When Rowland Schaefer, the founder and CEO of Claire's Stores Inc. (CLE), was felled by a stroke in late 2002, the company was caught unprepared. Even at 86, the iron-willed Schaefer hadn't groomed a successor and had only promoted his two daughters, Bonnie and Marla, to vice-chair positions to appease the board. Left with few choices, the board tapped the two sisters as "acting co-CEOs" -- but gave them orders to begin searching for a seasoned executive who could step in if their father wasn't able to return. "They had Claire's in their blood, but they were not proven quantities," says director Bruce G. Miller, a managing director at Ryan Beck & Co. (BBX).
Privately, though, Bonnie and Marla chafed at the idea of bringing in an outsider to run the $1.3 billion retailer, which sells inexpensive baubles, bangles, and bows for teens and tweens. The pair had worked most of their adult lives at Claire's and figured any outsider would need at least a year to learn the business. "We said, 'We know all this stuff, let's just go do it,"' recalls Bonnie, 52, who handles real estate and store operations from the company's headquarters in Pembroke Pines, Fla. Marla, who is four years older and the more extroverted of the two, oversees merchandising and investor relations from New York. Together they form a unique executive partnership -- a long-distance sister act built on their complementary strengths. "We like to say we share a brain," says Marla.
Back in 2002 the sisters simply ignored the directors' orders and threw themselves into the job. They did so well that after a year the board dropped the "acting" from their title. Smart move, because in the first two years of their tenure, profits nearly doubled, to $143 million, on a 28% rise in revenues -- a performance that earned them a No. 56 ranking on BusinessWeek's 2005 list of Hot Growth companies. For the fiscal year ended Jan. 31, analysts expect Claire's to record an additional 19% increase in profits. Investors clearly have bought in: Shares of Claire's have soared 157% since Bonnie and Marla took charge in November, 2002. "Wall Street was highly skeptical at first, but they've done a great job," says Eric Beder, analyst at Brean Murray, Carret & Co., a New York securities firm.
The Schaefer sisters admit they benefited from shifting fashions. Grunge was dead, and teen girls were into accessories again. But analysts credit them with revitalizing a company that had been slowed by two troublesome acquisitions -- a boys' apparel division called Mr. Rags (which was sold in May, 2002) and a second accessories chain called Afterthoughts.
Bonnie and Marla quickly reshaped the Afterthoughts unit, which had been renamed Icings, to appeal to the 17-to-27 crowd. Buying became more scientific: Instead of relying on the personal whims of the buyers, as their father had, they began using more market research to ensure they were on the cutting edge of teen trends. The sisters pushed more jewelry, which carries high margins. They also became more aggressive about licensing celebrity names they hope appeal to young teens: The company in February launched an exclusive line of Mary-KateandAshley cosmetics, and later this spring it will unveil a line of costume jewelry hand-picked by pop singer Mariah Carey. "The stores have become a hangout for teen girls," says Eugene Fram, professor of marketing at the Rochester Institute of Technology.
Meanwhile, Bonnie and Marla reorganized the management structure to break down fiefdoms "and make sure everyone was rowing in the same direction," says Bonnie. To help them drill deeper into store data and, they hope, spot sales trends earlier, the two recently hired the company's first-ever chief information officer. And while it was Rowland Schaefer who pushed the company into Europe and Japan in the 1990s, his daughters are taking the international expansion to the next level. To get a toehold in markets they don't know well, Bonnie and Marla have begun franchising the Claire's name to retailers in countries such as South Africa, Kuwait, and the United Arab Emirates.
That the sisters adapted to their new roles so well shouldn't be surprising, since they grew up in the business. Marla was a teenager when she took her first business trip to Europe with her father. She later gravitated toward merchandising, which required frequent travel to Asia to find suppliers to produce the 11,500 or so items that Claire's stocks. Bonnie, who says her father fired her from her first job as an assistant store manager because she "didn't have the right work ethic," returned a year later and found her niche on the real estate team, which contracts for space with mall landlords. Neither bothered with business school; their training was on the job.
But it wasn't easy for them to be taken seriously as they came up the ranks; the Schaefer family (their father is still alive) controls roughly one-third of the outstanding shares of the company. "No one believes you're there for any reason other than that you're a member of the family," says Marla. And the two say it was difficult to get their father, even when he was in his 80s, to cede any power. "We would pry his fingers off and say, 'Let us do it, let us do it, Dad, we're adults now,"' recalls Bonnie. "It's not that he was giving over daily control. We were taking it."
As co-CEOs, they've found a way to make what could be an uncomfortable arrangement work. They talk on the phone several times a day, and when they're together they often finish each other's sentences. Even as Bonnie complains that Marla keeps interrupting her, she twice reaches over to pick lint from her sister's sweater. "Never in my wildest dreams did I think I'd be working things out with my sister," Bonnie jokes. Indeed, they vowed from the outset to smooth over any problems privately so that employees would never see a schism between them. "We have our differences of opinion," admits Marla. "But we also know that if we're not together on something, no one in the company is going to buy into it."
When it comes to thinking about their own successor(s), Bonnie and Marla aren't necessarily counting on the next generation of Schaefers. Bonnie doesn't have children, and Marla's daughters are just 15 and 13. If they ever show interest in Claire's, she says, she'll insist they first take a job elsewhere "to have an appreciation of working in a family business."
By Dean Foust