Dress Barn acquires billion-dollar status

DSN Retailing Today, Jan 24, 2005

SUFFERN, N.Y. -- Dress Barn, a leading moderate-priced women's apparel specialist, is primed to expand and address new customers via its recent acquisition of Maurices, a value-priced juniors and youth retailer. For $320 million, Dress Barn purchased this once-private retail subsidiary with 477 stores in 39 states and annual sales of approximately $366 million. Not only does the combination with Dress Barn's 776 units and $754.9 million in revenue grow the store base to some 1,200 units, it makes the combined entity a $1.1 billion retailer.

David R. Jaffe, who since 1992 has been president, ceo and director of the company his parents founded, recently discussed the move with DSN Retailing Today's senior editor Emily Scardino.

DSNRT: Why was the acquisition of Maurices key?

JAFFE: It is truly a transforming event for Dress Barn, and we are thrilled because we think that it is a growth vehicle that at the same time allows us to develop synergies with back-office strengths and balance sheets.

DSNRT: Are you going to convert Maurices units to Dress Barn stores, or vice versa?

JAFFE: We are keeping the front end discrete, but there are logistics-oriented synergies on the back end. They have a terrific team, and we are not going to lay anybody off. I want everybody focused on running their own businesses.

DSNRT: What do you view as some of the strategic advantages of the merger?

JAFFE: Dress Barn likes to go into markets of 100,000 or more, while Maurices goes after markets of about 25,000. They have been going into places we would never go, and vice versa. We are both very comfortable running businesses in the strip mall.

DSNRT: What changes are in store for your acquisition?

JAFFE: Because of Maurices' focus on small towns, they have lower operating costs than retailers that focus on bigger markets and malls. They run a very good business with attractive operating economies, but we think that we can improve margins by increasing the amount of direct sourcing.

DSNRT: With Maurices, you are selling young men's for the first time. Will this business increase?

JAFFE: Men's is a very small piece of Maurices' business--less than 10%. Like Dress Barn, Maurices is primarily focused on the female customer ages 17 to 34, while Dress Barn is more for the 35-to 55-year-old woman. They are truly complementary businesses.

DSNRT: What is the expansion potential for each individual division?

JAFFE: Based on an analysis by a site-selection strategy company, we think that there are 750 potential additional Maurices sites--reasonable since they are primarily in the Midwest and are only starting to go over into the East. We plan to open 30 to 40 stores a year, at least. Dress Barn has the potential to also expand to about 1,200 units.

DSNRT: Where does today's Dress Barn stand as a retail entity?

JAFFE: We have gone through tremendous changes at Dress Barn over the past three to five years and transformed it from a 'national brands at a discount' concept to a private-brand retailer. We are now 100% Dress Barn-branded private label.

DSNRT: What about Maurices' assortment of merchandise?

JAFFE: Maurices has a small amount of national labels, about 20% to 25% of the business, but the core is made up of proprietary brands, which may go up.

DSNRT: How are you positioning the brands going forward?

JAFFE: We have spent a significant amount of time and money to get the message out: 'We're not your mother's Dress Barn.' The age demographic has been extended to include a slightly younger customer, but Dress Barn is not going after the 20-year-old. If I could get the 30-year-old I would be pleased. What we're trying to do is give her updated fashion. Today's 50-year-old is like yesterday's 40-year-old. We brought in a chief marketing officer for the first time to develop Dress Barn into a lifestyle brand similar to Ann Taylor or Gap, and believe this strategy could benefit Maurices as well.

DSNRT: Has your shift toward 100% private label at Dress Barn improved margins, or have you passed the savings along?

JAFFE: What we've done is not so much take bigger margins or reduce prices but improved the quality of our merchandise. As you get people competing with us, like Kohl's, Target or Sears--which are big competitors--we feel that's an important differentiator. We want product to be in the right colors with the right hand to prove it is an upgraded proposition.

DSNRT: Who do you view as Maurices' primary competitors in your market? JAFFE:: American Eagle is certainly a major player, but it's not really going after the customers in small towns. The focus gives Maurices other competitors, including [Abercrombie & Fitch] and Aeropostale. Maurices also keeps the customer longer in terms of age demographic.

DSNRT: What will make Dress Barn/Maurices a stronger company?

JAFFE: The Maurices business is a great fit for us, with a similar culture and small box. Both chains provide a lot of customer service. We think this puts Dress Barn up on the charts in terms of being a billion dollar retailer, having significant growth potential and future opportunities. We are very excited.