Retail

A lesson the CEO of Francesca's learned when he was fired once is helping to shape the retailer's turnaround strategy

Key Points
  • Francesca's CEO Andrew Clarke is leading the apparel chain through a transformation post-bankruptcy and is looking to focus on the LGBTQ community.
  • Clarke, 47, is one of the few openly gay retail CEOs.
  • Clarke wants to make Francesca's a safe space for customers and for employees — in large part because he remembers not feeling represented himself as a member of the LGBTQ community earlier in his career.
Andrew Clarke, 47, took over as the CEO of the apparel retailer Francesca's in March 2020.
Source: Francesca's

When Andrew Clarke was in his late 30s, he was let go from a retail job because of his sexual orientation.

"My boss at the time said to me that my lifestyle was incompatible with the company's values," said Clarke, now a 25-year veteran in the retail industry who is also one of retail's few openly gay CEOs.

"This was earlier in my career, but it wasn't that long ago," the 47-year-old said. "I think for the early part of my career, I very much hid my private life. I knew, in some of my earlier roles, that my boyfriend — who then became my husband — wouldn't be welcome at company events."

Today, Clarke serves as chief executive officer of the Houston-based boutique clothing company Francesca's, but that experience is still shaping his decisions.

When he decided to pursue the Francesca's gig in early 2020, he saw an opportunity to turn around an embattled chain that had reported two years' worth of losses. Francesca's had found its name on a number of experts' bankruptcy watch lists. But Clarke never could have predicted that his first day on the job last March would be 10 days before the Covid pandemic forced mall-based retailers, including Francesca's, to shut their doors for months. A little over a year into being CEO, Clarke finds himself working under new private equity ownership that rescued the brand out of a Chapter 11 filing.

"My turnaround opportunity at Francesca's became very much a fight for survival," Clarke said. "But I joined Francesca's because what I saw was a real opportunity for this brand that hadn't really been successful for two or three years. I felt there was hidden gold."

When the pandemic hit, stuck-at-home consumers weren't shopping for apparel, which made up more than 55% of Francesca's sales — with footwear, jewelry, accessories and gifts accounting for the remainder. Francesca's also had a skimpy showing online, with e-commerce accounting for less than a quarter of its total sales. That hurt the business terribly when its stores were temporarily dark.

For the third quarter, ended Oct. 31, 2020, Francesca's net sales totaled $79.3 million, a 17% drop year over year, the company said in court documents.

On Dec. 3, 2020, Francesca's filed for Chapter 11 bankruptcy protection, as a yearslong battle to get back to growth came to a head. Its business had hit a peak when it reported positive EBITDA of $87 million in 2016, court documents explained, which diminished to a loss of $62 million in 2020. Francesca's joined a long list of apparel retailers that also filed for bankruptcy protection last year, including Brooks Brothers, J. Crew and the department store chain J.C. Penney.

The business was sold to Francesca's Acquisition — an affiliate of TerraMar Capital, Tiger Capital Group and SB360 Capital Group — in February. The deal enabled Francesca's to emerge from bankruptcy with a $25 million asset-based revolving credit facility.

'Big unlock'

"Although the pandemic was wreaking havoc across the retail industry — and we were certainly not spared — ... but that actually was a big unlock for us," Clarke explained. "We said, 'We have to innovate. We have to change this model. We have to do it very quickly if we're going to be here on the other side of the pandemic.'"

Shedding underperforming brick-and-mortar stores has been one action. Pre-bankruptcy, Francesca's was already in the process of closing unprofitable stores in malls. But a court-supervised restructuring process allowed it to break leases and speed up some of that work.

Under Francesca's new owners, at least 275 stores will stay open. It has 460 operating today, down from the 558 locations the retailer had when it filed for bankruptcy last December, and an even bigger decrease from the more than 700 it had in 2019.

"On the shoulders of a successfully right-sized footprint, we should be able to build a really profitable omnichannel business," Clarke said.

Clarke's other focus is fixing the retailer's merchandise. Prior to him joining Francesca's, the brand was most known for date-night outfits, dresses for school dances or graduations, and chic work wear, Clarke said. But it has needed to shift as shoppers seek out more casual and comfortable options.

Many apparel retailers are grappling with this new preference. Apparel sales fell 19% last year, according to The NPD Group, but categories such as sweatpants and pajamas reported growth. Even as people look to refresh their wardrobes with new styles, many are still seeking comfortable options such as pants with elastic waistbands.

Source: Francesca's

Francesca's target audience has traditionally been women ages 18 to 35, but the business also now wants to reach younger girls. It recently added a tween collection, called Franki by Francesca's​, which has a range of more dressed-down options, including graphic tees and distressed denim, as well as crop tops and jumpsuits.

By going after Gen Z consumers, Clarke hopes to reach a generation of shoppers that has proven it favors buying from brands that stand for something and speak more authentically in their marketing. His professional background also makes him a fitting pick to be spearheading this shift. Clarke previously served as chief merchandising officer of the tween clothing and accessories brand Justice. He also has run Kmart's apparel business and led the women's apparel maker Loft.

'Free to be you'

Clarke wants to make Francesca's a safe space for customers and for employees — in large part because he remembers not feeling represented himself as a member of the LGBTQ community earlier in his career.

"Being fired for the way I live my life was a wake-up call for me — not about my values, but if I was ever in a position senior enough to create and craft company values, that would be the antithesis of what I experienced myself," he said. "And that's what we're doing now at Francesca's."

Clarke has taken what used to serve only as an internal motto to boost employee morale, "Free to be you," and is making it into a customer-facing slogan for marketing and graphics in stores. According to Clarke, this is one example of how the company is trying to pivot to reach more customers, including the LGBTQ community.

"As we look at the data around our customer, we see a rich diversity amongst our base," the CEO explained. "And our strategies have evolved to appeal much more broadly to that diverse customer."

For Pride Month, Francesca's has partnered with the gender-fluid fashion label The Phluid Project. Select rainbow-inspired products from Phluid Project will be available on Francesca's website and in its stores, the company said.

But Clarke sees the potential to do much more.

"This journey we're on — we're at the beginning," Clarke said. "We're creating a new company ... it's not just about Pride Month. It's about building something much more longer-term. We are playing catch-up in some respects, from the inside out, and on the product side we sell."

He hopes that by being open about his sexuality to customers and to employees, he will inspire others to be open as well.

"In order to change perception, perspective and to educate, it's necessary to have that representation," Clarke said. "I'm fortunate enough as an LGBTQ+ community member appointed to my role as the CEO of a public company ... I feel absolutely responsible for creating a safe, accepting, diverse working culture and environment for all my associates. It's as much internal as it is external."

"At the beginning of 2020, becoming the CEO of a public company as a gay man ... it's something I never thought I would achieve," he said.

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