Retail Leader Allen Questrom on the State of the Industry, Fast Fashion, Gender Pay Equity and More

Retail Leader Allen Questrom on the State of the Industry, Fast Fashion, Gender Pay Equity and More

Allen Questrom Speaks His Mind on Fast Fashion, Fixing Stores and What They Lack

Retail’s Mr. Fix It lays out his prescription for turnarounds and helping department stores.

Published by Women’s Wear Daily

May 4, 2016

By David Moin

NEW YORK — “The retailing business is not dead. I don’t think the world is coming to an end.”

So said Allen Questrom, the former chairman and chief executive officer of J.C. Penney Co. Inc., Federated Department Stores, Barneys New York and Neiman Marcus Group, who on Wednesday morning gave a candid view of the industry, its problems and some of its controversial players at a meeting of the Retail Marketing Society at the Harvard Club here.

Amid a heightened sense of concern in the air, with Aéropostale filing for bankruptcy and many in the room of 140 industry executives behind the scenes questioning the fates of Sears Holdings and American Apparel, Questrom’s appearance seemed propitious. Though it’s been a decade since he held active retail duty, Questrom is still out in the stores, busy on boards and not shy about offering opinions. He rarely makes public appearances, but he seized the moment, raving about fast fashion, denouncing corporate boards as “ineffective” and observing, “There are too god damn many stores.”

Questrom also spoke on how Wal-Mart could combat the ascension of Amazon, critiqued Ron Johnson and his infamous tenure at J.C. Penney’s, discussed his approach to turnarounds, and what it could take to revive Jos. A. Bank, a division of Tailored Brands, where he serves as a director. He’s also a senior adviser at Thomas H. Lee Partners.

He gave a thumbs up on Neiman Marcus and Nordstrom succeeding with their first New York stores, both slated to open in 2018. “The mall Neiman’s is locating in [Hudson Yards under development] is a little removed from where the upscale customer is in Manhattan, but over time it will probably be OK. Both of them are good stores and I think both will do well. But I think the whole upscale business has got to be more realistic in terms of some of the pricing.”

For a man who prefers not to use e-mail, he had much to say about the Internet and pure plays: “I don’t know too many people who make money at all, but you got to be in it.”

He’s been known as retail’s “Mr. Fix It,” having led Federated out of bankruptcy, pulling Macy’s out of Chapter 11 by merging it with Federated, and steering J.C. Penney’s back from the brink of collapse. On stepping into a turnaround situation, which he did on six different occasions in his 50-year career, he said, “The number-one thing is you can’t be the smartest guy or gal in the room….You need to understand the culture. Your job is to spend time walking through the store, spend time talking to the associates, talking to the store managers, talking to the corporate people. They have to know that you really want to know what they have to say. They are the most valuable part.

“With the information you gather from them, your own reading and looking at the business, you develop a strategy. It has to have no more than five key things to focus on. I want everyone to know what those are and I want to know what they think they can do to effect change in those five parts. I also want to pick things where we can make a difference quickly. People are feeling down. So you want to choose something that you can do quickly, so they feel they can make it.”

Questrom said it’s critical to get the right people in jobs that have to get done. “If you don’t have them internally, going outside to find people is difficult….It’s critical making sure everyone on the team believes they are very important to the success of that company. Not the ceo…every player has to believe they are essential to the success of that company. Being a ceo is a wonderful job, but it’s the job of a ceo to make people successful.”

He was candid commenting on Jeff Bezos, founder of Amazon, and the Web giant’s thrust into apparel, which is predicted to be $50 billion by 2020. “I think they will open stores as they have done in the book business,” Questrom said. “[But] Jeff Bezos is not a merchant. He’s an operational, engineering guy. He tries everything….It will be very difficult to run a fashion business over the Internet. Zappos has yet to make money.”

Wal-Mart can beat Amazon “by being a better store” and improving the apparel presentation. “The merchandise is not presented great.”

On Johnson, who tried to reinvent J.C. Penney and almost destroyed the company in the process: “I only knew him in the very end. He was a very smart man, in the sense he had very good ideas. He was thoughtful, creative. The problem is boards basically are ineffective. Mark Cohen [professor at Columbia University and former retailer] did an interesting article saying retail boards are useless. I wouldn’t have limited it to retail boards. You can’t really know a business if you go there four times a year. A board’s job is to make sure they understand the strategy and to question the strategy.”

Questrom said Johnson’s strategy of adding more expensive lines, eliminating sales in a downturning economy, and spending heavy renovating stores, should have been done gradually, not dramatically. “What happens is you just get abandoned by your customers and they go elsewhere.”

Questrom reluctantly went to see the model store Johnson created in Dallas, at the behest of J.C. Penney’s then-chairman Thomas Engibous. “I was impressed. It really looked terrific. Very upscale, very unique products. The problem was it wasn’t [for] the Penney’s customer. I said, ‘Ron, it looks terrific. But who are you designing it for? If he was properly managed — and [the strategy] was controlled [by the board] — they could have been successful because I think he is a very creative guy.”

Questrom, while critical of Johnson suspending all promoting at J.C. Penney’s, defended his effort at Tailored Brands to eliminate the buy one, get three suits free at Jos. A. Bank, which he called “a very cancerous process.” The deal was eliminated in the fourth quarter of last year. “I was aggressive on my point of view. Buy one, get three free was going on its second year and declining in sales, dropping like 9 or 10 percent. You have eliminated any regular-price customer or any customer who thinks about quality and Jos. A. Bank used to have some good quality, middle market suits. Most men come in to buy one or two suits. They don’t come in to buy four suits. Any one who does that wants to buy a cheap suit. We are not eliminating promotions. The Penney’s people eliminated promotions altogether. This was about getting the worst of all cancers out. We have 50 percent sales. You can buy one, get two free, but we eliminated that one which is the worst and I would like to eliminate buy one, get two free.”

He said Jos. A Bank needs to better define its customer, and the stores “must be presented in a more attractive way, but still must be a promotional business.”

On department stores, he said, “If your customer is in their 40s, you’ve got to figure out how to attract Millennials. I don’t think they are as different as everyone says they are. They don’t right now have a lot of money. You read in the papers about the debt these kids have. They are very, very value conscious. They are spending a lot of money on smartphones, what have you, but they are also shopping at fast fashion. And every retailer who is a traditional business, department stores, it’s not enough to have a sale.”

Questrom said he and his wife, Kelli, recently visited Zara in SoHo. “People were lined up at the registers. The floor looked terrific. The fashion trends were on target, more casual. This store was so on target. I don’t think the one by Bloomingdale’s looks really good. If I were part of Macy’s, I would have a fast-fashion department. I would give young Millennials something they want to buy right away. Business is not good, talking to most people here, but fast fashion is good.”

He was also keen on Primark, the Dublin-based chain that entered the U.S. with two stores last year. “You’ve got to see it. Not only are the prices terrific — they know how to merchandise the store. When you walk in everything is impactful.”

As much as he’s taken the big picture point of view, with some mega-mergers and remaking companies with broad strokes, Questrom is known to be deep into the merchandise and disposed to challenging his buyers on the nitty-gritty of the individual stockkeeping unit, whether it’s the color, the silhouette or where it’s placed on the selling floor. On Wednesday, he put the challenge to the audience. “ When I go into the stores some of you run, they are boring. There’s no excitement. No entertainment. It’s all sales signs.” And he said some of his more upscale shopper friends, sometimes refer to fast fashion as garbage. “But that’s what the customer wants, and by the way it’s not just young people buying it. Fifty and 60-year-old people are buying. I used to see them in upscale department stores.”

He got pointed discussing pay parity for women and the minimum wage, stating, “To my knowledge, women got paid the same as men. The only difference was there were less women at the top. But I had women buyers who were terrific and were very highly paid. I never saw a differentiation there. Other businesses I can’t speak for.”

The minimum wage issue, he said, “is a lot of bulls–t. You don’t need to worry about what you get paid on your first job. What you’ve got to worry about is what you do in the job. Because if you do a good job you get paid more money. I started in a retail training program. I think I got $100 a week. My wife, who I met in retailing, got $110. To this day, she always tells me ‘I got paid more than you.’”

Among those in the audience were several people who at one point or another worked for or with Questrom, including Ken Hicks, Michael Gould, Tony Spring, Frank Doroff, Jeffrey Sherman, Arnold Aronson, as well as Larry Leeds, John Pomerantz, Dan Schwarzwalder, Jill Granoff, Gil Harrison and Abbey Doneger. Robin Lewis of the Robin Report, who moderated, noted the standing room attendance. “Allen, do you know what this means? Lewis asked. “It means you are still relevant.”

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Photo of Allen Questrom by Ann Marie Soto.