New Fashion Focus Helps Eddie Bauer Rebound

CHICAGO - When trendy teenagers and 20-somethings think about flare-legged jeans and flannel shirts, they put American Eagle Outfitters and Abercrombie & Fitch at the top of their lists.

When they want durable clothes for "extreme sports," they head off to rugged-apparel retailers such as REI and the North Face.

And when they want inexpensive fashion accents such as vests or cargo pants, they make a beeline to Old Navy.

Then there's Eddie Bauer.

After almost two years of stumbling around, offending its loyal middle-aged customers by trying to attract a younger crowd, the Redmond-based casual apparel chain is showing signs of a comeback.

Its pine-green checked shirts and handknit daisy cardigans are classic without being boring. Its stores have more character, more of an outdoor feel, hearkening back to Eddie Bauer's Northwest roots.

Yet it's still unclear whether Eddie Bauer can recapture the cachet for outdoor-inspired apparel that made it one of the hottest specialty retailers of the 1980s.

"There's a lot more traffic in the category today from American Eagle Outfitters and Abercrombie & Fitch compared to when Bauer owned the category," said Sid Doolittle, partner with McMillan/Doolittle, a Chicago-based retail consulting firm.

"Even people like the Gap are getting into the business with this vest they're pushing."

To hear Eddie Bauer President Rick Fersch tell it, the company is definitely on the road back after shoppers turned a cold shoulder to offerings too bland in most cases, and too loud in others.

"It's been a wild year. We had to put together a strategy, and we're in the process of executing it," said Fersch.

So far the numbers back him up. Eddie Bauer, the biggest piece of Downers Grove, Ill.-based Spiegel's retail empire, has posted seven straight months of same-store sales increases in 1999.

That's a dramatic contrast with 1998, when the chain had 12 consecutive months of big sales decreases.

This year's results "really feel good, much better than last year when I was pulling my hair out," said Fersch, the high-energy 49-year-old executive who has headed Eddie Bauer for the past seven years.

In the first half, Spiegel, which counts on Eddie Bauer for 65 percent of its sales, eked out a $6.5 million profit compared with a $34 million loss in the year-ago period.

Still, Eddie Bauer has yet to reclaim the ground it held two years ago. Its 1999 sales increases have averaged 5 percent a month. That's significantly less than the 8.2 percent sales declines it suffered last year.

Meanwhile, fast-growing competitors such as American Eagle Outfitters are averaging monthly sales increases of 25 percent.

Small wonder. When cargo pants were hot in spring 1998, everybody from Old Navy to department stores had them. Eddie Bauer missed the trend by a season.

Safe and comfortable

Part of the problem is the company's corporate culture, which errs on the side of conservatism when it comes to fashion, said Tom Burns, senior vice president of the Doneger Group, a fashion and retail consulting firm in New York.

"Eddie Bauer is a little too safe, too comfortable," Burns said. By returning to its classic fashion roots and trying to recapture past glory, "Eddie Bauer could be painting themselves in a corner," he warns.

Fersch admits that the company has been slow to pick up on fashion shifts. "We almost had this rule: We didn't want to be trend right."

That's changed, he promises. "If cargo pants are hot, you're going to find them at Eddie Bauer."

But Fersch doesn't want to err by being too trendy, either. After all, Eddie Bauer's core customers are 35 to 50, not the fickle teenage crowd that American Eagle is courting.

His new motto for Eddie Bauer: "Fashion first. Hip, no. Aspirational, yes."

Fersch admits that the company's turnaround tale is far from finished. According to his own personal rating system, Eddie Bauer's spring merchandise was about "60 percent of where I want to be. Fall will be 75 percent. And for spring 2000, it will be pushing 80 percent to 85 percent. It's some of the most exciting things we've done."

Even now, there is plenty he is proud of.

A new golf line of apparel has sold well, extending Eddie Bauer's outdoor brand to warm weather months. A $50 microfiber golf windshirt was so popular this spring, "We left a lot of money on the table because we didn't have enough," Fersch said.

The new EBTek line of high-performance clothing and gear racked up double-digit sales increases this spring.

Some of the changes are small, such as adding one bright accent color to Eddie Bauer's Fair Isle women's sweaters or naming certain items after things in the Northwest. But in general, the theme is to make the clothing "less generic," Fersch said.

Courtney LeClercq, an investment analyst with Johnson Rice, a New Orleans investment banking firm, applauds the moves.

"What I'm seeing looks good. The merchandise is less focused on outerwear, which made them dependent on cold weather, and is returning to more of what the traditional Eddie Bauer customer likes," LeClercq said.

Fersch also has made some hard decisions regarding the company's spinoff retail concepts. A/K/A Eddie Bauer, the company's career-clothing store, is being folded as a separate retail concept. Now A/K/A Eddie Bauer's silk blouses and gabardine wool pants will be melded in with the casual clothing in its stores.

And the Eddie Bauer Home stores are being reined in, too. Gone are dishes, glassware and living room furniture, items where Bauer's name had "no authority," Fersch said.

Instead, Eddie Bauer Home will focus on down comforters, flannel sheets and bedroom furniture, where the company's cold-weather expertise makes sense.

That doesn't mean it is done experimenting, however. A new line of crib linens and furniture called Baby by Eddie Bauer is doing well, and the company just launched a similar line for children.

Trying new things is fine as long as Eddie Bauer realizes its future is in apparel, Doolittle said.

"You've got to be successful in the core first. It's their category. If they want to stay there, they have to step it up a bit. Going back to where they were isn't good enough today."