As president of Garfinckel, Brooks Brothers, Miller of Rhoads, Inc., David Waters has big plans for Washington:
A new Garfinckel's store in Georgetown, another in Friendship Heights, and eventually two more in yet-to-be-built suburban malls;
Three more Ann Taylor stores, one in the city and two in the suburbs;
New interiors, new merchandise and possibly new stores for Joseph R. Harris Co., which already as new management;
A new downtown Brooks Brothers store and perhaps a future suburban store as well.
These ambitious expansion goals are a major part of the internal growth that will be needed to meet the corporate target set by the Washington retail conglomerate - doublig ng sales and profits in the next five years.
Garfinckel Corp. earned $9.679 million last year on sales of $296 million. If earnings can keep pace with an estimated 20 per cent sales growth this year, the bottom line will exceed $11.5 million.
A more important goal for Garfinckel's management is improving the return on equity, which was 11.5 per cent last year. Under an excutive incentive plan, if ROE is brought up to the industry average, or 12.1 per cent, the management team qualifies for a bonus amounting to 3 per cent of pretax profits: Based on last year's earnings of $18 million, that would amount to $580,000. The ante goes up to 5 per cent, then 7.5 cent, if the return can be pushed a full point or even two above the industry average.
An important strategy for meeting those goals is acquisitions. The two made so far in recent months, the $14 million-a-year Ann Taylor fashion specialty chain and the $23.4 million Catherine's Stout Shoppe operation, will boost volume this year by more than $37 million.
Adding a 6 per cent to 8 per cent growth factor, the first year of the five-year plan should push Garfinckel's corporate volume toward $355 million for fiscal 1977, ending early next year. That's a 20 per cent gain over 1976's $297 million in sales, a pace that Waters said will be maintained.
In number of stores, the company has more than doubled since July to 192 units - adding 27 Ann Taylors and 73 Stout Shoppes to the existing 7 Garfinckel's, 17 Brooks Brothers, 27 Joseph R. Harris, 8 Harzfeld's, 21 Miller & Rhoads and 12 Miller's stores.
In five years, the corporate president said, Garfinckel will be a "a diversified company in terms of the type of merchandise and the types of markets we are in. We are committed to diversification."
Merchandise diversification will largely come by expansion. Although the recent aquisitions have been soft goods retailers, Waters lists hard lines companies as the next targets - catalog Showrooms, home improvement centers and "anything in the recreation and leisure markets." Acquisitions, he added, must have the attributes of the first two - good sales growth, good profit potential and good management that wants to remain with the corporation.
Market diversification, Waters indicated, will come both by acquisition and expansion. The purchase of Catherine's Stout Shoppes put the company into dozens of smaller Southern and mid-Atlantic cities in which it had never done business.
The Garfinckel's stores will expand out of the Washington market for the first time. Sites in Annapolis and Baltimore are being studied now, he said. If the regional expansion is successful, "we'd like to make it bigger," eventually a national chain.
Although the lease had not been signed, a new 20,000-square-foot Garfinckel's is planned as the largest store in a massive development called Georgetown Park, located south of M Street NW and west of Wisconsin Avenue, along both sides of the C & O Canal. The Garfinckel's store will be next door to Clyde's, with entrances from M Street and from and from and interior courtyard in the project now being created by developer Herbert Miller.
Garfinckel's is also ooking for a location on upper WIsconsin Avenue, in or near the Mazza Gallerie where Neiman-Marcus opened last week. It is a likely tenant for the proposed Tyson's II project as well as another mall planned in Fairfax City.
In order to maintain its share of the Washington retail market, Gardinckel's will have to expand. After five years of getting a steadily increasing share of the city's quality clothing budget, Garfinckel's sales growth has been slowed by the immigration of new rivals, Waters acknowledged. The specialty retailer competes more directly with Bloomingdales and Neiman-Marcus than any other Washington Retailer.
"In the long term we will compete effectively with the newcomers. We've been here, we know the market, we don't have to show our people films to teach them how Washington dresses,? he said, alluding to a technique used by Neiman-Marcus.
To compete more effectively, Garfinckel plans to revamp its men's wear departments where, Waters said, "We have not been strong enough to expoit the full potential available to us."
After a not entirely successful attempt at dressing Washington men in European fashions, Garfinckel's will more - along with most of the men's wear industry - toward "an updated traditional" approach. The appeal will be to a somewhat younger, "hipper" style, with more fashion influences than at Brooks Brothers.
As for Brooks Brothers, that division's Washington business could benefit from updating its downtown store, although there is no plan to abandon the present location. "Downtown is right for Brooks Brothers," said Waters, but he added, "We'd like to have a larger store at a first floor location."
What happens will depend on current plans to build a new retail and commercial complex at Connectivut Avenue and L Street NW, where Brooks now is located. Although the Garfinckel corporation does not report sales or profits for its individual operations, Water readily acknowledges that Brooks Brothers is the most profitable men's clothing business in the country. "At least nobody has argued with us," he said.
An important factor in that profitability, as well as in Brooks Brother's reputation for quality, is that is manufactures a majority of the clothes it sells, turning out not most of its suits but virtually all of its shirts and ties in three plants it owns in the New York area.
Manufacturing, however, tends to restrict Brooks Brothers growth rate, because opening a new store also means adding more sewing machines and tailors and expanding the factory in order to maintain the "look" of Brooks Brothers.
Neither pleasing profits nor a well-recognized look are among the assets of Joseph R. Harris, another Garfinckel corporation division. The division is losing money and Waters blames that on its lack of a well-defined identity.
Two members of the Harris family, from which the corporation purchased from which the chain in 1971, resigned last March and a new president, Steven Spyro, has taken over. Harris' first priority is "setting a clear definition of what it is," Waters said.
Seeking a segment of the market less expensive than the Garfinckel's stores and less trendy than Ann Taylor, the Harris stors will try to position themselves as an updated misses' operation, catering to 25-to-40-year-old women at moderate to upper moderate prices!
Most fall merchandise had been purchsed by the time the new Joseph R Harris president came on board, so it will be spring before the new approach is fully evident.
Along with new merchandising will come new store decor, and possibly some additional Harris stores in the Washington area. The chain is not yet ready to expand - it might instead benefit from contracting, Waters suggested - but opening of new reail centers could make it necessary to move and provide an opportunity of inaugurating a new look at the same time.
Additional Ann Taylor units are needed to maximize that opertion's share of hte market and to compete with Bloomingdale's for young women with a weakness for the women with a weakness for clothes. Considered a hot number in the women's wear business, Ann Taylor shops, which average a half million dollars of business a year, are too expensive and too avante garde to suceed everywhere in the Washington area.
In Richmond, where Miller & Rhoads is one of the major retailers, a new management team will take over next year when president John Marchant and vice president Gordon Malonee reach retirement age. A major marketing study will provide the basis for planning the future of that division, including a major makeover of the massive downtown store.
With five stores in Richmond - some of them new and just now maturing - Miller & Rhoads is saturating that market and will expand into Tidewate, the Garfinckel president predicted.
A new Miller's department store will open next year in Johnson City, Tenn., and that division's Chattanooga store will be renovated. Harzfeld's, a Kansas City women's wear chain, is also getting corporate marketing study that will help determine its future.