Thursday, March 19, 2015

The Bean Boot Marches Forward

In these pages and elsewhere, one reads story after story of retail debacles involving venerable, old-school retailers. One after the other, once-golden brands such as Sears, Radio Shack, and JC Penney seem to be imploding and disappearing in the face of more nimble competition and the inexorable rise of online retailing - not to mention their own missteps and miscalculations.

But among the tidings of failures, there are a few retail success stories. One old-school retailer with a classic name is striding confidently into the future on the strength of, among other things, a 104-year-old boot invented by an outdoorsman from Maine with the unlikely name of Leon Leonwood Bean.  Over that 104 years, L.L.Bean, Inc., headquartered in Freeport, Maine, has grown from a one-man operation to a global organization with 2014 revenue of $1.61 billion, up 3% from the previous year, with online sales up 7%.

The signature boots sell out every winter; this past winter, a particularly difficult one for New England, Bean sold approximately 450,000 pairs, a new seasonal record, and Bean boots are are back-ordered until spring or even summer. The boots are still made the same way they were 100 years ago: hand-stitched in Maine. They’re top quality, and they’re backed up with top-quality customer service.

Bean built itself as a catalog as well as a brick-and-mortar retailer, committed to above-average service.  As the Bean sites notes, “L.L. learned the value of personally testing his products, of honest advertising based on firm convictions, and of keeping the customer satisfied at any cost”. The reason the company that bears Bean’s name continues to thrive is because it learned early on to do things right. Here are three ways in which Bean has been acknowledged recently for doing things right:

Valuing and Rewarding Employees:
Recently Bean announced that based on its higher revenues last year, it plans to pay 5% bonuses to its nearly 5,300 employees.  Bean was designated one of Fortune's 100 Best Companies to Work For in 2015, a designation based on employee surveys. Bean ranked 56th overall, and was among the top 10 retailers and number one among outdoor retailers.

Embracing Online:
Bean embraced ecommerce early, and learned to do it well. Bean was #32 in the Internet Retailer 2014 Top 500 Guide. In the most recent Stella Benchmarks, a quarterly ranking of customer service performance from StellaService Inc.,  Bean was ranked among the top three retailers for providing the best overall customer service during the holiday season, and earned consistently high ratings for phone support, e-mail support, live chat support, shipping, and handling of product returns. Bean was also an early adopter and savvy user of social media platforms.

Sensible Expansion & Store Sizing:
As reported in our Accelerating News section, Bean plans to more than triple its number of US stores over the next 5 years, with a goal of at least 100 by 2020, up from its 26 current US stores. According to a story on Boston.com, this is the largest number of store openings in the history of a company that “has moved cautiously when it comes to retail stores”, and had never opened a store outside of Maine until the early 2000s. Also, in an era when retailers of many types – including Walmart and Target - are downsizing store footprints, Bean will build smaller stores, ‘‘more efficient and more productive” stores of around 15,000 square feet apiece, in marked contrast to the megastores opened by outdoor retailers such as Bass Pro Shops or Cabela’s.

After five years of steady growth, in which brick-and-mortar performance has sometimes outpaced its online performance - and with the continuing popularity and style profile of its signature boots – the company started by Leon Leonwood Bean is ready to step off toward the future.

Other Retail Success Stories:
In addition to L.L. Bean, there are a handful of other retailers who are marching forward with strength and confidence; among them the following:

Kohl’s:
Kohl's reported a profit of $369 million, or $1.83 a share, in the most recent quarter ending January 31, while revenue climbed 3.9%, to $6.34 billion. The company's shares have risen more than 33% over the last year. According to a Piper Jaffray report on female shoppers' spending habits which surveyed more than 1,000 women, Kohl's is women's favorite place to shop for clothes, ahead of Macy's, JCPenney, Wal-Mart, Amazon, Target, TJ Maxx, Old Navy, Sears, and Levi's. Kohl's has been the first choice among women for the last four surveys.

ULTA Beauty:
Ulta recently posted an 11.1% jump in same-store sales, and reported net earnings of $87.3 million for the quarter ended January 31, up 21.6% from $70.7 million in the year-ago period. For the year, the company reported profit of $257.1 million, and revenue of $3.24 billion. Ulta opened 100 stores last year, ending the year with 774 locations, and plans 100 net new stores in fiscal 2015.

Dollar General:
The dollar store category has been hot for some time, and this is certainly true of Dollar General Corp. Coming off a strong year in which sales increased 8% to $18.9 billion, same-store sales increased 2.8%, net income increased to $1.065 billion, or $3.49 a share, compared to $1.025 billion, or $3.17 a share the year before, DG is responding to the pending merger of rivals Family Dollar and Dollar Tree with an aggressive expansion plan to open 730 new stores and remodel 875 existing locations in 2015.

Chris Cardoni, Marketing Manager
CCardoni@KeyPointPartners.com

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