When the price is right; broward-based Claire's Stores, Inc., with $1 billion in sales last year, has the right formula for uncertain times: low priced fashion accessories for care-free young girls - Retail

South Florida CEO, March, 2003 by Scott Singer

Teenage girls want the cool stuff, and Claire's Stores, Inc., wants to sell it to them. Just ask Hallandale Beach 10-year-old Krystal Gonzalez, whose eyes come alight at the mere mention of Claire's. She drops an average of $20 per week there, on fashion items such as purses, earrings, and hair extensions. For those keeping score at home, that's over $400 per year. From just one ten-year-old girl.

The Pembroke Pines-based chain currently operates some 2,800 stores in malls and other locations in the United States and abroad, generating more than $1 billion in revenues for the fiscal year ended January 2003. Even in these economically pressed times, that's an increase of 9 percent in overall sales from the previous year, and a 5-percent increase in same-store sales. In babysitting-speak, that's a lot of diapers.

What keeps Claire's on top in the preteen market is a two-fold success formula: staying abreast of current trends in fashion accessories, and offering them at prices that kids can afford. That formula is no overnight phenomenon, however. Chairman and CEO Roland Schaefer, 86, a former wig merchant, began running the firm almost four decades ago.

It was then that Schaefer purchased the Harry Camp Company, which among other businesses, operated a chain of ten Claire's fashion boutiques in the Chicago area. Schaefer made the purchase to acquire outlets to hawk his wares, but when the wig business faded, Claire's continued selling the other accessories it carried. Before the 1960s ended, the company went public. The accessory business continues to be its core, although Claire's refocused on a younger market in the mid 1990s.

Schaefer maintains his role as chairman, president, and CEO of Claire's Stores. However, following a recent mild stroke, his daughters Marla L. Schaefer and Bonnie Schaefer have taken over the day-to-day operations as vice chairmen. "In '95 we realized what a niche there was in that teen market and we grabbed it," says Marla of the company's shift from catering toward all women to just teens. As to their methodology for picking merchandise, Bonnie explains: "How we did it was we had our buyers follow all of the hot TV shows, like 90210 and Melrose Place, to see what they were wearing ... We [also] looked at some of the music, the hot pop stars, and what they were wearing, and we translated that into what the kids would want." When sales soared among their youthful clientele, says Bonnie, "We knew we had hit upon something."

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Today the crowd that Claire's draws, according to Nadine Wendrow of Aventura Mall, is "young and hip," with a strong a mix of impulse shoppers. "Our core customer [at Claire's] is eight to 12," says Bonnie. "Our average price is about $3.80 [and] our average transaction is about $11 and change." The kids, she says, spend everything they can, with no worries about recession, looming war, or mortgages. "Kids don't care. The mall traffic last year was not the best, and we did well."

The company continues to make money in a challenging economy. Although it faced some difficulty integrating the formerly competing retail chain After-thoughts, which was acquired two years ago, Claire's generated a profit in each of the five quarters through November 2002, averaging a net margin of almost 5 percent on average revenues of $223.72 million per quarter. Fourth quarter profit figures, including the holiday season, have not yet been released, but in the third quarter, the company earned $12.36 million on sales of $230.04 million, up from 2001 third quarter profits of $2.37 million on sales of $204.13 million.

While Yogesh Wagle, specialty retail analyst for Standard and Poors, notes that "fashion drives sales" at Claire's, he is quick to point out that the retailer's secret weapon is affordable merchandise "priced right in a weak season."

"The success of Claire's is the value that you can get in the store and the selection," says Marla. Stores average 1,000 square feet, carry 11,000 unique items, and generate approximately $340 in sales per square foot--even higher in Europe, where outlets are smaller. As baby-boomer marketers realized back when Claire's was itself an infant, you should never underestimate the buying power of kids.