Mitchells stores, a Connecticut clothier to hedge funds and corporate chiefs, prospered with Wall Street until the financial crisis battered sales. Now, the group sees its California counterpart as the path to growth.
Mitchells acquired San Francisco retail icon Wilkes Bashford in November for $4.1 million in bankruptcy court, merging the East Coast stores frequented by Starwood Capital Group LLC’s Barry Sternlicht with a West Coast shop that supplies Apple Inc.’s Steve Jobs with his famous black shirts. The cross-country move is a gamble as luxury sales struggle to recover after the U.S. recession.
“If they’re able to maintain the same service, they will change the game,” Jack Welch, 74, the former General Electric Co. chairman and a Mitchells customer for a quarter-century, said in a telephone interview. “But it’s a long putt when you’ve got 3,000 miles between stores.”
Jack Mitchell, whose parents started the eponymous Westport store in 1958, said the family-owned business went west because “enormous decreases” in wealth by New York-area clientele meant expansion had to occur elsewhere. Hedge-fund executives, who once bought $1,500 John Lobb shoes, are spending cautiously in the aftermath of the financial crisis, he said.
About 240 hedge funds closed in the first quarter, following the liquidation of almost 2,500 in the prior two years, according to Hedge Fund Research Inc., a Chicago-based industry data provider. The Mitchell family’s Richards store in Greenwich, home to about 100 hedge funds, gets 70 percent of its sales from ZIP codes in that city.
A Changed World
“The world has definitely changed,” said Mitchell, 71, chief executive officer of the retail group. “But there’s still a place for quality products delivered with extraordinary, personalized service.”
Luxury fashion sales in the U.S. fell at least 30 percent from their peak, according to Robert Ackerman, North American president and CEO of Ermenegildo Zegna, the Milan-based maker of $3,000 men’s suits. The sector is “fragile,” Stephen Sadove, CEO of New York-based retailer Saks Inc., said in an August interview with Bloomberg Television.
“Everyone says luxury is coming back, but revenues aren’t what they were,” Russell Mitchell, 47, co-president, said in a telephone interview.
The five Mitchells properties -- two Connecticut stores, two in California and one in Huntington, New York -- had sales of more than $100 million in the year through July. That’s below the 2007 high achieved without the California assets, Jack Mitchell said. Still, year-over-year sales rose at least 10 percent in every month since last October, he said. He declined to give exact revenue figures.
Saks Sales Rise
Saks today reported that same-store sales for the five weeks ended Oct. 2 increased 6.5 percent from a year earlier. Dallas-based Neiman Marcus Inc. said sales gained 4.7 percent. Those retailers often track the performance of the family stores, Mitchell said.
Boosting sales in California may take time as unemployment saps demand, said Tom Newton, a Wilkes Bashford customer in the San Francisco suburb of Atherton and co-founder of ICD Funds, a money-market firm.
“It’s been devastating and I don’t see tremendous growth,” Newton, 44, said. “There’s still shock and a feeling of batten down the hatches.”
Finance Jobs Lost
The San Francisco metro area lost 3,100 finance-related jobs in the year through August and 12,800 since August 2007, state Employment Development Department data show. Technology fared better, with jobs in computer systems design increasing by 1,700 in the last year. San Jose’s metro area to the south added 4,000 jobs in computer and electronic manufacturing.
Wilkes Bashford Co. shut stores in Carmel and Mill Valley and laid off a fifth of its staff when it filed for Chapter 11 protection. Mitchells paid cash for the assets, assumed no liabilities, and renegotiated leases in San Francisco’s Union Square and at Stanford Shopping Center in Palo Alto, Russ Mitchell said. He didn’t disclose lease details.
The vacancy rate in Union Square, the city’s downtown shopping district where Hermes, Gucci, Tiffany, Neiman Marcus and Saks Fifth Avenue have stores, fell to 9 percent in August from 15 percent a year earlier, according to Ross Portugeis, a broker at Colliers International in San Francisco. Landlords cut rents by as much as 15 percent to retain tenants, he said.
“A year ago, it was awful,” Portugeis said. “It’s still uncertain, but the fear isn’t there anymore.”
Vest for $2,700
The same target market that may purchase an $8,000 Kiton suit or a $2,700 Cucinelli vest already shops at Wilkes Bashford and the Mitchells stores, suggesting the merger will be a “good fit,” said Pier Guerci, president of the U.S. division of Italian luxury brand Loro Piana, which makes $2,400 blazers.
“The top 1 percent of the population has similarities in spending habits -- what they do, where they go, what they like, what they don’t like,” Guerci said. “The Mitchells have a talent for bringing consumers what they like.”
Wilkes Bashford, 77, started his business in 1966 on San Francisco’s Sutter Street and had expanded the retailer to five stores by 2007. He promoted unknowns such as Giorgio Armani and Jean-Paul Gaultier and stood “on the front line of fashion” in the U.S., said Zegna’s Ackerman.
In an interview, Bashford said he has seen “meatball suits” evolve through hippie styles, fitted Italian designs and bespoke tailoring during the credit bubble. His name was a fixture for decades in Pulitzer Prize-winner Herb Caen’s newspaper column, a daily compendium of news items, gossip and musings that ran for almost 60 years in the San Francisco Chronicle. Caen, a customer who became a close friend, once wrote that brown socks with black shoes was a “sartorial conundrum that stumps even Wilkes Bashford.”
Bashford recalled a 1967 lunch meeting with a young Ralph Lauren, who laid out his vision for a fashion empire. Ties at the time cost $3.50, and a nice one cost $5. Lauren widened them by more than an inch and charged $12.50, Bashford said. He couldn’t stock the shelves fast enough.
His customers have included former San Francisco Mayor Willie Brown, another close friend; current Mayor Gavin Newsom; and ex-football stars Joe Montana and Jerry Rice. Technology entrepreneurs such as Oracle Corp.’s Larry Ellison and Jobs, Apple’s CEO, shopped at his store “from the very beginning,” Bashford said.
Steve Dowling, a spokesman for Cupertino, California-based Apple, and Deborah Hellinger, a spokeswoman for Oracle in Redwood City, California, declined to comment.
Bashford remains an employee of the store that still bears his name. He has kept his top-floor office, greeting customers and working the sales floors in the store’s current home, a townhouse-style building on Sutter Street. He said he believes luxury buyers still want personalized service that specialty stores offer.
That’s why Laura Felton keeps coming back to the flagship Mitchells in Westport after a dozen years. She needed shoes in a pinch for a trip to Italy and the staff, knowing her personal style, helped find Jimmy Choo lizard-skin pumps with black patent leather trim, on sale for $618 from $825, she said.
“This is like Fifth Avenue comes to Westport,” said Felton, 44, a skin-care products distributor. “And they know exactly what to show me.”
For Welch, service is personally handled by Bill Mitchell, 67, co-chairman of the company. The former GE boss buys Brioni suits in solid-blue and blue-pinstripe, and sews date tags inside to tell them apart.
“The service is beyond belief,” Welch said. “There’s never a time when they’re not trying to make the customer happy.”