Rue21 makes big push with 'fast fashion,' low cost

| Sunday, Aug. 7, 2011

Cheap, but cute.

That's how Phylisha Turner sums up the clothes, shoes and accessories at rue21's newly reopened and larger store in Monroeville Mall.

"Cute and affordable," Turner, 16, of Pitcairn said after she and friends Carrie Cahill and Jessie Kubler perused fast-growing rue21 Inc.'s latest Western Pennsylvania switch-over of one of its men's and women's clothing stores to the expanded rue21 etc! format that stocks belts, purses, underwear, makeup, jewelry and hair accessories.

Warrendale-based rue21 isn't as well-known as many of its competitors. But the company's climbing store count and rising sales, plus shoppers' comments at retail centers and online, are signs that its "fast-fashion," low-cost styles are resonating with price-conscious consumers. Rue21 had 638 stores at the end of January and 700 as of July; the company could open 110 locations this year on its quest to reach more than 1,000 nationwide.

"They are flying under the radar, somewhat," said Doug McIntyre, owner of Columbus-based research firm Cult Marketing. Compared to American Eagle Outfitters Inc.'s giant video screen promotions in Times Square and Abercrombie & Fitch's erotic and controversial ads and T-shirt slogans, rue21's statement isn't bold, he said.

Yet, "they have been growing very quickly, so obviously their model is working for them," McIntyre said.

The retailer's mantra is a continuous turnover of merchandise designed to appeal to 11- to 17-year-olds, or anyone who wants to look and feel 21. Stores get daily shipments to keep up with trends and ensure frequent visitors will find something fresh.

There's no running style theme, such as preppy or urban apparel, allowing rue21 to shift course quickly as fashions change.

"It's not all one style," said Sarah Rodocker, 12, of Forest Hills.

Store locations are varied. More than half are in strip shopping centers, often positioned close to another discounter or mass merchandiser, and the rest are in malls or outlet centers. Stores often are in rural or middle-income communities with few options for teens looking for the latest, affordable styles.

Low prices are key. Almost everything in the store costs under $35. Jeans cost $30 to $35, for example. Long, printed strapless dresses are $27, and most women's tops run between $11 and $20. Shoes and boots are under $40.

Shanah Bridgett, 15, calls rue21 her favorite store.

"They have nice prices, fair prices," said Bridgett of Wilkinsburg, who stops in when she goes to Monroeville Mall — usually once or twice a week.

The weak economy suits rue21's philosophy.

Consumers remain wary. Fifty-two percent plan to spend the same amount as last year on back-to-school purchases, while 35 percent will spend less, according to a recent survey by trends researcher, part of Experian. The National Retail Federation said families with children in kindergarten through high school will spend an average $603.63 on apparel, school supplies and electronics, about $3 less than last year's average.

Many teen shoppers' loyalties to expensive, heavily promoted brands fell off during the recession, said Audrey Guskey, marketing professor at Duquesne University.

"The economic downturn was what pushed rue21, Forever 21 and H&M to really become extremely popular," she said. Styles from the three fast-fashion retailers are so inexpensive that they can be worn a few times through one season and then discarded.

Teens who are active and growing don't intend to keep clothes for long, said Rob Callender, director of insights for TRU, a Chicago youth research and insights firm.

"In some cases, if they don't grow out of (clothes) they tend to wear them out, especially the guys," he said. "They don't expect to make clothes last in the long run, and that benefits fast-fashion retailers over ruggedly durable brands such as Levis."

The company known as rue21 Inc. was founded as Pennsylvania Fashions Inc. in 1976, and ran rue21 and $9.99 Stockroom stores for several years.

CEO Bob Fisch, an executive with the former Casual Corner clothing chain, who had 30 years of retail experience, arrived in 2001 and began to align the stores under one brand name.

The company reorganized under Chapter 11 bankruptcy in May 2003, changed its name to rue21 and began to focus on building that brand. At the time, it had 170 stores. Repeated attempts to reach Fisch were unsuccessful.

In 2006, when rue21 had about 250 stores, the company created its etc! store-within-a-store format that offers accessories. Every new store is a rue21 etc! and more than 70 percent of locations overall have added the concept, the company has said. The etc! category represents about 25 percent of the business, rue21 has said.

"The accessories are fun, and they have new perfume, too," said Sara Velsito of Turtle Creek, a Woodland Hills School District teacher who bought a short-sleeved, zebra stripe jacket at the Monroeville store. The store has well-organized displays, she said.

Other shoppers noted the bigger selection of dresses and accessories, and unique styles compared with other mall retailers. Styles are trendy "but not over-the-top," said Jessica Rispoli, 20, a Slippery Rock University student who bought a striped, off-the-shoulder shirt.

The stores have proprietary brands — rue21 etc! along with Tarea women's underwear, and Carbon and C.J. Black men's apparel. U.S.-based vendors supply the clothing, although most items come from overseas.

The company debuted on the Nasdaq exchange on Nov. 13, 2009, at a price of $19 per share, raising $29.2 million in its initial public offering. The stock since then has been up and down, and traded in the $31 range last week.

Some analysts have expressed concern about rue21's strategy of locating in lower-tier shopping centers and other factors, and the stock's volatility might reflect those worries, said analyst Alyce Lomax of The Motley Fool. But, she noted: "What I have seen from rue21's actual performance is impressive growth, especially in such a difficult consumer climate."

The company successfully opened stores while Abercrombie & Fitch and others in the teen clothing business closed sites, Lomax said.

Lomax finds its strategy of setting up shop near Walmart, Target and Kohl's — all of which promote their own clothing lines for the same age group — fascinating.

"They are sneaking a little business away from these guys," she said.

Additional Information:

A closer look

About rue21:

What : Clothing and accessories retailer

Headquarters : Warrendale. Distribution center in Weirton, W.Va.

Employees : 228 at headquarters, 7,243 overall as of Jan. 29.

Stores : 638 in 44 states as of Jan. 29; passed 700-store mark in July.

Western Pennsylvania stores: Forbes Avenue, Oakland; Galleria at Pittsburgh Mills, Frazer; Grove City Premium Outlets; Uniontown Mall; Tanger Outlet Center, South Strabane; Westmoreland Mall; Butler Crossing Shopping Center, Butler; Indiana Mall; Monroeville Mall.

Source: rue21 Inc.

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