Rue21 has a new road map for success

Three years ago the Pittsburgh-based company filed for Chapter 11 bankruptcy protection and closed roughly 450 of its nearly 1,200 stores. The company moved quickly to reorganize, however, re-emerging from bankruptcy about four months later, in August 2017, under new leadership and with a new strategy.

“We think we have a great business model that resonates with our customer, and we’re very optimistic about the future,” Rue21 Chairman and CEO Michael C. Appel told SCT. Rue21 is sticking to its core mission of providing value-priced, on-trend fashion to a shopper audience of young men and women. But the company has made some key strategic changes too, among them a sharp portfolio reduction: Its store count now stands at about 700 across 45 states. “We think the current number of stores we have is about right,” said Appel. Historically, the company has operated at peak profitability whenever store count hovered at about 700, he notes, suggesting that there could be some more trimming as leases expire.

The bigger focus now is on increasing productivity within that existing store base, Appel says. “Two areas where we see great potential are our men’s business — where we think we have much less competition in terms of on-trend fashion at our price point — [and in] growing our plus-size business,” said Appel. He estimates that roughly 40 percent of the junior fashion offerings for young women now are in the plus-size category. “We know there is a great opportunity there, and we intend to grow that,” he said.

Yet another Rue21 priority involves intensifying the store experience for shoppers through a “style-seekers” design. That design consists of an all-white decor and increased numbers of fashion displays, with about 35 mannequins showcasing outfit styles and combinations. This new design also makes the stores easier to shop, by means of sections clearly delineated across the various categories. As of November, the company had completed its renovations in about 130 stores.

“We also think, in the right situations, we have an opportunity to open new stores as well,” said Appel. In fact, Rue21 celebrated its first new-store opening since having re-emerged from bankruptcy, at The Mall at Robinson, in its Pittsburgh hometown, last September. “We’re excited to add Rue21’s latest ‘style-seeker’ concept store to the center,” said Beth Edwards, Mall at Robinson’s general manager. “The new concept meets the ever-changing needs of our shoppers by providing inspiration and helping them find the latest styles at affordable prices.”

Part of the Rue21 reboot has been the effort to research and understand its customers and to strengthen the management and merchandising teams accordingly, says Appel. Another element involves maintaining sufficient liquidity to pay vendors and to invest in the business. Indeed, Rue21’s descent into bankruptcy was the result of a heavy debt load of nearly $1 billion left over from a 2013 leveraged buyout by private equity firm Apax Partners.

Rue21 is also utilizing technology and data analytics to help improve operations and customer connections. “We have a lot of really exciting initiatives there to better grow our business,” said Appel. In addition to launching a buy online, pick up in-store service in April, the company introduced a buy now, pay later option that allows customers to stretch payments out over a two-month period.

Still, these are no easy times for fast-fashion retailers: 2019 saw bankruptcy filings from Forever 21 and Charlotte Russe, among others. But Rue21 offers its value-minded customers quality as well as speed, in the belief that fast fashion does not have to mean disposable fashion, Appel says. “We have been working really, really hard to improve the quality of the product so customers get something that will last and [that] they feel is worth the price,” he said.

The company has been concentrating also on merchandising. “We were very challenged in the fall of 2017 with the assortments that were put together by the previous merchandise team,” said Appel. The new team has set its sights on tailoring the assortment to the customer and on improving quality while remaining price-competitive. “I think the future is bright for Rue21,” Appel said. “We believe stores are part of the total omni-channel experience, and we’re committed to the store experience as the total package that we give to our customer.”