Charming Shoppes, Inc. - Company Profile, Information, Business Description, History, Background Information on Charming Shoppes, Inc.

450 Winks Lane
Bensalem, Pennsylvania 19020

History of Charming Shoppes, Inc.

Charming Shoppes, Inc., is a leading retailer, specializing in women's apparel. Founded in 1940 with a single store in Philadelphia, Charming now operates over 1200 stores in more than 40 states; all of its store operations are under the names Fashion Bug and Fashion Bug Plus. The stores are large by apparel industry standards (averaging 8,000 square feet) and are usually located in strip malls as opposed to larger (indoor) shopping centers. The stores target middle income people and specialize in junior, misses' and large-size women's apparel, including sportswear, outerwear, intimate apparel, and accessories. The company is also moving into other markets such as shoes and casual men's apparel in some of its stores. A public company since 1971, Charming Shoppes, Inc., is a Fortune 500 company.

Charming Shoppes was opened on September 13, 1940, under the name "Charm Shoppes," by Morris and Arthur Sidewater in Philadelphia. In the 1930s, Morris (Moe) had been a buyer for Associated Merchandising in New York and Arthur (Artie) performed as a dancer on tour with Red Skelton. Apparently, Moe and Artie had long talked about opening up a women's clothing store and, with borrowed money, opened up Charm Shoppes. The two ambitious businessmen had rough going in the beginning, bringing in only $480 in sales in the first week of business. In addition, they received legal notice that very same week that they had to change their store's name because the name "Charm" was already registered. Rather than give up the business completely, the Sidewaters agreed to add "ing" to their name and were paid $235 to buy a new sign. The $235 put their accounts in the black for the first time.

It wasn't long before the new store became a thriving business. By the end of the decade the Sidewater brothers were discussing expansion. In order to open up and manage the new stores, Moe and Artie took on additional partners, with each partner managing his/her own store. In these early days, the two Sidewater brothers did their own advertising, a task at which they proved quite effective; with his previous experience as a buyer, Moe Sidewater displayed a keen understanding of fashion trends.

In 1950 the Sidewaters began a life-long business relationship with Artie's good friend, David Wachs, and David's brother, Ellis. The four formed the Sidewater/Wachs alliance and opened stores in Norristown, Pennsylvania, and Woodbury, New Jersey. Both stores were promoted with grand openings that featured local celebrities. The Woodbury store was the largest retail establishment in the town at that time.

By 1960 the four partners were ready to open the first Charming Shoppes store in a large suburban shopping center. Sensing that suburban shopping would be the wave of the future, Sidewater/Wachs felt the new stores should operate under a new name. The first "Fashion Bug" was introduced into the Black Horse Pike Shopping Center in Audubon, New Jersey, that year. This sparked a period of tremendous growth for the company as they added "Fashion Bug" stores to an additional eight shopping centers throughout Pennsylvania, New Jersey, and New York.

In 1971 the four primary partners decided to take Charming Shoppes public, offering stock issues for public sale. By this time the company had 21 stores, 18 partners, and accelerated growth rates in sales, with further potential yet untapped. Moe had taken over the primary tasks of management and systems control and, in looking toward cost cutting, began to computerize the operations; all credit charges and payments were consolidated onto a computer system installed in the company headquarters. In addition, the company centralized its bookkeeping and credit operations on computer and centralized the Fashion Bug charge accounts, thus making it possible to charge merchandise in any store. The company became a pioneer in the use of computerized cash register (point-of-sale) terminals that offered direct control over inventory.

After the computerization of much of the company's operations the company experienced its highest growth rates in its history. By the late 1970s, Charming Shoppes had 60 stores. To accommodate this accelerated growth, the company opened an additional buying office in Bensalem, Pennsylvania, that housed offices and a distribution center. The distribution center, innovative for its time, gave Charming greater control over its inventory and was soon imitated by Charming's competitors.

The centralization of operations also included a reorganization of the buying operations. Up until this time, each store manager acted as the buyer for that store. But due to the more complicated and diverse clothing markets, buyers now had to become specialists, individuals trained to select a particular type of clothing. To accommodate this trend, Charming centralized buyers into one buying division, with each buyer reporting to a specific clothing department and helping the distribution center ship out new merchandise to the stores. The larger stores also led the company to expand its display and interior design staff.

The company continued to expand during this period of reorganization. By the end of the 1970s the number of stores increased from 60 to 100 and the company again moved its headquarters to a larger location, its present Bensalem offices, a 400,000-square-foot facility. Growth continued unabated into the 1980s, as the number of stores increased six-fold in comparison with the previous decade. The company streamlined its distribution process in order to improve the flow of merchandise.

The increasing complexity associated with managing the Charming Shoppes network of stores has led to a management overhaul in recent years. For its first 30 years of existence, the entire 900-store network was essentially managed by the partnership of the four brothers from two families, the Wach and the Sidewaters. By 1987, however, the company leadership saw the need to re-evaluate their management and decision-making strategy for the future. This involved a reorganization of the managerial hierarchy.

Wachs, according to the Wall Street Journal, "took over at the opportune time for change. Like other women's apparel retailers, Charming Shoppes ... saw demand plunge for its once-popular sportswear, leaving it laden with costly inventories. Accompanying this consumer turnoff to tired fashions and miniskirts were other pesky problems: price rises from overseas suppliers hurt by the falling U.S. dollar, and uncertainty of supplies from abroad." The Journal went on to laud the company's efforts at reorganization, charging that the Charming Shoppes "merchandising prowess faltered as too many chefs played with its marketing recipe."

In an attempt to remedy the perceived stagnation of management, in 1987 David Wachs took over as chairman and CEO and implemented a management restructuring geared toward attracting professional managerial expertise in an attempt to recapture its core market constituency: middle income women, aged 25 to 45, seeking a range of apparel, from dress wear to sports wear.

The management "revolution" was also viewed as necessary since management expertise was crucial to keep the company growing. This shake-up, referred to by the Wall Street Journal as a "blood transfusion," broke up the family control that had previously determined long-term marketing strategy.

Charming Shoppes remains in a solid competitive position, whatever its recent difficulties. The company's fiscal 1993 sales were up by more than 15 percent. Charming's sales and profitability throughout the years have been consistently solid. As Women's Wear Daily reports, the company ended fiscal year 1993 with net income of $81.1 million on sales of more than $1.1 billion, a marked improvement from just ten years before, when net income was just $12.1 million on sales of $174.3 million.

According to some industry analysts, Charming's success has been largely a function of its strip mall locations, its direct control over its distribution and sourcing, and its private label credit card program. These factors remain crucial: Developers are projected to build more strip malls; the company sources 75 percent of its own goods, eliminating the need for middlemen; and its credit card program promotes customer loyalty and multiple purchases.

Most importantly, in the words of Charming's chairman, David Wachs, in the women's retail market, "we are the low-cost operator." In the end, for a given quality level, the lowest cost producer will always have the competitive advantage. The low cost strategy depends heavily on the strip mall sites; rents are historically about 40 percent lower at strip malls than large shopping centers, and the strip mall sites offer greater growth potential, according to some analysts. Further, the company's reliance on strips, which often includes exclusive rental contracts, excludes much of the competition in the women's apparel industry.

Another way in which Charming Shoppes is able to maintain its competitive cost structure is via its vertically integrated structure. The company, which already sources a high percentage of its own goods, plans on increasing this figure to 75 to 80 percent in the next couple of years. In pursuit of this increased efficiency, which has further contributed to the low cost strategy, Charming has capitalized its operations, investing in the latest electronics technology for clothing pattern design, computerized inventory control, and design.

Investors' analysis of the expected future earnings is optimistic and Charming plans to expand to 2000 stores, according to CEO David Wachs. This expansion will include new merchandising efforts into the sportswear and ready-to-wear departments, with special emphasis on men's wear.

Principal Subsidiaries: C.S.A.C., Inc.; C.S.F. Corp.; C.S.I.C., Inc.; Charming F.S. Co.; Diversified Fashions, Inc.; Fashion Service Corp.; J.M. Balter, Co.; J.P.A. Service Co.; Kirkstone Ltd.; Winks Lane, Inc.; International Apparel, Inc.; CSI Industries, Inc.; Executive Flights, Inc.; Specialty Fixtures, Inc.; Ericool Co. Ltd.; Evatone Trading Co.; FB Clothing, Inc.; Fashion Acceptance Corp.; Sentani Trading Ltd.; Yardarm Trading Ltd.; W.L. Distributors, Inc.; FSHC, Inc.; Charming Shoppes of Delaware, Inc.

Additional Details

Further Reference

Charming Shoppes, Inc. Annual Reports, Bensalem, PA: Charming Shoppes, Inc., 1979-1992."The History of Charming Shoppes," In Touch, Charming Shoppes, Vol. 8, no. 8, August, 1986.Hymowitz, Carol, "At Charming Shoppes, A Blood Transfusion," Wall Street Journal, October 10, 1988.Macintosh, Jeane, "Charming Shoppes' Fashion Bug Flies High," Women's Wear Daily, November 25, 1992.

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