Summary Case: Liza Davis and the Bargain Hunting Customer

Liza Davis and the Bargain Hunting Customer

A public-traded upscale women’s fashion chain

August 2009, the economy => a worldwide recession

The weeklong meeting at headquarters

Jane Offerman – CFO

Financial results: compared to the same period last year => net sales decreased: the quarterly ( 21%) and 6 month (26%)

After restructuring => net loss = nearly $18m for the first 6 months of 2009

                                    ( vs net income = $48.5m for the first 6 months of 2008)

However, the company => has managed to reduce 30% of inventory and more than 10% of SG&A expenses compared to this time last year

Weak winter demand => expect to break even for the remaining 6 months => losses for 2009 = $18m

Adam Medina – the vice president of marketing => propose to shift the focus to bargain hunters => to stay competitive in market => should revamp rewards program and increase sales and discounts

Mary Jo Chapman – the vice president of merchandising => Liza Davis – an extremely valuable brand images => core customers want to shop at a quality retailer, not a bargain basement => it will be better in long run if resist the temptation to undervalue merchandise and brand

The Party is Over: Fashion and the Economy

Some examples:

Fall of 2008 => Saks Fifth Avenue => credit crisis and heavy inventory losses => huge and early markdowns – up to 70% well below the break even point => rival retailers quickly jumped into the markdown fray, but to no avail: store sales dropped 10% to 30% in the 4th quarter 2008 over the same period in 2007 and annual growth entered negative territory

1/2009 => Saks laid off 1,100 people, including director of women’s fashion

Summer 2009, customer exodus from high-end discretionary goods showed little sign of abating => key indicators for apparel demand through 2013 were weak => retailers keep a tight grip on expenses and inventory => inventory declined 6% at specialty stores and 10.3% at department stores from May 2008 to May 2009

Talbot’s => one of Liza Davis’s competitors => decrease 21.3% inventory at the end of fiscal year 2008 over fiscal 2007

The glory days in the fashion industry => gone, one industry analyst wrote:

The consumer will not recover until 2011

Spending pattern will look different from the recent past => a new normal shopping environment, a more budget constrained consumer => force retailers to adjust to lower sustainable levels of demand

Even when GDP returns to growth => the consumer will not return to pre-recession frivolity

Customers seek lower prices and more value for their money => department and specialty stores generally charge higher prices than other retailers and attract customers through merchandising (carrying the latest styles) and marketing, with brand identification being especially important => were particularly damaged by the downturn => lose significant market share to mass merchandisers

Liza Davis Stores: Classic Chic for the Professional Woman

2009 => Liza operated 990 specialty stored throughout The US in regional and super regional enclosed malls and upscale open air strip malls