United Retail Group Inc.

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United Retail Group Inc.

365 West Passaic Street
Rochelle Park, New Jersey 07662
U.S.A.
Telephone: (201) 845-0880
Fax: (201) 909-2210
Web site: http://www.unitedretail.com

Public Company
Incorporated: 1989
Employees: 4,700
Sales: $378.6 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: URGI
NAIC: 44812 Women’s Clothing Stores; 44815 Clothing Accessories Stores

With locations in 36 states, United Retail Group Inc. owns a growing national chain of apparel stores which cater specifically to the needs of larger sized women and teens. Tapping a market which has historically been marginalized and ignored by the retail industry, United Retail focuses exclusively on providing clothing, accessories, shoes, and cosmetics to women of size 14 and up, with fashion-conscious casual wear being the company’s primary source of revenue. United Retail was previously owned and operated by fashion retailer The Limited, and is now run by former Limited executive Raphael Benaroya, a 30-year veteran of the apparel industry. Under Benaroya’s guidance, the company has grown to oversee over 500 stores in 36 states, operating under two names: The Avenue and Sizes Unlimited. The Avenue is upscale in focus, with locations primarily in major shopping malls, while the Sizes Unlimited chain offers larger sized clothing at lower prices and is located mainly in strip malls. After a period of lagging sales in the mid-1990s, United Retail is a highly profitable company, with sales at decade’s end of almost $400 million.

Founding of United Retail: 1987-92

In 1987 the huge national fashion chain The Limited introduced two new store concepts under the auspices of its Lane Bryant division: Sizes Unlimited and Lerner Woman. Targeting larger sized women between the ages of 18 and 50, the two stores were meant for the most part to attract a clientele similar to that of The Limited’s eponymous stores: fashion conscious women who were shopping on a somewhat restricted budget.

In the 1980s The Limited had enjoyed tremendous national growth, with stores located in almost every major mall nationwide, and these had attracted a loyal customer following. The Limited’s clothes were inexpensive, trendy, and body conscious, and the company’s designers were quick to mimic the latest fashions from less affordable labels. Though The Limited grew to become a highly successful corporation, the company’s stores appealed primarily to a restricted consumer market of younger, highly body-conscious women. Therefore, as the company grew in profitability, it looked for ways in which to appeal to a broader customer range. The introduction of Lerner Woman and Sizes Unlimited was a part of the company’s overall growth strategy, and within a year the two stores had grown to 88 locations.

The Lerner Woman stores were slightly higher in price and quality than Sizes Unlimited, and were located in upscale, usually enclosed, shopping malls. Sizes Unlimited locations were focused in less expensive strip malls, and offered apparel which was not as trendy as the store’s sister division. Both stores had as their main focus women’s casual wear, designed for sizes 14 and higher, with Lerner Woman also offering a limited line of dressier career clothes. Prices were kept affordable, as they were at The Limited’s original chain, and by 1989 the two new chains were enjoying steady growth.

At the end of the 1980s the market for fashionable apparel specifically designed for the larger consumer was on an upswing. From specially made swimsuits to lingerie, well-made, larger sized apparel was a growing niche market. In 1989, with further growth in mind, the parent division of Lane Bryant moved to consolidate the two new concept chains; they were merged together under the rubric of Lerner. To prevent loss of name recognition, Sizes Unlimited retained its store name, while administrative functions were consolidated. During this time, the head of Lane Bryant, the division which oversaw the two stores, was Raphael Benaroya, and it was he who engineered the strategy that eventually turned the chains into United Retail.

Benaroya was a veteran of the retail market and had an ambitious vision of the role he was to play in the development of the industry. A native of Israel, Benaroya received his undergraduate degree from the University of Minnesota in 1972 and immediately after graduating began a career in the management end of the apparel industry. He first went to work for General Mills, at which he became involved in the company’s Izod Lacoste division. After working with Izod Lacoste on product development and sales, Benaroya took a position working with the highly popular label Jordache. From there, Benaroya moved to The Limited, where he eventually became president of that company’s Lane Bryant division. By the time Lane Bryant introduced Sizes Unlimited and Lerner Woman to the public, Benaroya was well prepared to run a company of his own.

It was at Lane Bryant where the entrepreneur recognized the untapped potential of larger sized women’s apparel and accessories, and when Sizes Unlimited and Lerner Woman both showed healthy sales, Benaroya moved to make the stores independent. With the help of outside investors, the Lernmark division became a company independent of The Limited, in 1989. Benaroya left Lane Bryant to become Lernmark’s CEO, and that same year he changed the company’s name to United Retail Group.

Benaroya’s first move upon becoming head of United Retail was to change the name of the company’s Lerner Woman stores to The Avenue, a decision which, while causing some confusion among consumers, was meant to distance the stores from their former parent company. Under Benaroya’s leadership, United Retail initially experienced steady growth, and within two years the company was operating 153 Avenue stores and 252 Sizes Unlimited locations. While most of the company’s locations were centered in the eastern and southern parts of the country, the stores were also introduced at strategically selected shopping centers and strip malls across the country.

The early 1990s saw a drastic increase in the number of new apparel companies going public. In 1992 alone two dozen clothing and accessory companies made their debut on the stock exchange, and investors were becoming increasingly willing to take risks on an industry which previously had been run by primarily private revenue. United Retail, after showing strong expansion and sales, was one of the 24 apparel companies to go public in 1992, a move which proved not entirely successful for the company during the mid-1990s. After the company’s initial public offering (IPO), Benaroya retained a 20 percent ownership of United Retail, while The Limited purchased a 16 percent stake.

United Retail Flounders: 1992-98

Benaroya approached his new company with an aggressive plan for fundamentally altering the manner in which large sized women’s clothing was marketed and designed. Speaking to reporter Marianne Wilson of Chain Store Age Executive in the fall of 1991, Benaroya noted that “With 40 percent of the American women’s market in size 14 and up, we think The Avenue is a concept that is long overdue. Style and fashion is as important to a large-sized woman as it is to a smaller-sized one. The days when the large-sized shopper would settle for dowdy looking clothes and ugly stores are over.”

With this idea in mind, Benaroya’s company began focusing on bringing in designs which flew in the face of traditional larger sized apparel. The inventory of The Avenue and Sizes Unlimited was revamped to be even more fashion-conscious, and the stores themselves, particularly those under The Avenue rubric, were given extensive makeovers. Because The Avenue stores were intended to compete with more upscale department stores and chains, the locations were redesigned to have a more salon-like appearance, with subtle lighting and marble floors added to all the company’s new locations and some of the already existing sites as well. In addition, United Retail introduced in-house credit cards under The Avenue name, with special purchasing incentives given to card holders.

The way in which Benaroya approached the operation of his company was unique too. Instead of leaving floor and sales work entirely to his non-management employees, Benaroya made it a house rule of United Retail that all upper-management employees, himself included, worked the floor of certain stores for a set amount of time every year. This way, United Retail’s executives didn’t lose touch with what worked—and what didn’t—in the image and sales of the company. Benaroya also responded personally to many of United Retail’s customer comments and complaints, and so proved himself to be not only a committed businessman, but a committed salesperson as well. “I love to sell,” Benaroya told Wilson, adding “And I love to talk with customers. I think that’s the only way you can stay in touch with what’s really going on in the retail business.”

Unfortunately for United Retail, Benaroya’s enthusiasm and shrewd sense of salesmanship couldn’t save the company from some dangerously difficult times in the mid-1990s. During that time, the industry’s competition became tougher than ever, particularly in such niche market areas as larger sized apparel. Benaroya and his company weren’t the only players in the industry to see the untapped opportunity for great profits in the plus-sized market, and competition had begun to chip away at United Retail’s sales by 1993. Such fashion labels as Liz Claiborne, as well as such department stores as Saks Fifth Avenue and Dillards, had all introduced their own lines of specially sized women’s apparel, making it increasingly difficult for United Retail’s locations to keep up with or outpace rivals. In addition, such companies already had well established name recognition among consumers, and so were more easily able to move their new lines without hugely expensive ad campaigns.

Company Perspectives:

We strive to lead in 1) building world class brands of fashion and related products; 2) producing worldwide quality products designed in-house; 3) selling directly to consumers in multiple channels of distribution.

After a flurry of growth in the early 1990s, the apparel industry in the middle of the decade took a downward turn: out of the 24 companies that went public in 1992, 17 of them saw their stock drop significantly the next year. United Retail was hit particularly hard, with the company’s stock falling 44.7 percent in the first half of 1993, and with third quarter losses of $2.1 million. After rapid expansion at the beginning of the decade, the company was forced to begin downsizing and closed some of its less lucrative locations. By 1994, United Retail’s earnings had fallen almost 70 percent, and the company was in dire need of restructuring.

The reasons for United Retail’s faltering sales were myriad, and had to be responded to in numerous ways. Between the store’s name change, greatly increased competition from other retailers, and the company’s own aggressive expansion, United Retail had found itself in an untenable situation financially and had to make major changes if it was to survive.

The first saving strategy Benaroya and his team developed was to refocus United Retail’s inventory on brand recognition. Thus far in the company’s history, The Avenue and Sizes Unlimited had carried other retailer’s products as well as a limited amount of the company’s own Avenue label. In 1994, United Retail began giving more shelf space to its Avenue line and made a conceited marketing effort to make customers aware of The Avenue not only as a store, but as a label as well. The company began producing such items as casual and career wear under its Avenue label, and by 1995 most of the company’s locations carried primarily Avenue apparel.

United Retail also responded to its lagging sales by increasing the variety of its apparel and accessories. Previously, both The Avenue and Sizes Unlimited had focused mainly on casual wear; in the mid-1990s the company began offering more choices in career wear, particularly women’s suits, lingerie, and clothing for dressier occasions. To keep its stores stocked with Avenue products, United Retail purchased a 128-acre distribution center in Troy, Ohio, which had capacity to serve almost triple the amount of locations owned by the company. By 1997, after closing less profitable stores and refocusing its image, United Retail was still in the red but was starting to make a comeback.

1998-2000: United Retail’s Renewed Success

In 1997 United Retail had an operating income of $3.2 million; the next year, due to increased sales and brand recognition, the company’s operating income reached $23.5 million. Within one year, Benaroya had led his company back to profitability.

Through the company’s restructuring it had become apparent that The Avenue stores were more popular, and better reflected consumer trends, than the company’s Sizes Unlimited locations. With that fact in mind, United Retail in 1999 converted 300 of its Sizes Unlimited stores to The Avenue name. That year, sales were at $382.6 million, and the company planned to open 25 new stores within the next two years. After a period of financial uncertainty, United Retail at decade’s end had proved itself to be a viable force in the apparel industry.

Principal Subsidiaries

United Retail Inc.

Principal Operating Units

The Avenue.

Principal Competitors

Catherines Stores Corporation; Charming Shoppes, Inc.; The Limited, Inc.; Liz Claiborne, Inc.

Key Dates:

1987:: The Limited introduces Sizes Unlimited and Lerner Woman.
1989:: The two chains are consolidated and spun off as United Retail.
1992:: United Retail goes public.
1994:: United Retail reports dangerously low sales.
1998:: The company is revamped and stages a comeback; 300 Sizes Unlimited stores are converted to The Avenue concept.