Yahoo Finance Christopher & Banks strives to turn around business amid activist pressure
Dwindling mall traffic and a heightened promotional environment continue to plague retailers. And one name that's been struggling over the last year and a half is Christopher & Banks (CBK), the Minneapolis-based company with about 520 stores specializing in women's apparel. With the stock down about 60% in the last year and the target of activists, CEO LuAnn Via joined Yahoo Finance to talk about the state of shopping and her plans to turn around the company's performance.
After Via joined Christopher & Banks -- which targets women 45 to 60 years old -- in 2012, the stock saw dramatic improvement as she improved profitability. EBITDA, or earnings before interest, taxes, depreciation and amortization, improved from negative 2.5 million in 2012 to positive 22 million in 2013 and 25 million in 2014. However, comparable-store sales started to soften mid-2014, coming down 7% in each of the last two quarters of that year. This slowdown continued into 2015, also impacting profitability.
The missy's category as a whole has been hit especially hard in recent years; other names like former-Dress Barn name Ascena (ASNA) -- which acquired Ann Taylor parent last year -- has also struggled to boost sales. In addition to a general shift to e-commerce, Via blamed a lack of strong fashion trends in the category along with a shift in spending women's habits, to more money going toward home and electronics.
Turnaround efforts
The company is currently combining its Christopher & Bank locations that carry missy and petite sizes with its plus-size locations (CJ Bank). With about 30% of its customers cross-shopping between the two concepts, the "MPW conversion" -- aptly named for its missy, petite, women's (plus) combination -- is an effort to rationalize the store base, save costs, and appeal to women who may be on the edge of missy and plus-size and who'd want all the sizing options in one location.
At the end of 2013, 61 of the company's stores were MPW stores. In 2014, 216 of the company's stores offered all three sizing groups, and at the end of this year, about 335 of its total locations are expected to do so.
In the MPW locations, Christopher & Banks is now working to put all the sizes on one rack instead of on separate sides of the store. This follows data showing that, following MPW conversions, customers perceived the product assortment had been narrowed, as plus sizes were on one half of the store and missy and petite sizes on the other. Via said the company is pleased with initial feedback following the change.
The company is also working to optimize its merchandise selection, with a "good-better-best" pricing strategy; "good" represents 50% of the assortment and "better" and "best" each with 25%. And it has rolled out outlet-specific merchandise to supplement its clearance base store merchandise.
Via also said she sees strong growth in the company's e-commerce business. Launched just in 2008, online sales have been growing rapidly and now represent about 15% of company sales, a number the company expects to grow as a result of its omni-channel investments.
Activist pressure
While the company has undergone some shifts to combat declining sales, some say it hasn't been enough. Jonathan Duskin of Macellum Advisors has been especially pointed in his criticism. He sent a letter to the companys' board in April of 2015 criticizing management for its performance and advocating for a strategic review. Macellum, which managed to get two of its nominees on the board of Children's Place (PLCE), has continued to put pressure on the company.
Via said she is responding to Macellum's issues. Christopher & Banks recently hired a consultant in response to activist pressure and will report the findings of the analysis on the company's March conference call.
"We respect all of our shareholders and their opinions. They can absolutely add value and they can be a distraction and be costly as well. I think the important thing is to really as a CEO to fous on the business," Via said.
Via, who has many years of experience in women's retail as former CEO of Payless ShoeSource and with leadership roles for the Lane Bryant, Catherine's, and Cacique brands, said that while the retail landscape has shifted in some ways substantially, in many ways it has stayed the same. "There's a lot of conversation about women CEOs in the country. It's probably not as big a shift as we would have thought 15 or 20 years ago," she said.
The bottom line: The story from here is about bringing traffic back into stores and online amid a difficult retail environment. If Christopher & Banks can improve sales, the stock will bounce.