Casual Male Rolls the Dice, Sacrifices Old Stores to Make Way for Big New Ones
Casual Male (CMRG) is reconfiguring operations around a new store concept, Destination XL, in a gutsy move to better serve existing customers and attract new shoppers.
The move takes gumption because for its initiative to work best, Casual Male will have to close some stores that operate in its established Casual Male and Rochester chains.
To open its first Destination XL in Schaumburg, Ill., on July 8, Casual Male closed three of its namesake operations nearby. The move might be considered a true retrenchment as overall company square footage will remain constant. At 12,000 square feet, a new Destination XL store is about three times the size of a Casual Male store and carries a much larger product assortment.
David Levin, Casual Male Retailer Group CEO told me that namesake and Rochester store closings in markets where the company decides to add Destination XL would remain proportional. Opening an 8,000 square foot Destination XL â€"- and a store that size is possible in smaller markets, Levin said -â€" would entail closing two 4,000 square foot Casual Male locations. Casual Male hasn't yet determined how many Destination XL locations will ultimately bow but four will constitute a first wave of store openings.
Destination XL meets an ongoing challenge Casual Male faces, which is how to serve big and tall customers who might be defined by size but have little else in common. "We serve customers from 18 to 40 to 80," Levin said. "We've got customers who make $25,000 a year and $200,000."
Casual Male shoppers also have diverse tastes. Previously, company strategy called for offering a limited assortment of products in its 4,000 square foot stores, supplementing that with additional selections in its catalogs and online. In 2004, it took an another step to serve the full range of its customers by acquiring the 21-store, high-end Rochester Big and Tall Clothing chain, which sells more designer labels such as Ralph Lauren and Tommy Bahama than does Casual Male. Plans called for expansion of the Rochester chain to 75 stores, but Levin said that the company's management realized that only a very limited number of markets could support the upscale stores.
Still, Levin said the company recognized many customers found shopping and, particularly, building a wardrobe with Casual Male difficult. He noted that many Casual Male stores have a single mannequin to suggest how its offerings might be united into a look and too few products choices to build any but the most basic wardrobe. He said the Internet represents a relatively large proportion of Casual Male sales, which suggests acceptance by many shoppers. But a significant proportion of customers expressed frustration with catalog/ecommerce shopping -- and the inevitable guessing at sizes and dealing with returns -- that patronizing the company all but required.
Destination XL stores offer multiple departments featuring displays that suggest how to build casual, formal and other wardrobes. As a result, Levin said, Casual Male expects that Destination XL customers will pick up more items and spend more money at each store visit, a premise validated in Schaumburg at least as far as it could be in the first two weeks of operation.
With more square footage than Casual Male stores, Destination XL also has floor space the company can devote to expanding the selection available in what it considers to be transitional sizes including pants with 42- and 44-inch waists. Many shoppers who reach those sizes previously patronized conventional stores with broad style and label assortments. Because choice narrows at conventional stores as sizes increase, the expanded assortment in transitional sizes should drive more new customers to Destination XL.
Men's apparel sales suffer in tough economic times, but Levin said Casual Male had adjusted to conditions and now is in the right form to launch Destination XL. It has paid down debt, he noted. To mitigate risk, the company completed a five-store proof of concept test that added a Casual Male product assortment to an upscale Rochester store, which then operated as a proto-Destination XL. The expanded selection was well received accepted by customers, Levin said, validating market research indicated that customers would travel further to shop a larger product selection.
Destination XL should give Casual Male a financial lift, Levin said. Replacing three Casual Male stores that each generate a 20 percent operating margin with a Destination XL that enjoys a projected operating margin of 30 to 35 percent is inherently more profitable, he observed.