As other retailers struggle to make gains in the recovery, Mark Derbyshire is celebrating the swelling ranks of employees joining Holt Renfrew's million-dollar sales club.
The president of Canada's premier luxury fashion chain is thankful that well-heeled customers are back shopping, helping staff achieve those record sales. But Mr. Derbyshire is also working hard to change shoppers' behaviour - such as weaning them off their recessionary habits of buying only on sale, which bruised the bottom line.
Mr. Derbyshire, who took the top job at Holt's at the beginning of 2010, is determined to restore profitable sales growth. He's scaling back sharply on discounts, trying to entice consumers to pay full price by refreshing inventory at Holt's 11 stores more often.
There's an urgency to Mr. Derbyshire's initiatives to pump up business: Sweeping changes are coming to the Canadian retail landscape as savvy foreign rivals prepare to invade. The posh U.S. department store chain Nordstrom is hunting for store sites in Canada; high-end U.S. clothier J. Crew, a favourite of Michelle Obama, is moving in this fall several doors away from Holt's at one of this country's top malls.
And the Bay, once a tired retail player, is showing signs of life under new leadership and a shift up-market as it gets ready to go public later this year.
Mr. Derbyshire is betting he can hang on to Holt's customers by offering a selective diet of hot designer fashions and fewer discounts.
"Increased competition brings out the best in us all," said Mr. Derbyshire, clad in a made-to-measure grey wool Armani suit (full price: $2,200) with the new magenta Holt's name tag ("Mark") at his breast pocket.
"As a lot of companies were working on more and more promotions, we were pulling back on promotions …" Instead, customers are told, " 'Buy it today because we're going to sell out of it.' … So we don't feel the pressure of having to discount. That's been a big win."
The full-price model is part of Mr. Derbyshire's five-year business plan to strengthen Holt's results following a period of stagnation caused by the economic slump. Also on his drawing board is plans for a multimillion-dollar expansion (by 40 per cent) and facelift of one of the chain's leading stores, at Yorkdale Shopping Centre in Toronto, which will be unveiled on Friday. It's the mall that soon will welcome the first J. Crew to Canada.
His efforts seem to be paying off: Privately held Holt's enjoyed a record profit in 2010 - double that of its next best year, 2006 - while sales, at an estimated $600-million, rose 10 per cent in 2010 from a year earlier, he said; the pace of growth picked up even more in the first quarter.
The company, which ran 16 sales promotions in 2009, is lowering that to four in 2011 and just two within a couple of years. It's shipping goods to stores as many as eight times a year, double the previous rates, and delivering new private label cashmere items every month.
Also this year, Holt's is on track to beat its 2010 record of inducting 77 sales staff in its million-dollar sales club, up from 56 employees in 2009. One salesperson in Vancouver smashed all the retailer's records by generating $4-million in business last year.
The uptick at Holt's is in stark contrast to many mainstream retailers that are grappling with cautious post-recession consumers. "There's no doubt that the luxury consumer is back in a meaningful way," said Antony Karabus, leader of retail consulting services at PricewaterhouseCoopers Canada. "For Holt's, the whole concept of flowing inventory into stores [faster]and reducing promotions is a critical one."
Mr. Karabus said Holt's is particularly vulnerable to new competition in its men's wear section, which is its weaker suit. Still, Mr. Derbyshire is clearly focused on women. And the downturn transformed them as shoppers, making them more discriminating in their purchases, he said.
"I don't need to have six (hand)bags to feel like I've done well - one bag is enough," he said, quoting one affluent customer. "But it needs to be just right. Almost-right doesn't cut it any more."
Customers are ready to splurge on the right $10,000 Oscar de la Renta gown or $3,000 Donna Karan leather jacket, with their priority pricey designer lines, he said. In 2010, Donna Karan sales at Holt's jumped more than 60 per cent while Oscar sales rose 45 per cent after both designers visited Holt's to mark 25 years with the retailer.
Mr. Derbyshire also woos shoppers with a bit of theatre, with events in-store. He conducted this interview in the middle of the Yorkdale store, having staff place chairs between displays of trendy Vince and Lacoste garments. He stepped up budgets about 15 per cent in the past year to pay for live musicians and actors - dressed as Cupid for Valentine's Day - rather than shelling out for a big annual film festival bash at one flagship store, as Holt's did in the past.
Other changes are more subtle. After feedback from employees, Mr. Derbyshire switched the piped-in store music to tunes such as Prince's Raspberry Beret and You Got the Love by Florence and the Machine, rather than bland instrumentals.
His research also revealed that female customers couldn't find sizes at either end of the scale, so he widened the range from 0 to 16, rather than mostly 6s to 10s. And in response to customers who said they're looking for something fresh, he trimmed the overall brand roster by 10 per cent, dropping such sluggish sellers as Mark Fast and Vionnet and adding, for instance, Tom Ford and Rachel Zoe women's wear and Kate Spade shoes.
"The real growth has been fuelled by our top end, by our designer business," he said. "That customer wants new, wants now, wants to be the first. Having that frequency [of new inventory]becomes very important."