C. Penney, Wal-Mart), the chain has closed underperforming stores and remodeled and upgraded merchandising at remaining locations, according to the East Bay Business Times.
Among the changes at Mervyns have been wider aisles, improved lighting, improved in-store graphics and product displays.
“This is the new Mervyns,” said Ms. Castagna, executive chairwoman of Mervyn’s board of directors. “We want a clean look, with prices easy to see and merchandise selection easily accessible to customers.”
Other changes under Ms. Castagna’s leadership are reminiscent of her experience at J.C. Penney. She has cut back on branded product to include only the most sought-after items and focused on developing a stronger private label identity.
The company, she said, has also “started having store events, which have not been done for a long time.”
Another thing the chain is doing that it hasn’t done for many years is building new stores. Four units, averaging about 80,000 square-feet, are currently planned for sites in Arizona, California and Texas.
The company, said Ms. Castagna, is also “considering a number of sites” for even more new stores.
Moderator’s Comment: How far would you say Mervyns has come in the past two years? What will the chain need to do if it is to build a sustainable business
for the long haul? – George Anderson – Moderator
Mervyns’ main “problem(s)” in the past seemed to be a that they weren’t somebody else: they weren’t Target, then they weren’t Kohl’s…they were that generic junior dept store in the strip-mall down the street, and for analysts who follow lemming-like from one “hot” name to the next, that’s a big no-no. (Of course they did have real issues of having either too few or too many stores in a few states, and that has presumably been corrected.)
Now that they’re out of Wall Street’s spotlight, I think they’ll do OK; they may never develop an identity – I definitely don’t share enthusiasm for the “Mervyns of California” approach (a Minnesotan’s bad joke/idea of what the Golden State is about)- but one can go a long way being part of the background…most businesses do.
I visit my NorCal Mervyns religiously every two years to buy two pairs of genuine red-tab 505 Levis (no, not for larger sizes). I just wear the suckers out. Nothing ever changed. The Levis were always on sale, the store was always absolutely stuffed with merchandise — creating a cluttered look, and there was always a line at the returns desk.
I recently made my biennial pilgrimage and boy, things look much better. Checking out was slicker, the checker actually said “hello,” and the Levis were still on sale. Works for me. I’ll definitely be back in 2008.
Being heavily involved in the CA market, I can see firsthand that Mervyns is making a major stride and overtaking Macy’s, Kohl’s and Sears. Their merchandise is fresh and the buyers have hit a home run predicting the upcoming seasonal trends. Likewise their marketing approach is more consumer direct and less mass based. They seem to reach out much better to their customer base and I have seen improved direct mail, voice mail and print advertising. This is the comeback story of the year in mid-tier retailing.
Many of the changes noted are apparent to my eye when shopping SoCal Mervyns stores.
Vanessa Castagna is an incredibly bright and capable merchant. One of her greatest strengths is the ability to conceive of a vision, reach clarity on the elements needed to bring the vision to life, and then stay the course in support of that vision.
Improving the shopping experience is vital. This was one of the lessons from JCP, as well as Kmart, Sears, and Wal-Mart. Upgrading, rationalizing and improving the merchandise assortments without changing the shopping experience does not work. You have to change the environment, then stock it with consistent offerings. Build it and they will come, have what they are looking for and they will stay.
I believe the assortment planning, promotional execution, and new product development processes have a long way to go. There is still too much clutter in competing offers at retail. The overlap between and amongst brands and private label is still too large. The assortment is not as focused or tailored as it will need to be.
I agree with an earlier comment, but not with regard to shoes. Who will be the Nordstrom of this segment? Who will leverage technology, process and culture while still creating local market assortments and experiences? The market area Mervyns operates in is NOT homogenous. This would be apparent from their own data. The stores in SoCal are not identical to those in NoCal, and Costa Mesa is very dissimilar from Simi Valley.
Mervyns has done the first step well. Improve the environment. Now the next step: manage the assortments and change the culture.
Mervyns is doing all of the right stuff! The key here is to continue with their focus on non-performers and engaging the stores in community events. These drive sales and knock-out losses. Their mix is good and their mantra sings. However, they need to remain focused on thinking like they are losing money everyday and continue to maximize the performance stores while closing down their underperformers. These stores will change from quarter to quarter but management must remain focused on delivering an excellent customer experience both above line and below it! This will be Mervyns’ key to a bright future. They should minimize or even consider halting their growth until they have all of their stores performing and cut-out any losers.
Any retailer that can dump the worst-performing third of its stores ought to do a lot better. Many retail chains are terribly weighted down by bad real estate. It’s very hard to jettison the bad locations, but once you do, the ship can sail at top speed. Had those 82 lousy locations been kept, Mervyns wouldn’t have had the money to revitalize itself.
The Federated/May merger made that big hole in the “softer” middle quite a bit larger…things are going to get interesting for Mervyns as Wal-Mart and Target’s aspirational moves, Lisa Schultz’ efforts at Kmart, and J.C. Penney all clamor to fill it. Ms. Castagna’s focus on private label is the only way to go if they want to be a contender. Target’s sophisticated direct sourcing operation (Target Sourcing Services) has the retailer buying half of their private label product directly oversees (no wonder they continue to refer to their apparel effort as a “money machine”). While Mervyns was sleeping, J.C. Penney, Wal-Mart and Kmart have beefed up their apparel sourcing and upped the fashion quotient as well. In order to stay in the running, Mervyns will need to return to its “Mervyns of California” roots (remember when they were THE destination for swimwear and affordable versions of the “latest”?) but pump up the volume with a fast-fashion focus. Falling into Kohl’s (former?) rut of no-name basics in rounder strength won’t cut it against these determined competitors. A strong branded cosmetic alliance ala Penney’s/Sephora and Kohl’s/Estee would also help things along. Finally, who among this crowd is going to step up and become the “Nordstrom of the middle” when it comes to shoes?
Mervyns is thriving in the Californian “up” economy and is taking advantage of Sears/Kmart’s lack of merchandising imagination, Kohl’s complacency and Penney’s upscale moves. I also applaud their advertising and their opening new stores so that perceptually they are considered a retailer on the go.