FASHION VICTIM

Etam is finally up for sale. After years of failed repositionings and 1997 losses of more than 4m, the fashion retailer has no choice. Natalie Cheary investigates likely buyers and asks, who can save Etam?

The Etam brand brings several things to mind. Sadly, for its owners, plunging profits, poorly-focused advertising and an outdated image are just a few of them. In fact, the only recent good news for shareholders has been the announcement that the fashion retailer is up for sale.

Etam is constantly referred to by the press as a “troubled” or “struggling” chain. Since the end of the recession, the retailer has endeavoured to reinvent itself under managing director Nick Hollingworth, the former md of Evans. One of the major problems, say observers, is Etam’s image.

Over the past five years, Etam’s operating profits have plummeted from 11.8m in 1993 to 465,000 in 1996 to a loss of 4.2m in 1997.

Turnover, meanwhile, has de-creased from 221m in 1993 to 187m in 1997 and the number of outlets has shrunk from 239 to 216.

Etam is underperforming against rivals in a growth market. According to figures from Verdict Research, only three clothing retailers have seen their market share fall since 1994 – C&A, Bhs and Etam, which has suffered the greatest fall from 1.3 to 0.9 per cent. By contrast, New Look has built its share from 0.7 to 1.2 per cent.

Last week’s sharp rise in the 74-year-old retailer’s share price – from 109.5p to 140.5p – led to an admission from the chain that it “has received approaches from third parties which may or may not lead to a change in control of the company”.

Despite the doom and gloom, Etam insists that it does not need to be taken over to survive. Instead, an acquisition will speed up the process of recovery.

Andrew Hayes, spokesman for the company, says: “Etam is looking for a partner to accelerate the recovery process…it [the recovery process] is taking time and Etam is now considering who it can work with on that.”

But the chain is unlikely to turn the situation around on its own. It has undergone a series of revamps in recent years which have failed to reverse its fortunes. The constant change has been reflected in its advertising, designed to attract young women but which has used older role models to represent the brand, such as EastEnders’ Michelle Collins, models Jerry Hall and Marie Helvin, swimmer Sharon Davis and actress Leslie Ash. It has now turned to Ulrika Jonsson and Patsy Kensit for its latest press executions.

The Kensit advertising, Hollingworth’s attempt to mirror Dorothy Perkins’ success with supermodel Helena Christensen, was unfocused and confused consumers as to which market Etam is targeting.

The two favourites to take over the retail chain are New Look and the Burton Group. But both House of Fraser and Moss Bros have also been linked to a deal.

Etam is no stranger to takeover bids. In 1991, a UK company, Oceana, launched a hostile bid, which was rejected. The company does, however, have a 40 per cent stake in the business and Oceana’s chief executive Michael Lewis and his father Stanley – now chairman of Etam – joined Etam’s board in 1993. It is not known whether they are supporting a sell-off.

A report in the Financial Times last week suggested talks between Etam and New Look are already well underway. Both refuse to comment.

New Look, which has grown strongly over recent years, is among Etam’s closest rivals, along with Burton Group’s Top Shop, Miss Selfridge, Bay Trading Co and, more upmarket, Dorothy Perkins and River Island.

Launched in 1969, New Look was a relatively late entrant into the market but has expanded rapidly. The independent chain, which is planning to float on the stock exchange, has a database of about 200,000 account holders and over 400 stores.

Significantly, New Look’s sales are 455 per sq ft, compared with Dorothy Perkin’s 325, River Island’s 316 and Miss Selfridge’s 314. Etam’s 225 sales per sq ft, half that of New Look, underlines its parlous state.

A survey into shopping habits by market research consultant Taylor Nelson AGB, completed this month, has also found that New Look is second only to Marks & Spencer when it comes to customer loyalty.

The survey, which involved 6,000 women of all ages, social classes and locations over a period of 32 weeks, showed that 23 per cent of respondents regularly shop in New Look. Dorothy Perkins ranked third, Top Shop seventh, Etam ninth and River Island tenth.

Plans to launch a home shopping catalogue and ranges of footwear and underwear in every New Look store were also announced last month.

The Burton Group is a different type of predator. The group has Top Shop, Dorothy Perkins, Principles, Evans, Burtons and Top Man in its portfolio, giving it a market share of five per cent (the 1996 figure includes department store Debenhams which is being demerged from the group).

Recently consolidated to enable the five branded chains to operate as one business, the group is going through a period of profound change. Even the name of the holding company is changing – to Arcadia.

The other two parties linked with a possible deal, Moss Bros and House of Fraser, are both less likely bidders.

Moss Bros specialises in menswear with chains such as Cecil Gee, the Suit Company and Blazer. Although recent figures show healthy, increasing profits, future expansion plans seem geared more towards rolling out existing chains and exploring the mail order market.

Similarly, House of Fraser (HoF) appears to be internally, rather than externally, focused. The department store chain is concentrating on its successful own-label range Linea. Clive Vaughan, retail analyst at Verdict Research, observes that HoF acquiring Etam would be like “the blind leading the blind”.

Etam’s key problem is the public’s perception of it. The chain has a historic association with the so-called “Essex girl” phenomenon, namely women with high disposable income who prefer the “cheap and cheerful” to the classic, upmarket and designer brands.

It was those very same women who suffered during the recession in the early Nineties and Etam has been trying to redefine itself ever since.

The first major relaunch was in 1994 when the chain rethought its range to cater for a more upmarket consumer. The likes of Next and Principles were, however, already very strong in that market and the relaunch failed.

This year, Etam has “relaunched” itself yet again, most recently with the Patsy Kensit campaign. The ads, featuring Kensit dressed in leopard skin, with the strapline “clothes with personality”, ran in every women’s magazine. Many column inches were devoted to them.

Etam became the second biggest advertising spender in women’s magazines between August 1996 and July 1997. The chain was not far behind designer brand Escada with a spend of 585,000, compared with a zero spend for the 12 months before. Dorothy Perkins came a close third with 446,000, a 1.7 per cent decrease on the previous year.

Yet unrest within Etam was evident when it appointed two advertising agencies within the space of five months. Clark & Taylor was chosen in March with a brief to revamp the brand. Steven Sharp Associates – the agency responsible for launching supermodel Helena Christensen as the “face” of Dorothy Perkins – was then appointed in August to launch the Kensit campaign. The agency subsequently split with Dorothy Perkins because of its association with Etam.

Jane Gill, fashion editor of Cosmopolitan, says Etam’s major problem is the public’s inability to see past the “Essex girl” image. “Women have their own view of Etam from the early Eighties and it’s going to be really hard to change that. When you say ‘Etam’, people have an automatic perception.” Gill adds that this perception is “a real shame” as Etam’s latest collection is actually full of quality, fashionable clothes.

A test undertaken in the early Nineties reiterates Gill’s point and proves that Etam’s problems have less to do with quality and more to do with negative brand association.

A panel of shoppers was asked to rank by quality and desirability clothes from a range of shops, including M&S and Next. Etam was placed near the bottom yet when the shoppers were given a similar selection with the labels taken out, Etam was ranked one place behind M&S at the top.

Etam has failed to bridge that credibility gap.

Vaughan puts Etam’s problems down to the fact that it did not change fast enough to meet the competition. It did try to diversify by launching teenage retailer Snob and menswear retailers Peter Brown and Boyz 2, but all three chains were soon phased out. “Perhaps part of the problem was that the previous management took their eye off the ball,” he says.

One area where the management has lost its vision is Etam’s advertising, whereas rival Dorothy Perkins seems to have hit the nail on the head, Gill believes. “Whatever Helena Christensen wears sells out instantly,” she says. In other words, young women relate and aspire to the glamorous model’s image in a way that they don’t with Etam’s models.

Dorothy Perkins has also succeeded in giving itself a more up-market image with the introduction of the diffusion range by Clements Ribeiro, the duo of designers who are stealing the show on the catwalks at the moment. Similarly, River Island has the Charlotte Halton formal wear and Louisa Calvino higher price ranges.

Etam refutes, however, that its target consumer is the young woman. Hayes says: “Etam has a broad appeal to women in their 20s, 30s and 40s. It’s not high fashion but it’s fashionable. It’s not focused on the As but the Cs.” The chain has a range of maternity wear, as does Dorothy Perkins, aimed at older shoppers.

Whoever Etam attempts to target, it will struggle to discard the negative image associated with it. Yet its stores in prime high street locations make it an attractive proposition.

Discarding the brand and starting from scratch seems to be the most sensible solution for any potential purchaser. It certainly worked for cheap and cheerful Chelsea Girl, now known to millions of young women as the upmarket and stylish River Island.

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