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business newsUp-and-Coming Retailers: Rue21
The success of this teen shop makes you wonder: Is Old Navy getting ... old?
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Rue21 is a tween-to-teen retailer that has set its sights on domination of the cheap-and-cheerful "value" fashion market.
This isn't the same Rue21 "older" shoppers -- as in twentysomethings -- might remember from years ago. The Warrendale, Pennsylvania-based clothier has gone through a bit of a rebirth. It was founded in 1977 but by the early part of the naughts was in trouble. When it filed for Chapter 11 bankruptcy protection in February 2002, it had 247 stores in 39 states. By the time the company emerged from bankruptcy at the end of May 2003, its stores had shrunk to 169 in 37 states.
Now, newly reinvented and ready to rebound, Rue21 is looking for some market share.The company held an initial public offering in November that "dazzled" investors, as reported by the Wall Street Journal. The IPO had shares priced at $19 each. By end of trade that day, they had hit $24.30.
Still, its teen-focused ambitions make the company a David staring down a Goliath, Old Navy, part of the Gap (GPS) clothing empire. Launched in 1994, Old Navy is a top performer in Gap’s group of stores, duking it out with Gap for the top retail honors -- its 2008 sales were $5.7 billion, just behind Gap’s $5.958 billion.
The sheer amount of Old Navy stores -- 1,067 at the beginning of 2009 -- is a pipe dream for many retailers. But the chain hasn’t been without its own drama. According to an article in BusinessWeek, after bringing on designer Todd Oldham to ramp up the brand’s fashion power, the two acrimoniously parted ways and Old Navy is still trying to get back on firm footing with shoppers.
"My ideas weren't supposed to go into the stores," Oldham says. "What inspires a designer might horrify a merchant. My goal was to inspire the designer to create something appropriate for the merchants."
Meanwhile, reports on Rue21's fall season have been upbeat, even fawning.
"Despite the recession, same store sales have not only held up well but have been on a tear recently. For the 13-weeks ended October 31, 2009, same store sales were up 13.5%. We haven’t seen a number like that it retail for what feels like ages," wrote financial news editor Rick Stine at the blog Randomly Noted.
Rue21 added 88 stores by November in 2009, bringing the current total to 537 stores across the country. According to the company’s 2009 third-quarter release, it plans to open 100 more stores in 2010. Its third-quarter 2009 net sales were $137.1 million, a 40.7% increase from $97.5 million at the same time the year before.
As shoppers look for more bang for their buck during the recession, Rue21’s timing couldn’t be better.
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