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MOVING UP

Wilsons Leather hopes new stores and higher prices will reverse a sales slump

By Molly Knight

Wilsons Leather is getting a face-lift and a price lift. Citing the need to update its look and ambience to help solve its financial woes, Wilsons opened two new mall-based prototypes last November at General Growth Property’s Ridgedale Center, in Minnetonka, Minn., and Kenwood Center, in Cincinnati. The following month the Brooklyn Park, Minn.-based specialty leather retailer said the design was a success and would be the blueprint for its new units going forward.

In conjunction with this new look, the retailer is moving upscale and making its product pricier. “This represents the most significant change in customer presentation in our 100-year history,” Michael M. Searles, chairman and CEO of Wilsons The Leather Experts, told SCT. “It was time to reinvent. When you’re this old, you’ve got to change with the times to reflect a continued understanding of your customer.”

It may have been time for a major overhaul, insiders say. The company reported sales of $75.7 million for December 2006, down 31 percent from $110.2 million in December 2005. Overall sales fell 20 percent on the year, from $370.6 million in 2005 to just $295.5 million in 2006. In the company’s Dec. 30 filing, Searles blames reduced traffic and unseasonably warm weather among the factors hurting sales.

Wilsons remains optimistic that its remodeling efforts will buoy profits, though. The first changes were cosmetic. Gone is the old black-and-gray Wilsons Leather sign emblazoned over the door, replaced by a sleek, orange logo that reads simply “WL.” This is the same imprint the company already uses on its handbags, says Megan Morley, marketing coordinator. “Before, ‘Wilsons Leather’ was spelled out in kind of a gaudy and clunky way,” said Morley. “This new logo is a lot more classy and sophisticated, and we feel that better reflects our brand. Plus, the new orange really catches the eye, which is important. In shopping centers it’s always good to stand out and be noticed so you can get more traffic.”

Inside, the prototype units adopted an orange-and-white color scheme that matches the new logo. They now use a more organized and color-coordinated approach to merchandising that officials say is better aesthetically and makes the stores easier to navigate. “Our stores have always put men’s apparel on one side of the room and women’s on the other, but now we’re dividing by color, too,” said Morley. “You might find fur jackets in one section and our handbags organized by designer, but most of our other products are put in sections by our palette. You’ll have your off-whites here, your blues there, then your blacks, reds, et cetera. It simply makes things easier to find.”

Once it got the color part of the operation down, Wilsons decided to fix an aspect of its stores that company officials deemed especially problematic: clutter. “The layout of the new stores is very upscale and vignette-focused, as opposed to a less-focused environment,” said Searles. “We are very pleased with the way they turned out.” The new unit at Ridgedale Center uses high-tech lighting and very high ceilings to create the upscale, modern feel the company is after now, Morley says.

The switch to more-expensive merchandise is part of an effort to lure higher-income customers. “We are going through a complete rebranding process,” said Searles. “It’s a different product we’re selling, and the price points are higher. By reorganizing our products and marketing them to this customer, we expect to see great results. So far, people have been responding well to the changes.”

Morley says the lines will be priced higher all across the board but declines to specify how much. “That varies by department,” she said.

The lines this winter included a blue-gray women’s pick-stitch trench coat for $398 and a men’s lamb car coat for $498. “We are focused on providing our customer a more contemporary product,” said Searles. “And, as always, the quality of our product is something we take great pride in.”

Eventually, each of the 297 mall-based units and 14 airport stores in the Wilsons fleet will be remodeled. The company has announced no plans to remake its 116 existing factory outlet stores. The mall-based stores measure about 2,600 square feet, the airport units about 700 square feet, and the outlets — which operate under the Wilsons Leather Outlets and Wallet Works names — roughly 4,000 square feet. “We have a significant number of stores coming up for lease renewal at the end of the year,” Searles said. “Each of those stores will be updated at that time.” Officials decline to say how many stores they plan to open this year or how long the complete re-invention process will take. At present, the company does not plan to expand internationally.

Not that anyone would argue against the need for a century-old company to update, but some caution that Wilsons should avoid too much change too soon. “It would be a real mistake for them to muddle their meaning and become unrecognizable to longtime customers,” said Dr. Robert Passikoff, president of Brand Keys, a New York City-based retail consulting firm. “With any company, your name recognition is as important as anything else. You can change what you sell but messing with your signage can be tricky. That being said, they obviously needed to do something to reinvent themselves. Still, it’s a risk.”

Morley acknowledges the company’s concerns about maintaining name recognition, but calls those concerns minor. “It’s just a ‘W’ and ‘L’ now, so we need to train our customers to learn the new logo,” said Morley. “That being said, they’ve seen it before on our bags and tags, so the shift shouldn’t be too disorienting.”

In some sense, this is not the company’s first major rebranding, though. In 1988 Bermans Leather merged with Wilsons House of Suede and Leather to become Wilsons Leather. Insiders say many customers still think of it as Wilsons House of Suede and Leather. “You’ve got people who’ve shopped there for years who say, ‘I’m going down to Wilsons House of Suede and Leather,’ but of course they’re going to Wilsons Leather, because Wilsons House of Suede and Leather hasn’t existed for nearly 20 years,” said Passikoff. “So people will continue to go to places they like and places they trust as long as they know what it is. I just worry someone will see a bright orange ‘WL’ and not know what the heck it is, or think it’s some kind of spin-off, and then get confused and keep walking. This kind of thing would be disastrous for any company, whether they’re struggling or soaring.”

Sources say it is too early to predict how the new design will affect sales, but Passikoff comes as close to hazarding a guess as anyone can for now. “At this point,” he said, “it probably can’t hurt.”