How a plus-size clothing label dug out of bankruptcy: Body pride, diversity and Instagram

By Robin Givhan

James Rhee, executive chairman and chief executive officer of Ashley Stewart. Photo / Yana Paskova
James Rhee, executive chairman and chief executive officer of Ashley Stewart. Photo / Yana Paskova

Three years ago, Ashley Stewart was a retail nightmare. It was an unprofitable mess of 189 stores buried in unglamorous malls and inner-city business districts. It was also operating in the digital Stone Age with outdated e-commerce and no social-media strategy. It had already suffered through one bankruptcy and was headed into another.

All the while, it was selling clothes to some of fashion's most disrespected customers: Plus-size women. African-American women.

For James Rhee, recounting this litany of woes and sins is now a form of bragging.

How bad were things? God-awful. Which means that, by comparison, things are now pretty great.

"It had no value," says Rhee, who stepped in as chief executive officer when the company hit rock-bottom in 2013.

Today, Ashley Stewart, which is privately owned, has risen from the depths of financial despair to ride a cultural, social and demographic wave.

It has become a streamlined and profitable 21st-century brand with an e-commerce business accounting for 40 per cent of its revenue, as well as a lively social-media presence.

A brand kept on life support by the loyalty of black women now has an online customer base that is 40 per cent white. And instead of losing $7 million a year, Rhee says, the brand is ringing up profits of $20 million annually.

The upswing is, in part, because of better management and improved technology. It is surely a victory for math geeks. But Rhee also made several bets that are paying off. He put his faith in Instagram, body pride and diversity.

"Part of my thinking during the first six months was, when you look at the world over the next 10 years, are you going to bet on social media? That women over size 12 will have their day? Will nonblack women look at black women as emblems of beauty?"

James Rhee, executive chairman and chief executive officer of Ashley Stewart. Photo / Yana Paskova
James Rhee, executive chairman and chief executive officer of Ashley Stewart. Photo / Yana Paskova

"I believe the time has come for this woman."

He may be right.

The average American woman is about 5'3" and weighs a smidgen over 166 pounds, according to the Centers for Disease Control and Prevention. Her waist circumference is 37.5 inches, which means that at the Gap she wears a size 18 and at Gucci she does not exist.

The variety of fashion available to plus-size customers has expanded significantly in the past decade. Brands such as Lane Bryant are upping their fashion savvy with the help of designers Sophie Theallet and Prabal Gurung. Christian Siriano, who has also worked with Lane Bryant, has gained a reputation as a Seventh Avenue designer who not only is eager to dress non-model-size celebrities but is also particularly adept at it.

Most recently, he designed the gown Leslie Jones wore to the premiere of her film "Ghostbusters." And when Fashion Week begins in New York on Sept. 8, designer Byron Lars will present a collection that ranges from size 0 to 18.

Plus-size models such as Ashley Graham are more prominent in glossy magazines, and the understanding of precisely what plus-size customers want from the fashion industry has shifted: They aren't searching for clothes to make them look thinner; they want clothes to help them realise the sexy and glamorous vision they already have of themselves. Indeed, Graham will present her unabashedly sexy lingerie line on the fashion week runway in partnership with the Canadian plus-size retailer Addition Elle.

We never talk 'plus.' We never talk race. We want to make ... clothes that are affordable, on-trend and make her look great.

Ashley Stewart is exploiting all those cultural shifts to get its share of a $20 billion segment of the fashion business.

"We never talk 'plus.' We never talk race. We want to make ... clothes that are affordable, on-trend and make her look great," Rhee says.

Race, however, was part of the original Ashley Stewart business model - and part of what made it different.

The company was founded in 1991 by New York real estate developer Joseph Sitt, who believed money was to be made by bringing mainstream retail to underserved urban neighbourhoods. He was not a fashion guy; he was a bricks-and-mortar guy. But to convince national brands that they could build profitable businesses in predominantly African-American communities, he had to show them what was possible.

His market research revealed that among the many businesses these neighbourhoods were lacking, there was a particularly glaring omission: women's apparel. Sitt's research also showed that many of those potential customers were plus-size. As Sitt noted in a 2006 interview with Inc. magazine, he came up with the store's name by merging Laura Ashley with Martha Stewart, two brands that he thought "were icons of upscale Americana, and we wanted to bring that upscale shopping experience - the antithesis of what you've seen in the inner city."

Clothing part of the Ashley Stewart collection.
Clothing part of the Ashley Stewart collection.

He built tremendous goodwill for the stores within the communities by participating in local fundraisers and handing out discount coupons. But mostly, he gave his customer the fashion that she craved.

"She wants it to be tight and sexy. She wants to be noticed," says Kristen Gaskins, president and chief merchant officer. "She's conservative; she goes to church. But she also has an active nightlife."

The result was a brand that grew from one store to more than 350, spread out over 100 cities, and that was hailed as a symbol of urban renewal. Sitt's company branched out to speak to Latina women with the Marianne brand. The enterprise eventually brought in a reported $400 million in annual sales.

In 2000, he sold the company to the first of many private equity firms that would preside over a downward spiral - one caused by over expansion, poor management and a shift into basic, boring clothes - that gained speed during the recession.

Ashley Stewart filed for bankruptcy in 2010 and again in 2014.

It was as the second bankruptcy was looming that Rhee, who was on the board of the parent company, resigned from his position and took the reins of Ashley Stewart.

Rhee is first generation Korean-American - a Harvard-educated lawyer who never practised law. He spent two years teaching high school history before settling into a career in finance. "The learning curve was steep and humbling," says Rhee, 45, who also holds an ownership stake in the company. "I told everyone that on paper, I was the least qualified person to run the company."

But he had unlikely emotional connection to Ashley Stewart's customer base, which has a history of not being served well by the fashion industry.

They have something for the younger crowd, but nice, sexy stuff for the older woman.

"The brand reminds me of my mom," he says. "She didn't grow up here or speak the language. She was an educated woman, but she didn't always feel comfortable. But she'd go into a Korean grocer and they'd be speaking her language, and I could see that she'd feel comfortable. I could see it in her shoulders."

"One of the things our brand stands for," Rhee says, "is not judging people, but being accepting."

During the first six months of Rhee's tenure, he visited stores and watched customers shop.

He noticed that many of the black women who browsed during the week were focused on getting a good deal. But when they came in on the weekend, they were often searching for something special for an evening out. And they were willing to pay full price. He also learned that a lot of the women were not just devoted customers, but also devout churchgoers.

"I'd go shopping every Sunday after church," says Connie Holmes, a D.C. Police officer. "One Sunday, I was looking at the line and it was so long. I said, 'I can't wait all day; I have to go home and cook dinner! You all need more help in here!' " So the store's manager suggested she fill out an application. She's been working as a part-time clerk for five years.

Clothing part of the Ashley Stewart collection.
Clothing part of the Ashley Stewart collection.

Rhee took what he learned about the customers and applied it to a business plan. While every company uses social media - to sell products, to build a network - Rhee added church to the conversation. The company promotes #churchflow - a hashtag that the Sunday morning community uses when posting pictures of their church fashion. The brand also promotes its more modest offerings as perfect for Sunday service or a fellowship hall dinner.

In an industry regularly criticised for its disinterest in diversity, Ashley Stewart has aggressively reached out to black women with block parties in Brooklyn, panel discussions on black entrepreneurship and cross-promotions with Carol's Daughter, a brand specialising in products for natural and chemically relaxed hair.

Rhee also made fundamental organisational changes. He closed about 100 stores. He decreased the payroll from 1,800 employees to 1,000. He upgraded the website and revamped the merchandising team. He sped up the production cycle so the company can get fresh goods into stores within four to six weeks.

The Ashley Stewart shop in Largo, Maryland, survived the purge. It's tucked into an open-air mall that includes Foot Locker, Shoe City, Sprint and a lot of empty storefronts. Tyrone Holland, the store manager, has been with Ashley Stewart for about 10 years. Before that, he'd spent two decades working in fast food.

He has gotten to know a lot of his customers because a lot of them come in regularly. Janice Berry estimates that she shops the store about 15 times a month, which is to say that she is the kind of customer that retailers dream about. Berry is a 69-year-old black woman with a lineless face, a pixie haircut and rimless eyeglass. She wears a size 14, perhaps a 16. "I like sporty things, but sexy," she says. "They have something for the younger crowd, but nice, sexy stuff for the older woman."

If you want colour, this is the place to be.

Ashley Stewart is not a runway brand with fashion cachet. It is not especially inventive or luxurious. But it no longer traffics in basics. It sells styles that were once presumed to be taboo for women of a certain size. In addition to business attire, the racks are filled with jersey jumpsuits, off-the-shoulder blouses, jeggings,tulle skirts and denim cutoffs that barely look long enough to cover the tush. All of this is available in size 12 to 26, some of it as large as a 32.

"People think it's so much harder to service this customer than it is," Gaskins says. "She really isn't a separate customer. If I wake up tomorrow as a size 22, I'm still going to be me."

The fashion industry is at a crossroads. As it looks forward to its twice-yearly ritual of runways shows, it mulls multiple questions: Do catwalk productions geared to the trade make sense when shoppers are accustomed to direct access to pretty much everything? How do fashion brands monetise Instagram followers? Can Seventh Avenue continue to ignore women larger than a size 14?

In June, Ashley Stewart got a new owner: The Invus Group. The investment firm also owns Weight Watchers, which is either a grand contradiction or perfect synergy. The stores, most of which are about 3,500 square feet, have not been remodelled. They are not glittering showcases. And while plenty of customers have noticed improvements, others have not. "I think it's the same," shrugs Tonie Anstead, 59, as she browsed the sale racks.

But adds: "If you want colour, this is the place to be." Oh, and she likes the shirts.

How bad were things? The company sold scrap metal from its warehouse to help make payroll. By comparison, that makes even a lukewarm customer assessment practically a rave.

- Washington Post

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