PAUL STUART CEO PAULETTE GARAFALO TALKS CHANGING TIMES AT THE STORIED RETAILER

In an era of retail disruption where the old rules no longer apply, Paul Stuart still does many things the old-fashioned way. Is this a good thing? Here, we sit down with Paulette Garafalo, the store’s CEO for the past 18 months, to talk about strategy.

Q: You seemed so firmly entrenched at Brooks Brothers: why did you take this job?

A: I took the job because I’ve always admired this store and, with so many years at Brooks Brothers and Hickey Freeman, I felt I had the skill set to make a difference. When I first interviewed here, I was asked how long it would be until I could turn things around and I said probably three years. I didn’t have a set plan: I needed the first year to listen and absorb, the second to execute and the third to refine. I’ve learned that if you move too quickly, you make lots of mistakes and risk losing the DNA of the original company. The owners agreed with me and didn’t demand overnight results.

Q: So how’s it going?

A: To be honest, I’m obsessing a lot. Business is erratic: on fire in September, off in October, and ahead for November, but we got off to a slow start in December. We need to figure out why business in the flagship has been so unpredictable. Our branch stores (two in Chicago and one in DC) are doing fine with their loyal local customers, but this Madison Avenue flagship is our heart and soul and we need to make it more consistent.

Q: Your newly renovated main floor at the flagship is magnificent.

A: I’m very proud of it: the fluted wood, the polished floors, the original Persian rugs, the gorgeous new women’s department, the trendy men’s hair salon (it just opened and already guys are waiting in line for a transformative haircut!) But most of my pride is reserved for our sales associates: they’re the ones who make this place special. They’re the ones who know everything about the business, and everything about their customers.

For example, we do a disproportionate amount of business by appointment. When I first started, I’d hear all these in-store announcements on the loudspeaker stating that a specific sales associate has a “CU on two…” I had no idea what they were talking about and was too embarrassed to ask but it turns out a CU is a customer here to ‘see you’. So now when a seller tells me “It should be a good day: I have four CU’s coming in,” I know what he’s talking about. But truth be told: CUs are great but our bigger challenge is to increase walk-in traffic.

Q: Could you articulate your other big challenges as CEO?

A: In addition to growing business in the flagship, our current goals include: 1) building international business beyond Japan (where there are two freestanding stores and about 100 shop-in-shops); 2) growing the wholesale business (“Made on Madison” is our fabulous concept shop for luxury robes and loungewear, all made right upstairs; 3) growing the women’s business; 4) increasing the penetration of made-to-measure; and 5) bringing in more younger customers.

Q: How’s that last one going?

A: Admittedly, the majority of our customers are 45-plus, since not too many millennials are buying $2,000 suits. But ironically, despite a small surcharge, made-to-measure is bringing in some younger guys as this generation seems to like personalization. We’re now pursuing MTM in dress furnishings as well as in clothing; it also helps keep down inventory levels.

And of course, we’re growing sportswear. Right now tailored clothing is about 60 percent of the men’s business but we’re moving into sportswear in a big way. When I started, the team didn’t believe in casual bottoms: there wasn’t a single pair of men’s casual pants in the store! Now we’ve got great assortments of khakis and 5-pockets in addition to dress trousers. So we’re moving in the right direction.

But I believe tailored clothing will remain the backbone of our business because we offer so much value. Our customer can get a beautifully-styled full canvas suit in the finest Italian fabrics from the finest maker for $2,000; our European competitors are much more expensive.

Q: Are you using any of the new measuring technology or those digital screens that help customers visualize how their custom suits will look in various colors and patterns?

A: To be honest, I don’t think that’s for us. We have almost 30 tailors working in this building and our customers expect that personal touch. It’s not uncommon for a VIP customer from Scottsdale or Boston to fly into NYC on a Friday with his wife or partner and spend the entire day shopping. In these cases, our tailor shop will work all night so the customer can fly home on Saturday with his new wardrobe perfectly altered. Since we’re so much about personal service, the digital stuff doesn’t quite resonate with our customers.

Q: Yet you’ve launched an e-commerce business, right?

A: Yes, and we’re very excited about it! It hadn’t been part of our culture previously so I saw a huge opportunity there. We hired a whole new young digital team and shifted our marketing dollars so we’re now spending 45 percent of our budget online, and 55 percent on traditional advertising, which our customer still appreciates. I’m very happy with our recent print Christmas catalog.

Q: How much of your total business is done online?

A: It’s still only about 8 percent; it should be 15-20 percent. In fact, I was just complaining to our head of e-commerce who immediately replied that our web business was up 16 percent in October. I told him that’s not good enough: I need it up 200 percent!

Q: You mentioned a wholesale business: what’s that about?

A: Right now, it’s mostly luxury robes for men and women, all made right upstairs by our very talented craftsmen. We’re looking to wholesale the collection since it’s so unique. However, the problem is that most retailers are not all that eager to buy product from another retailer. We recently shipped some robes to Rochester Big & Tall and they’re really excited about the potential. Because B&T is a niche business, they don’t see us as competition.

Q: Tell me about your women’s business, which has long been a struggle?

A: We never sold much women’s, I think because we didn’t address working women. In retrospect, it seems obvious: we’re right in midtown between the Harvard and Yale clubs; we should be catering to professional women all day long. With our new product mix, I think the business will continue to grow. Plus it’s now all under the direction of one creative director so there’s a single vision guiding everything we do.

Q: What’s been performing best at retail this fall/winter?

A: Suits have been consistent and contemporary sportswear is doing really well. In fact, our best sellers are items we never thought we could sell: suede leggings, men’s banded bottom joggers in luxury fabrics (they sold out!), quilted vests for men and women (sold out twice!), sporty shoes, even hiking boots. We’re selling hand-knit sweaters for dogs crafted in Uruguay (my dog Patsy is in our Christmas catalog!), knit caps with fur pompoms, mink-lined men’s vests and barn coats…

Q: What is your outlet strategy? Do you worry that off-price will damage the Paul Stuart image?

A: We have only one outlet and this is for disposing of past season goods. We don’t plan on opening more: it’s only an absorption strategy. Bottom line, our stores are on sale only twice a year, and only end-season. We don’t do point-of-purchase promotions because we’re not competing with Saks or Bergdorf’s on the big brands. Virtually everything we sell is exclusive to us.

Q: I think Mr. Grodd must be smiling from heaven to see how you’re building on his legacy.

A: We’re trying really hard to maintain the family values and I think we’re achieving that. I never knew Cliff Grodd personally but from all I’ve heard, he was the one who created a culture revolving around the world’s finest product and exceptional service. It’s a philosophy that’s served us well.