Chadwick's of Boston, Ltd. - Company Profile, Information, Business Description, History, Background Information on Chadwick's of Boston, Ltd.

35 United Drive
West Bridgewater, Massachusetts

History of Chadwick's of Boston, Ltd.

Chadwick's of Boston, Ltd. is the largest off-price catalog retailer of women's apparel in the United States. Although it markets clothing for the entire family in all sizes, in addition to accessories, gifts, and cosmetics, women between the ages of 25 and 55 are the company's primary customers. Chadwick's sells women's clothing under private labels as well as such name brands as Pierre Cardin, Herman Geist, JG Hook, and Blassport. Established in 1983 by retailer Zayre Corporation, Chadwick's was sold to Brylane Inc. in 1996. Chadwick's boasts a mailing list of 11 million names and claims 4.8 million active buyers. The company also owns and operates two outlet stores in New England.

Emerging in the 1980s

Chadwick's of Boston made its debut in 1983 as an off-price mail-order company offering specialty women's apparel brand names and prices similar to those in the Zayre Corp.'s Hit or Miss chain of stores. Hit or Miss outlets were at the time selling brand-name apparel at 20 to 50 percent off regular prices, and the close correspondence between Hit or Miss merchandise and that offered in Chadwick's catalogs allowed customers to handle and judge the products before trusting to catalog shopping from home. Originally considered an experimental project, Chadwick's had sales of $3 million in fiscal 1984 (the year ended in January 1984), $21 million in 1985, and $24 million in 1986, when Zayre's management decided that Chadwick's had achieved its goals and proven a viable operation.

In 1987 Zayre spun off its off-price segment, consisting of its T.J. Maxx, Hit or Miss, and Chadwick's of Boston units, to a new subsidiary named The TJX Companies, Inc. As a division of TJX, Chadwick's function remained to feature off-price specialty items of women's apparel, much of which was also carried in the Hit or Miss stores, at prices significantly below conventional retailers and other mail-order catalogs. These items were said to consist of first-quality current-fashion and classic merchandise, including sportswear, casual wear, dresses, suits, and accessories, in a mix of brand names and private labels, targeting 20-to-50-year-old women, including housewives as well as career women, who were interested in moderately-to-upper-moderately-priced merchandise. Chadwick's delivered 23.7 million catalogs in 1987, an increase of 35 percent over the previous year. The division also developed an independent merchandising group during this time.

Chadwick's of Boston's sales grew from $33 million in 1987 to $43 million in 1988 and $47 million in 1989, when TJX's annual report declared that the division was selling "moderately-priced merchandise substantially below regular department store prices to a customer whose profile is similar to that of the Hit or Miss customer." This report said that the size of a typical Chadwick's catalog was about 56 pages and that nine mailings had been made during the fiscal year, including a focus book, or smaller book highlighting the best-selling items. About 35 percent of the goods sold were private label and 65 percent branded.

Chadwick's mailed 39 million catalogs during 1989. The TJX division also moved its base of operations from Stoughton, Massachusetts, to a new 175,000-square-foot fulfillment center in West Bridgewater. This state-of-the-art facility offered the long-term capacity of shipping four million orders per year. In addition, Chadwick's developed an independent buying staff for the organization.

Chadwick's fall 1989 catalog was redesigned to offer a more fashionable, visually appealing, and lifestyle-oriented presentation. Management considered the results encouraging and carried the new design into the winter and holiday catalogs, both of which were deemed successful. In response to what TJX's annual report called "the extremely promotional retail environment as well as specific promotions by other apparel catalogs," Chadwick's also successfully introduced an end-of-season promotional sales catalog. In addition, during 1989 the division conducted market research in order to keep abreast of shifts in customer lifestyles. The number of Chadwick's catalogs reached 50 million in 1989. Sales in 1990--the year ended January 27, 1990--reached $77 million.

Dramatic Growth in the Early 1990s

The calendar year 1990 was marketed by dramatic expansion and other changes. Chadwick's mailed catalogs 20 times for a total distribution of about 67 million catalogs. TJX's annual report described it as "America's first company to offer the off-price concept in women's apparel nationally through the convenience of a mail-order catalog." The Chadwick's target customer was now described as the working woman between 20 and 45, a group of women "who are interested in attractively priced merchandise and who enjoy the convenience of catalog shopping." A heavy focus was placed on career wear, including current fashions and classic styles in dresses and suits. Weekend apparel was also featured, and Chadwick's increased its assortment in petite sizes. Net sales reached $112.7 million in 1991.

During 1991 Chadwick's reported "resounding success" in shifting its focus quickly in response to an increase in demand for casual wear by mailing a casual-wear focus book. The company also reported improvement in order fulfillment through better forecasting and more aggressive buying and furthered strengthened product quality-control programs, leading to reduced merchandise returns. Moreover, Chadwick's purchased its formerly leased West Bridgewater facility. Sales totaled $173.4 million in 1992, an increase of 56 percent over the previous year. Operating income rose by 44 percent, despite considerable increases in postal and United Parcel Service costs, as well as a national economic recession.

During this time Chadwick's took steps to improve its merchandise quality, an initiative it was hoped would attract more customers and reduce the volume of returned merchandise. The company also increased its telemarketing capacity and upgraded the existing system to improve the ordering process. This quality assurance program also focused on ensuring that merchandise orders were packed correctly. Finally, the company began test-marketing a line of menswear. Distribution capacity at Chadwick's more than doubled with the expansion of its fulfillment center from 175,000 square feet to more than 400,000 square feet. Chadwick's sales reached $291 million in 1993.

By the end of 1994 Chadwick's had added menswear to certain of its catalog offerings and had expanded its offerings in large and petite sizes for women. Its target customers again included homemakers as well as working women. A further expansion of the fulfillment center completed that year brought the West Bridgewater facility to 676,000 square feet of space, while the company also leased 127,000 square feet nearby for offices and warehouse space. The Chadwick's customer database was proving valuable to its parent company, providing data for TJX's store siting, micromarketing, and promotional strategies. Chadwick's also was planning a new catalog bearing the Cosmopolitan name, of magazine fame, geared toward young working women and offering the latest fashion trends at affordable prices.

A 1995 Discount Store News article declared that "Chadwick's appeals to the customer who needs to dress like she got it at Talbot's, but whose budget is more sensitive to discount values." Chadwick's sales volume grew so rapidly in 1994--passing more than $420 million for 1995--that it experienced difficulty in filling orders. As a result, sales barely grew the next year, and profits fell from four to three percent of revenues, and then to a nominal level.

Nevertheless, Chadwick's rebounded in 1996, registering sales of $472.4 million, operating profit of $26.6 million, and net income of $8.3 million. In fact, its operating profit comprised about 84 percent of parent TJX's that year. The cataloger's fulfillment rate--the percentage of customers who actually received the apparel they wanted to order--improved significantly during this time. However, because of rising paper costs, Chadwick's reduced its mailings by more than 16 percent, to 196 million catalogs.

TJX, in order to focus attention on its store-based retailing and pay down some of its debt, decided in 1996 to spin off Chadwick's of Boston as a separate company. Its plan was to sell 61 percent of the company in a $158-million initial public stock offering. The prospectus called Chadwick's "the nation's first and largest catalog retailer of off-price women's apparel," concentrating on careers, casual, and social wear at prices 25 to 50 percent below regular department stores. The company's six million active customers were said to be typically "middle- to upper-middle-income women between the age of 25 and 55." (The company had narrowed the upper limit of its target customer's age back to 50 years in 1995.) Chadwick's also began publishing Bridgewater, a new catalog that included men's as well as women's off-price apparel.

Becoming a Brylane Subsidiary

In July 1996, TJX postponed plans to spin off Chadwick's, citing a recent downturn in the stock market as exercising a dampening effect on new issues. Instead, three months later, it announced plans to sell the company to Brylane LP for an estimated $328 million in cash, notes, and receivables. Brylane, a rival catalog company, had an annual sales volume one-third larger than that of Chadwick's and specialized in plus-sized apparel for women as well as big-and-tall apparel for men. Interviewed for Catalog Age by Melissa Dowling, Brylane chairman and chief executive officer Peter Canzone observed that both enterprises had been "going after the same value-oriented apparel catalog customer" and added that "Chadwick's has some of the best merchandise negotiators in the catalog business." Chadwick's recorded sales of $451.5 million and net income of $10.9 million in 1996.

Brylane made its initial public offering the following year, becoming Brylane Inc., while its new acquisition, Chadwick's of Boston, retained its identity as an independent subsidiary still based in West Bridgewater, Massachusetts. In March 1997 Chadwick's introduced the Jessica London catalog, a new catalog for larger-sized women. Two million copies were mailed to potential customers derived from a mailing list of those who had purchased larger-size clothing from Brylane in the past. A Chadwick's executive told Shannon Oberndorf of Catalog Age, "We've been building up our plus-size file for the past year after seeing the growth in orders of our regularly featured large sizes. We're not trying to go after the Brylane customer, but targeting a segment of our own buyers." The Jessica London catalog offered prices sharply below those of department and specialty stores and targeted younger, career-oriented women sizes 14W to 26W.

Under its new ownership, the Chadwick's catalog continued to target women between the ages of 25 and 55 who wore regular-sized apparel (sizes 4 to 20.) In addition, Chadwick's had expanded its merchandise offerings to target women who wore petite and special-size apparel (sizes 2 to 26). Private labels, including brand names such as Savannah, Fads, Stephanie Andrews, and JL Plum, accounted for 53 percent of Chadwick's net sales in 1997. Men's and children's apparel, women's special-size apparel, and accessories, gifts, and cosmetics--tested and offered on a limited basis&mdashcounted for 22 percent of net sales. The company offered 73,000 stockkeeping units of merchandise at an average of about $27. The average order was $87. In its 1997 annual report, Brylane described Chadwick's market segment as about one-third--or 33 million--of all U.S. adult women. The medium age of the Chadwick's customer was said to be 42, with typical income equal to, or above, the national average.

Chadwick's announced plans in August 1997 to build a 330,000-square-foot distribution and customer-service center in an industrial park in Taunton, Massachusetts, where the company had received property tax concessions. A portion of the company's ready-to-wear women's-apparel catalog operations was moved to this location in the spring of the following year. The remainder of Chadwick's operations were still located in the Boston suburb of West Bridgewater. The company's overstock was marketed through retail outlet stores in Brockton, Massachusetts, and Nashua, New Hampshire. As it moved toward a new century, the company was reportedly planning to broaden its product line through the introduction of a bed and bath furnishings catalog.

Additional Details

Further Reference

Bailey, Steve, and Steven Syre, "Chadwick's Preparing Its IPO in Buyer's Market," Boston Globe, May 24, 1996, p. 52.Bushnell, Davis, "Tax Incentives Draw Complaints," Boston Globe, January 11, 1998, South Weekly/Business Section, p. 10.Cochrane, Thomas M., "Catalog Couture," Barron's, February 10, 1997, p. 53.Dowling, Melissa, "A Fitting Acquisition," Catalog Age, December 1996, p. 6."Mail Order Proves a Strategic Fit," Discount Store News, February 20, 1995, p. 20.Oberndorf, Shannon, "A Plus-Size Chadwick's," Catalog Age, June 1997, p. 12.Reidy, Chris, "TJX to Sell Chadwick's for $328m to Brylane," Boston Globe, October 22, 1996, p. C2.

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