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CACHÉ LUXE ENTERS AFTER LILLIE RUBIN’S EXIT

By Deborah Garbato

THE DEMISE OF CACHÉ INC.’S poorly performing Lillie Rubin offshoot was an impetus for the creation of what the chain hopes will be its new growth engine: Caché Luxe. The new concept draws from the women’s apparel retailer’s strong brand awareness and uses Rubin’s upscale mall locations to tap an upscale customer base.

Caché Luxe’s 19 boutique-style stores delve deeply into the “affordable luxury” end of sportswear and special-occasion dressing. The emphasis is on fine silks, leather and fur for the trend-conscious woman 25 or older. Luxe also brings Caché into a higher pricing tier that is “less affected by macroeconomic trends,” said Chairman and CEO Brian Woolf during a conference call with investors. Luxe made its debut in October.

Caché, which posted about $280 million in sales in 2006, says it plans to open 75 Luxe stores in upscale malls over the next five years. Pricing in Luxe stores is typically in the $200-$300 range, about 30 percent higher than at Caché’s 260 core stores. Some Luxe items hit $3,000 or $4,000. “This is a natural extension of the Caché brand and is a great extension of business,” said Clifford Gray, vice president of design and construction at the New York City-based chain.

Lillie Rubin, which Caché bought out of bankruptcy in 1999, had also emphasized special-occasion dress. But despite the company’s efforts to revitalize the chain, Rubin’s 39 stores failed to generate brand awareness. Caché closed the stores in September. “Lillie Rubin created a drain on the organization,” said CFO Margaret Feeney during the call. “But our core business is very strong.” Feeney added that Caché has no debt, despite the costs associated with closing Lillie Rubin. Caché’s comparable-store sales were up roughly 4 percent.

In developing Luxe, Caché used “only the best Lillie Rubin locations” in the country, says Gray. These include Florida’s Boca Raton Town Center, the Houston Galleria and New Jersey’s Garden State Plaza. Caché Luxe stores measure between 1,800 and 2,000 square feet. The core Caché stores measure about 2,000 square feet and sometimes up to 3,200 square feet. The company says sales per square foot at Luxe stores will exceed $500; traditional Caché stores generate up to $450 per square foot, and the average transaction at Caché is about $150.

Caché Luxe’s boutique-style environment involves fewer garments and more open space than Caché stores. But though the retailer offers a high level of customer service, it does not take the boutique concept to an extreme. “We want more open space with less product so the customer feels special about what she’s buying,” said Gray. Feeney noted that Caché stocks about 2,300 items, compared with 1,700 at Luxe. Gray describes the Luxe shopper as a woman who enjoys quality fabrics and fashion-forward apparel that is tastefully and attractively embellished. A gray wool skirt in the chain’s Garden State Plaza store, in Paramus, features lace insets in place of slits. Jackets and other cover-ups are coordinated with strapless dresses, allowing the product line to appeal to diverse body types and ages. “We get customers in their 20s as well as their 70s,” said Fatima Tekeoglu, the store’s manager. Sizes range from 0 to 14. Luxe also sells evening bags and jewelry.

Gray said he expects to see some overlap between the Caché and the Luxe customers. Indeed, the name Caché Luxe links the chains while also denoting a distinction. Gray also said he anticipates that Luxe will be drawing shoppers from Neiman Marcus, Nordstrom and other upscale chains. Many of these are inside the same malls as Luxe.

Over time, Caché will undoubtedly tweak the Luxe concept. Still, Eric Beder, an analyst at New York City-based Brean Murray Carret & Co., says Luxe will probably succeed right out of the gate. “The concept is an impressive effort to further expand the franchise to a higher-end shopper and create a more unified brand identity,” wrote Beder in an October report. “The concept could be accretive almost from the initial rollout. We view Caché Luxe as strictly an A-plus mall or ‘high street’ concept.”

Jeff Van Sinderen, a senior retail analyst at Los Angeles-based B. Riley, says the development of Luxe is a logical way for Caché to use real estate. It widens the reach of the company’s name under a different but related concept, too, says Van Sinderen, who was at the Houston store in October. “The Galleria is a plus-plus mall,” Van Sinderen said. “The Caché name is better known than Lillie Rubin. It is much easier to leverage the Caché brand. Luxe allows them to scale up a little in terms of price. There is a customer who wants product that is a little higher end and has a fit that complements her. This was an opportunity.”

The retailer says it will unveil a new store design for Caché Luxe during the first quarter. Gray describes the look as warm and timeless, involving marble floors, chandeliers and varied ceiling heights. The company also plans to boost its marketing expenditures to 4 percent of total expenditures, from the current 2 percent, and also to expand its direct mail program and launch a customer “loyalty program.” Jim Frain, who implemented a successful marketing program for Chico’s, is heading up Caché’s promotion effort.

Caché is also putting more stores on downtown streets, and, where appropriate, Luxe could eventually follow. Gray is bullish on lifestyle centers as well. “They are on the front end of what’s happening,” Gray said. For the immediate future, though, Luxe will remain mall-based.