Christopher & Banks Corporation
Christopher & Banks Corporation
Incorporated: 1986 as Brauns Acquisition Holding Company
Sales: $209.2 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: CHBS
NAIC: 448120 Women’s Clothing Stores
Christopher & Banks Corporation operates through its wholly owned subsidiary Christopher & Banks, Inc., which is a publicly owned specialty retailer of women’s apparel headquartered in Minneapolis, Minnesota. Christopher & Banks has 320 stores in 27 states. The stores operate under the names Christopher & Banks, CJ Banks, and Brauns, and are located primarily in shopping malls in the northern half of the United States. In July 2000, the 44-year-old company changed its name from Brauns Fashions to Christopher & Banks Corporation. The company’s primary customers are working women from 35 to 55 who are looking for clothing with style, high quality, moderate price, and versatility. The company hit its stride in 2000, making national business headlines rare for a small company and winning kudos for its financial turnaround and market success.
Minneapolis Roots and Beyond: 1956–86
Gil Braun opened the first Brauns women’s clothing store in 1956. He had 20 years of retail experience with J.C. Penney and Buttreys. The store was located in the Miracle Mile Shopping center near his home in St. Louis Park, a suburb of Minneapolis. At the time, shopping centers were just beginning to sprout up in the growing suburbs of the Twin Cities of Minneapolis and St. Paul. Brauns Fashions served middle-income women. In 1960 Braun opened his second store, which tripled in size soon after.
Brauns’ merchandise included coats, suits, dresses, sportswear, accessories, and lingerie. Gil Braun believed in providing quality apparel at a reasonable price. In addition, he believed strongly in giving a personal touch and running a friendly business similar to those he frequented in the small South Dakota town where he grew up. He encouraged his store employees to get acquainted with customers, learn their names, and find out their clothing preferences.
By the late 1960s, Brauns had grown to 20 stores in the Twin Cities. During the 1970s and early 1980s Brauns expanded to ten other midwestern states, continuing to focus on quality, value, and attention to the needs of its customers. In 1974 the company opened the first Gigi store targeted to teenage girls and younger women looking for more contemporary styles. The Gigi stores grew in number as well, but were always a much smaller part of the overall operation. Over nearly three decades, Gil Braun saw the demand for suits and dresses decrease, while his customers’ appetite for sportswear and causal wear continued to grow. To meet the merchandise needs of the growing chain, the company moved to a larger distribution facility in nearby Eden Prairie in 1981.
By 1986 Brauns Fashions had grown to 110 stores in 11 midwestern states, with revenues of approximately $50 million. At that time Braun and his wife were spending the winters in warmer climates to escape the Minnesota cold. But that interfered with his ability to stick to his hands-on approach to managing the company. He was ready for a change. That year he sold the company for $25 million to Marc Ostrow and James Fuld in a leveraged buyout. The company was incorporated by Pennwood Capital Corporation as Brauns Acquisition Holding Company (later changed to Brauns Fashions Corporation) .
New Ownership, a Shaky Market: 1986
The new ownership, with Larry Kelly as company president and chief operating officer, made changes right away. They altered the merchandise mix from primarily casual wear to more distinctive career wear. The focus shifted away from the traditional Brauns customer—a middle-income, value-conscious woman looking for a versatile wardrobe—to a more upscale career woman. The new owners planned to further expand the chain nationally.
The new Brauns charged full speed ahead, opening more than 30 new stores from 1987 to 1990, but not always in the company’s traditional locations. Some stores were opened in areas with much different demographics, including larger cities such as Chicago. The addition of new stores and the change in marketing focus coincided with a nationwide drop in retail sales, which hurt the company. Company losses increased from $21.6 million in early 1987 to $27 million in early 1989. Over the next three years, same store sales fell considerably. (Same store sales is the retail measure of a company’s performance considered most accurate because it examines sales from stores open at least one year and ignores sales fluctuations due to new store openings.)
The new owners responded to the downturn by implementing a management turnover and strategic restructuring plan. Nicholas Cook was appointed president in May 1989. Cook had valuable experience in the industry and company as a 15-year veteran of Brauns. Cook updated stores and altered the merchandise mix back to more casual apparel that was interchangeable between a woman’s work, home, and outside activities. During the next two years, new stores performed well, but same store sales did not improve. The company saw overall improvement, however, and reported its first full year of profit in five years in December 1991.
To solve debt problems it had been battling with since the 1986 takeover, and to finance renovation and expansion plans, Brauns Fashions decided to go public in 1992. The company made an initial offering of 1.25 million shares at $7 per share. Shareholders offered another 625,000 shares. At the time the company had grown to 143 stores in 16 midwestern states. In addition, Brauns had a $10 million public debt offering in the fall of 1993, which helped restructure mounting corporate debt. New stores that were opening during this time were positioned in smaller markets such as mid-sized cities with cultures similar to those in communities where Brauns stores were successful.
In 1994 Brauns had a growing number of stores to keep supplied and needed larger facilities. The company doubled its warehouse space by moving from Eden Prairie to a 210,000-square-foot facility in Plymouth, in suburban Minneapolis. Despite the company’s store expansion, Brauns had sales of $94 million and a net loss of $245,000 that year. Same store sales were still sluggish.
In 1995 Nicholas Cook became chairman and chief executive officer and Herbert Froemming became president and chief operating officer. Recognizing that the fastest growing demographic group in the market was women from age 35 to 54, the leadership took steps to further define its primary customer and weave her character into the fabric of the company. The typical Brauns customer was determined to be Mary, age 39, who worked full time and had a family income of $55,000 or more. She preferred a more business casual look that she could wear to both work and to community meetings, or to her children’s events later in the day. Discussions about Mary’s needs pervaded all aspects of the company.
To highlight unique products that Mary could not get elsewhere, Brauns focused on selling more private label casual merchandise under the names Christopher & Banks, Chelsea Studio, Eurosport, and Exparte. Executives increased imports from manufacturers in Asia from 14 percent in 1993 to 45 percent in 1995. The high percentage of imports allowed the company to offer customers higher quality apparel at a lower cost.
By 1995, Brauns had 225 stores in 22 states. The company had losses of more than $2 million during the first six months of 1995 on sales of $43.5 million. In June 1996 Brauns extended the terms of its credit agreement to avoid possible technical default.
1996: Chapter 11 and Recovery
After experiencing the effects of a three-year retail slowdown and consecutive annual losses, Brauns Fashions filed for chapter 11 bankruptcy protection in July 1996. As part of the strategic restructuring plan, it closed nearly 50 marginal or unprofitable stores. The company outlined a plan to fully pay all creditors and become profitable by 1997. Restructuring was, at the time, a growing trend in the retail community.
Brauns scaled back its store operations to 172 stores in 20 states. All Gigi stores were closed in the transition. Management instituted a store credit card and focused the merchandise mix more on sweaters and sportswear, and less on dresses and coats. In addition, Brauns reorganized its distribution center and freed up an additional 33,000 square feet of space to sublease. By March 1997 the company had satisfied claims of the reorganization plan.
New leadership took over the company in 1998 when William Prange became president and chief executive officer. Prange had been head of merchandising operations since 1994. Nicholas Cook continued on as chairman of the board. The company redesigned its stores, enhanced customer service in subtle but effective ways, and focused the marketing lens more closely on “Mary” and her needs. Prange initiated a store makeover that he thought customers would respond to. Store changes included adding all wooden hangers, handled paper bags, tissue paper wrapping, and envelopes for receipts, all of which communicated a classier store environment. Store managers also worked harder to hire women who reflected their target customers, often hiring teachers who were enticed by a 50 percent off corporate benefit.
Christopher & Banks serves the clothing needs of today’s busy, fashion conscious woman offering quality, everyday fashion options suitable for your work and leisure activities .
Prange also increased imports, primarily importing directly from factories in Asia. He worked closely with factory owners without the expense of a middleman, thus passing on savings to Brauns’ customers with lower-priced apparel. Brauns thus offered customers inexpensive, but original clothing. Prange and other company executives visited factories regularly and established relationships to ensure that the apparel was not being manufactured in sweatshops.
Customers responded, and Brauns started growing again. Sales revenues increased, primarily from new store openings. Store growth continued with 179 stores in 1998 and 195 in 1999. Brauns’ financials began showing increasing profitability.
2000: New Name and National Recognition
By the second quarter of 2000, company sales were up 42.3 percent from the previous year and same store sales had risen 21 percent. The company was gaining attention on Wall Street for its impressive growth. Forbes magazine ranked it 27th on its 200 Best Small Companies in America list for 2000.
In July Brauns shareholders approved a company name change from Brauns Fashions Corporation to Christopher & Banks Corporation. The new name identified the company more closely with the successful Christopher & Banks brand, which had gained recognition and loyalty among the customer base over several years. The company’s new ticker symbol became CHBS.
Soon after, Christopher & Banks launched a new division of stores called CJ Banks for size 14-24 women. The company targeted the same geographic areas and identified the CJ Banks customer as “Tracy,” Mary’s younger sister, who had the same lifestyle and tastes. Retailers estimated that the women’s plus-size market was the fastest growing, with 35-40 percent of women in that category. Christopher & Banks opened 20 CJ Banks stores in the fall of 2000 and continued with steady expansion.
In fiscal 2000 Christopher & Banks reported a 46 percent growth in sales to $209.2 million, resulting in earnings doubling to $1.50 per share. Management continued to expand both store formats, and transition several Brauns stores to Christopher & Banks. They expected complete name changes at all Brauns stores by the end of 2002. Management continued to focus on customer service, high quality products, original merchandise, and the visual presentation in stores. Marketing remained secondary, with the company’s storefront windows still considered the best form of advertising. By 2001 the company directly imported 80 percent of merchandise from Asia under the Christopher & Banks label.
In June 2001 Money magazine declared Christopher & Banks “the best performing stock in America.” This was based on the fact that over five years the company’s stock had grown from a split-adjusted 44 cents to around $39, a staggering 8,800 percent increase that far exceeded advances during the same period by tech heavyweights EMC, Microsoft, and Cisco, among others. Money noted that even in the slump of early 2001, Christopher & Banks increased earnings 62 percent and thus continued to attract huge investor interest.
By July 2001 Christopher & Banks operated 320 stores in 27 states. The company was ranked 70th in Business Week magazine’s 100 Hot Growth Companies in 2000, and in 2001 moved up to 16th. With increasing national recognition, stable financial resources, and a commitment to its mission, Christopher & Banks was poised to meet the apparel needs of “Mary” and “Tracy” for many years to come.
Christopher & Banks, Incorporated.
Christopher & Banks; CJ Banks.
Marshall Field’s; Bloomingdales Inc.; R.H. Macy & Co., Inc.; AnnTaylor Stores Corporation; The Talbots, Inc.; Bernard Chaus, Inc.
- Gil Braun opens the first Brauns store in Minneapolis, Minnesota.
- Pennwood Capital Corporation acquires Brauns Fashions chain in a leveraged buyout.
- Nicholas Cook becomes president and chief executive officer.
- Brauns Fashions becomes a public company.
- Herbert Froemming becomes president and chief operating officer.
- Brauns Fashions files for chapter 11 reorganization.
- William Prange becomes president and chief executive officer.
- Brauns Fashions changes its name to Christopher & Banks Corporation; company introduces CJ Banks stores, catering to plus-sized women.
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——, “Survival Strategy: Troubled Retailers Are Using Bankruptcy As a Business Tool,” Star Tribune, August 12, 1996, p. 1D.
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