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NEW OWNERS PREP LORD & TAYLOR FOR REVIVAL

By Curt Hazlett

Change is coming fast at Lord & Taylor, the once-elegant retail chain that NRDC Equity Partners bought last year.

On Oct. 4, the day NRDC announced the $1.08 billion deal’s close, the company revealed that Lord & Taylor would vacate the seven floors it has occupied in Chicago’s Water Tower Place since 1975. A month later NRDC President Richard A. Baker hinted that the company might dispose of the flagship New York City store on Manhattan’s Fifth Avenue, after having said that it wanted to keep the store, possibly in a scaled-down form. (A spokeswoman later said plans for the Fifth Avenue store were “not yet finalized.”)

And in February Lord & Taylor unveiled a high-profile team of advertising and branding consultants, interior designers and architects that it said would spark its revival. President and CEO Jane Elfers said the announcement was “the first of many steps we plan to take in order to continue to energize and refine Lord & Taylor.”

If any retailer has needed an infusion of energy, it is Lord & Taylor. Once a fashion leader, it lost much of its cachet under the ownership of The May Co., which expanded the chain far beyond its home in the Northeast. May shut 32 stores in 2003, and many of the remaining 48 stores continued to struggle after Federated Department Stores bought May. NRDC promised to revive the brand when it announced the acquisition last summer, but the vows were accompanied by questions about its commitment to retailing. NRDC is a venture between National Realty & Development Corp. and Apollo Real Estate Advisors, and analysts pointed out that the venture had no retail experience before its acquisition of Linens ’n Things in February 2006.

NRDC has said all along that it would evaluate Lord & Taylor’s real estate portfolio and make decisions based on what was appropriate for the retailer’s needs. As for the Chicago store, NRDC said Water Tower Place owner General Growth Properties wanted to recapture the space, which was leased until 2010. The first two floors have since been leased to American Girl, and General Growth said the remainder would be filled with specialty retail.

The fate of the Fifth Avenue store remains unclear. The 611,000-square-foot flagship has been valued at anywhere from $300 million to $600 million, and most observers believe it is far larger than the retailer needs.

In November NRDC’s Baker suggested that Lord & Taylor might even leave New York City. “It’s nice having a Manhattan store, but I wouldn’t call it key,” he told Crain’s New York Business. “We want to be where people live, not where they work.” But this February other New York media reported that Lord & Taylor planned to downsize the store and convert part of it to condos.

Baker could not be contacted for this story, and a spokeswoman declined to discuss the company’s real estate plans.

Whatever its intentions on the real estate side, NRDC has plunged into the task of revitalizing Lord & Taylor. It has set aside $150 million for capital improvements to the remaining stores, and Elfers has continued the extensive remerchandising she began four years ago under then-owner May.

Reviews so far are positive. “I’ve been a fan of Lord & Taylor for the last year or so,” said Candace Corlett, a principal of WSL Strategic Retail, a New York City-based consulting firm whose clients have included Donna Karan, Saks Fifth Avenue and Target. “I think they’ve done a brilliant job of mixing in fashion that is edgier along with the classics. You could almost draw a picture of the old Lord & Taylor customer: She was very classic, very conservative, very preppie. Now the merchandise mix has a lot more breadth to it. They also have a sensational shoe department — and Nordstrom used to own that.”

Lord & Taylor hopes to keep that momentum going with its new creative team, whom Elfers calls “some of the most innovative minds in the creative design and marketing communities today.” Consultant David Lipman was hired to invigorate the retailer’s advertising campaigns, something he has done for Burberry and Zegna. He will collaborate with the BrandBuzz unit of Young & Rubicam, which will develop brand strategy and the 2007 holiday advertising campaign. The stores themselves will be getting face-lifts from interior designer Randall Ridless, who has designed stores for Bergdorf Goodman, Burberry and Holt Renfrew. Ridless, equally well known for his residential design, is the former vice president of store planning and interior design for Saks.

For the more substantial makeovers, Lord & Taylor has engaged Mancini Duffy, a Greenwich Village-based architectural and design firm whose portfolio includes Bloomingdale’s, Calvin Klein, Saks and W Hotels.

Corlett says redesigning the Lord & Taylor stores is a good idea, but only if done with panache. “Retailers kid themselves when they start tweaking the design,” she said. “It needs to be a bold statement for people to notice, and there are lots of opportunities for department stores to make bold statements in their design and architecture. But changing the color of the signs and carpet isn’t what shoppers notice. They notice wild fitting rooms and terrific lounging areas.”

Respecting the chain’s overall direction, Corlett is optimistic. “Lord & Taylor has done a terrific job with the stores and with sustaining the culture,” she said. “With merchandise there is always the question of whether you’ve hit the fashion nerve correctly. Lord & Taylor needs to stay true to who they are, yet continue to add merchandise. Even classic preppy women have days when they feel edgy, and they need to bring in more of that.”