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CAN EDDIE BAUER REGAIN ITS LUSTER?

BY ANNA ROBATON

Eddie Bauer outside his Seattle store in this 1920s photo.

Earlier this year Eddie Bauer returned to a marketing ploy that once helped to fortify its reputation as the premier American retailer of rugged outerwear. The Redmond, Wash.-based chain, which had outfitted Jim Whittaker for the 1963 climb that made him the first American to conquer Mount Everest, supplied his wardrobe when he returned to Everest in May to mark the 40th anniversary of his climb.

By helping to sponsor the event, Bauer hoped to boost sales of its famous goose down products. But the event was also symbolic, as Bauer faces its own uphill struggle for another chance in life.

This autumn the 83-year-old, 529-store chain, whose net sales peaked at $1.8 billion in 1999 and have declined steadily since, enters the key phase of a year-old effort to turn itself around. Under a new management team installed by its bankrupt parent, The Spiegel Group, Bauer is attempting to win back the consumers who have soured on the chain by returning to its roots as a purveyor of functional and durable outdoor-inspired apparel. In the mid-’90s “Bauer took its eye off its core customer and started chasing a customer that ultimately rejected Eddie Bauer,” said Chief Marketing Officer Engle E. Saez, a former Starbucks executive who is heading the effort to rehabilitate the Bauer brand.

“We got caught in a game of monkey see, monkey do. That turned into a game of musical chairs, and when the music stopped there was no place for Bauer,” he said. He was referring to the chain’s efforts to compete with such trendy, youth-oriented retailers as Abercrombie & Fitch and American Eagle Outfitters, and then with the legions of retailers offering casual dress apparel for work.

“The world moved towards casual because casual wear was accepted at the workplace and accepted for entertainment and leisure activities,” said George Rosenbaum, chairman of Leo J. Shapiro & Associates, a Chicago-based consumer research firm. “This was a tremendous shift in what people were wearing and what was being marketed to them and a greater opportunity for growth than the concentration on nature-related outerwear.”

Ultimately, Bauer watered down its product line, turning off many of its loyal customers in the process. Last year net sales for the Eddie Bauer division, which also includes the catalog and Internet units, fell 11 percent to $1.4 billion. Same-store sales, too, fell 12 percent last year and have continued to fall this year, dropping 10 percent in the first quarter versus the prior-year period.

Now, along with winning over new customers, Bauer must convince its once-loyal customers that it is committed to real change. The chain introduced its turnaround effort last summer with a $12 million multimedia national marketing campaign. The print ads featured photos of American landscapes and of Bauer’s washable Seattle Suede jackets, a key product in the chain’s new merchandise mix.

“The biggest hurdle is reclaiming our credibility with our core customer,” said Saez, who describes that customer as a “socially engaged, physically active, intellectually curious adult whose core values are family, friends and community.

“We turned into someone in the late ’90s that they didn’t understand and they didn’t like,” said Saez, who helped to build the Timberland and G.H. Bass brands before joining Starbucks. “But they have a deep affinity for Eddie Bauer, and they are willing to listen [to us].”

Much of Bauer’s fate depends on support from Downers Grove, Ill.-based Spiegel, the catalog giant that acquired Bauer in 1988 and embarked on a major expansion of the company. (Spiegel is owned by the Otto family of Germany.) That expansion, some experts say, led to some relatively high real estate and distribution costs. When the now bankrupt Spiegel acquired Bauer, the chain had only six stores. In 1997 Bauer opened its 500th store.

Spiegel may opt to sell off what many experts consider its most valuable asset because of Bauer’s strong brand-name recognition. Spiegel has capitalized on the brand to sell everything from home furnishings (through its Eddie Bauer Home division, which has 45 stores) to cars (through a partnership with Ford Motor Co. in 1983).

“Even though Spiegel was much larger than Eddie Bauer [when it acquired the chain], Bauer became the tail that wagged the dog,” said Robert Spector, a Seattle author and retail expert who chronicled the company’s history in his 1995 book, The Legend of Eddie Bauer. “Now Bauer is probably Spiegel’s most valuable asset.”

Indeed, Spiegel may be shining up its crown jewel in preparation for a possible sale. In addition to the marketing and merchandising changes under way at Bauer, Spiegel is closing 60 underperforming stores, and observers say it is likely to close more as part of its reorganization.

As Spiegel’s largest holding, Bauer generated more than 60 percent of Spiegel’s net sales of $2.3 billion last year. A Spiegel spokeswoman said the company has no plans to close more Bauers as part of the reorganization and that it is “not actively engaged” in discussions with any other companies to sell the chain.

L.L. Bean, the Freeport, Maine-based retailer of outdoor-inspired clothing, is reportedly mulling a bid for Bauer. Both companies sell through multiple channels, but Bauer’s massive presence in shopping centers would allow Bean to reduce its reliance on catalog sales. Eighty-five percent of Bauer stores are in malls, 10 percent are in lifestyle centers, and 5 percent are in downtown locations. The average store is 9,000 square feet.

“Eddie Bauer is a wonderful name,” said Kurt Barnard, a retail consultant based in Upper Montclair, N.J. “The problem is they have failed to hit the right fashion note.”

Hoping to hit that note, last year Spiegel assembled a new management team at Bauer. In addition to Saez, the team includes new CEO Fabian Månsson, former CEO of Swedish retail giant H&M, as well as a new senior vice president of apparel, Bauer veteran Joel Gardner. Gardner built and runs Bauer’s outlet operation. He also oversees merchandising and product design and development for all Bauer divisions.

Next month Bauer, which has virtually eliminated business casual offerings, will ramp up its marketing efforts again to highlight what it now considers its most important lines. Fall ads will focus on jean wear and on the Seattle Suede line, which Bauer helped to develop and has expanded over the past year.

As winter approaches, the chain will begin marketing its high-performance outerwear products, including waterproof parkas and lightweight down vests and jackets. During the holiday season, Bauer stores will showcase the company’s heritage while offering help with gift selection through a series of in-store packaging ideas.

Acknowledging that it alienated its customers through a failed attempt to woo younger, trendier shoppers, Eddie Bauer is returning to more-traditional fashions.

But Bauer won’t go back to selling hunting and fishing gear as it once did. Before the chain began to diversify in the mid-’90s, many of its stores were decorated with canoes and photos and memorabilia intended to reflect the personality of its founder, the late Eddie Bauer. An entrepreneur and avid outdoorsman, Bauer founded the company in 1920 as a sporting goods shop in downtown Seattle. That store is now the chain’s flagship.

“There are certain things you can’t undo,” said Saez.

Still, some experts wonder whether Bauer will be able to undo much at all, especially now that J. Crew, Lands’ End, L.L. Bean and others are also vying for consumers who want classic styling and clothes that last.

“There isn’t much hope for them as a freestanding company,” said Sid Doolittle, a partner at McMillan-Doolittle Retail Consultants, Chicago. “They have only developed a few products, so they don’t have the proprietary products that they used to that gave them the reputation they had when they were acquired.”

But Saez is betting that Bauer can go home again. In addition to offering value and quality in its products, Bauer enjoys a brand “personality” that is “real, not fabricated,” he said. “These are things that other companies have tried to invent. These are things we truly own.”

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