Monday, December 05, 2005

As Filene's fades away, Basement expects to thrive

Paul Grimaldi
The Providence Journal, R.I.

PROVIDENCE -- New Englanders this year fretted about the loss of the venerable Filene's chain, which is being incorporated into the Macy's chain.

After the holidays, the Filene's name will be stripped from the chain's stores as part of Federated Department Stores' $11-billion takeover of rival May Department Stores.

But those who rue the looming disappearance of Filene's from the commercial landscape aren't looking in the right places. The Filene's moniker remains part of the nameplate for another retailing icon -- Filene's Basement, which the Boston-based retailer spun off in 1988.

The chain of 27 stores is now part of Retail Ventures, of Columbus, Ohio, which also owns Value City Department Stores and recently spun out shoe retailer DSW.

Retail Ventures' chief executive, Heywood Wilansky, said the disappearance of Filene's may give the Basement stores a chance to come out of the shadows of its onetime parent.

"Frankly, the closing of Filene's is going to help us differentiate" from its progenitor, Wilansky said.

Wilansky, who once headed Filene's, laid out the strategy for turning around a company the Boston retailer had spawned as a way to rid itself of overstocked, out-of-date merchandise. He made his remarks recently during a trip to Providence to speak at a management conference sponsored by Tofias PC, a professional services firm in the city.

He became CEO of Filene's Basement in 2003 and took his current spot a year later.

"What I found when I got to Filene's Basement was a tired company," he told a group of small-company owners and businesspeople.

The company was caught in a downward spiral. Its core middle-class customer was defecting to rivals up and down the price scale. Basement merchandisers brought in cheaper goods to ring up sales, but the low quality alienated even more core shoppers and forced the company to compete with huge discounters such as Wal-Mart and Target.

"Over time, Filene's Basement rode the escalator down," he said. "Filene's Basement was too small -- no way we could win on price. Our only chance . . . was to move into the high-end, off-price play."

So, Wilansky moved the company toward carrying some high-priced name-brand clothing, such as Hugo Boss suits, to create a "veneer" of exclusivity, while still selling mostly off-season overstocks at reasonable prices.

As he recast the merchandise he also sought better locations and larger stores, opening in upscale suburbs near Atlanta, Chicago and Washington, as well as in and around New York. The company now has 27 stores, including 9 stores in Massachusetts.

While the company is researching 200 areas across the country to find new locations, Wilansky said, there are no deals in place for next year. He would not say whether the company is committed to returning to Rhode Island, where it once operated a store in Warwick.

One thing is certain, though, the original Boston store in Downtown Crossing is staying put.

"We're committed to downtown Boston, we're committed to that store," he said. "If I touch one damn light bulb, I'll be hung by the mayor."

He's also riding the annual bridal gown sale, which began decades ago in the Boston store, for all it's worth.

Many Basement outlets now hold the events annually, generating immeasurable international publicity, he said, introducing a four-minute video montage of news reports, features and a comedy bit by late-night TV host Jay Leno.

"How much would you pay to have Katie Couric and Matt Lauer do a commercial?" he asked. "Jay Leno?"

The strategy appears to be working, from 2002 sales of $280 million, revenues could reach $425 million this year and $600 million in 2007. At that point, Wilansky said, he might spin out Filene's Basement with a stock offering.

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