Second Acts

One of the reasons I love Madonna is because she keeps reinventing herself. From sexy young pop star to movie star to Kabalah follower to devoted wife and mother. Now, in her most recent guise, she’s a sexy middle-aged pop star who may or may not be having an affair with a New York Yankee slugger. The point is she keeps coming up with new ways to present herself to the public.

It’s worth noting that Madonna’s audience has stayed largely intact throughout her various reincarnations. But what’s most fascinating to me about Madonna is that she seems to have an innate sense of not only when the time has come to end one act and start another, but of what that next act should be. Her timing is pretty much impeccable. Retail chains could learn a lot from her in that regard.

The fact is that some retailers never get beyond their first act. In some instances, they haven’t a clue as what their second act should entail. In others, it’s because they are so puffed up with importance that, even in the face of declining sales, they are sure that what brought them to the party will eventually triumph again. Others try, but their timing isn’t what it should be. This month’s cover story, “The Second Act, What’s Next for Retail?” (see page 35), includes a look at 10 retail brands that are in the grip of reinvention, to varying degrees of success. The good news is that most of the companies at least realize that their first act is over. That, in and of itself, bodes positively for their future. The ultimate success in mounting a second act, of course, depends on many factors.

One name that isn’t on the list, but is sorely in need of resuscitation, is the 276-store Steve & Barry’s LLC. It filed for Chapter 11 bankruptcy after its default on a $197 million asset-backed loan from GE Commercial Finance Corporate Lending. The company attributes its problems to a combination of weakening consumer demand and super-thin margins put under even more pressure by the crisis in the credit markets.

The poor economy aside, many analysts contend that Steve & Barry’s business paradigm was flawed from the start, relying on ultra-thin profit margins and incentives from mall developers that ultimately couldn’t balance the chain’s operating costs—particularly in the face of its low, low prices and expensive celebrity licensing deals. Those factors, plus rapid expansion and larger stores, made profitable operations extremely difficult. Some industry experts say that much of the chain’s earnings were directly tied into one-time up-front payments from mall owners. Once the sweetheart deals ended, Steve & Barry’s came crashing down.

I never bought anything at Steve & Barry’s (with the exception of gift cards), but my friend’s 16-year-old daughter and her pals were devoted shoppers. I remember how excited they were when Sarah Jessica Parker’s Bitten line debuted last summer.

“It’s too good to be true,” one teen told me as we looked over the selection. I remember thinking the same, particularly when I came across a stylish and well-made houndstooth coat priced at just $19.95. As it turns out, we were right.

As I write this, things don’t look very good for the once white-hot chain. With financial deadlines closing in, a white knight has yet to emerge as its savior. Sometimes, I guess, there is no second act. At least not when you don’t get the fundamentals right the first time around.