Wal-Mart Repositions on Apparel, Prepares for Layoffs

After failing miserably at it’s attempt at high fashion, Wal-Mart is planning to lay off up to 200 employees from its apparel division, and move several more to New York. Considering how much trouble the company has had with its clothing line, it seems like the company should be hiring, not firing. Perhaps the company is planning to understaff (PDF) its headquarters as well as its stores.

Wal-Mart Shuffles Apparel Division [Northwest Arkansas Morning News]

The Big Apple is taking a bite out of Bentonville, but it isn’t the big bite that was expected.

Home office employees of Wal-Mart’s apparel division are bracing for final word on a mass reorganization that could eliminate up to 200 jobs, while shifting others to New York.

Sources close to and within the retailer said product sourcing jobs and some positions in product development and design may be eliminated as the retailer explores deals with new labels and restructures buying positions to absorb other duties. Most of the remaining apparel staff of up to 900 employees will shift to a new location two miles northeast of the home office, while some employees will be asked to transfer to an expanding New York office.

When the reorganization will become final is unknown. Wal-Mart employs about 12,800 at the home office.

Wal-Mart spokeswoman Linda Blakley denied Friday the reorganization neared completion.

“I don’t believe final decisions have been made, and I don’t know of any ... potential changes in apparel that are happening,” Blakley said on Friday. “We have not announced nor given any date for any announcement on any changes in the apparel division.”

On Monday afternoon, a Wal-Mart office adjacent to the company’s associate store and layout center in Bentonville appeared to be in preparation for a move. Employees shuffled in racks of clothing while maintenance workers installed surveillance cameras on the exterior of the building apparently being used by Wal-Mart’s apparel division.

Blakley said in a voice message left late Monday evening the company was “simply moving fixtures and other equipment into that center” following the lease expiration at the previous layout center.

Wal-Mart has examined an apparel division reorganization for at least six months as it considers expansion of its New York team. But the once-expected exodus to New York has been pared to a transfer of far fewer apparel staff, the sources said.

But eyes remain on New York.

Blakley previously said buyers would remain in Bentonville, but product strategy, design and merchandising would be directed from the New York office under Dottie Mattison, who was promoted in July to head the New York office as vice president and general merchandise manager of women’s apparel.

Following Mattison’s move to New York, a small “pilot” office opened in 2003 moved into a larger, 46,000-square-foot office in a Broadway building whose tenants include Ann Taylor Inc. and Ross Stores Inc.

The new office is in close proximity to Jordache and l.e.i.—the labels sources close to Wal-Mart say the company is interested in buying.

A Jordache design house is located at 1400 Broadway, adjacent to Wal-Mart’s trend office at 1372 Broadway. Jordache has evolved from a trendy jeans label in the 1980s to a designer and manufacturer of apparel under a variety of labels, including the manufacture of private-label denim for Abercrombie & Fitch, Gap and Tommy Hilfiger.

Nearby at 1466 Broadway are offices of Jones Apparel Group, which owns l.e.i. and other brands including Nine West, Easy Spirit, Energie and Gloria Vanderbilt. The brand is a staple at competing retailers J.C. Penney, Kohl’s and Goody’s.

“We’re always considering options that we believe will strengthen our assortment,” Blakley said Friday, declining further comment on “proprietary information.”

Sources said that uncertainty is rampant among the apparel staff, who fear Wal-Mart’s interest in new labels would reduce the number of in-house staff needed for apparel operations. Apparel employees have been openly fearful their jobs may be eliminated or transferred, the sources said.

Wal-Mart outlined a three-year plan in 2006 that called for operational restructuring, including leadership, as well as category adjustments, and changes to merchandise assortment and the merchandising buying teams. In the plan, changes examined in the past two years are to be executed in 2008.

“Most of apparel has already undergone restructuring,” said Ken Schroader, a retired Wal-Mart operations manager. “All of merchandising has been restructured in the last year. The apparel piece would just be one of a number of areas being restructured.

“In most cases of restructuring, Wal-Mart has offered the option of either accepting other available positions or you are offered a severance package.”

But what may be a loss for the apparel division is welcomed news to industry experts, who have been waiting for a turnaround in women’s apparel.

“For them to go ahead and purchase the knowledge base and connections and sourcing expertise is a positive step, because in my mind, if you try it yourself and can’t do it, the best thing is to find people who can,” said Patricia Edwards, fund manager with the Seattle-based investment firm Wentworth, Hauser and Violich.

The apparel division has in recent years been under fire from investors, who have blamed bad choices in women’s clothing for poor company earnings.

The retailer announced last year it would launch an apparel line this spring from surf and beachwear designer Ocean Pacific in an exclusive deal with Iconix Brand Group.

“I believe that signals a more aggressive stance on brand acquisition and brand definition,” Carol Spieckerman, president of Bentonville-based retail consultant Newmarketbuilders, said in a prior interview with The Morning News. “They’re going to start nurturing brands as lifestyle brands, as is very much the standard right now.

“It’s a real shift, but I believe eventually they are going to have a stable of brands that speak very clearly to particular customer segments, or at least that’s the goal.”

How Wal-Mart structures its alignment with new labels remains to be seen, but the retailer has reportedly placed high priority on exclusive branding deals and acquisitions to expand on private-label apparel.

Richard Jaffe, retail analyst with St. Louis-based Stifel, Nicolaus & Co., and other analysts report that exclusive deals are the trend among most retailers.

“To buy credibility is a lot easier than to create credibility,” Jaffe said. “Buying the Jordache license is buying the credibility.”

Posted by Alex Goldschmidt on Wednesday, January 23, 2008