Cache Incorporated

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Cache Incorporated

1460 Broadway
New York, New York 10036
U.S.A.
(212) 575-3200
Fax: (212) 575-3225
Web site: http://www.cache-inc.com

Public Company
Incorporated: 1975 as Atours Incorporated
Employees: 1,500
Sales: $146.8 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: CACH
NAIC: 44812 Women’s Clothing Stores; 44815 Clothing Accessories Stores

Cache Incorporated is a publicly traded company that owns and operates a highly successful national chain of upscale women’s apparel and accessories stores. Focusing primarily on formal dresses and fashionable evening wear, Cache’s stores compete directly with both small, exclusive boutiques and huge, national department stores, with its prices ranging from $150 dresses to tailored suits for hundreds of dollars. Located mainly in large upscale shopping malls, Cache’s stores appeal to a high-income, style-conscious female customer base, providing clothes for both special occasions, such as proms and weddings, and dressy day wear. In 1998 Cache acquired Lillie Rubin, a small national chain of high fashion, high-priced women’s apparel, thereby further expanding the company’s reach in the niche market of formal attire. With the company’s sales in 1998 reaching almost $150 million and stores in more than 30 states, Cache is making its mark as a small but vibrant apparel company, capable of keeping up with the notoriously capricious trends of the retail industry.

Rocky Beginnings: 1975 Through the Late 1980s

Cache was founded in 1975 as Atours Incorporated. Initially located on the East Coast, Atours purchased high-end apparel from U.S. and European vendors, offering customers well-made, trendy day and evening wear. Atours presented an alternative shopping experience to those weary of large, impersonal department stores: the company’s stores were kept small, with an emphasis on customer service, the inventory exemplifying a focus on style over quantity. The strategy worked, with Atours going public in March 1981. In July 1983 Atours changed its name to the flashier nomenclature of Cache Inc.

After a strong start, the 1980s proved to be a difficult decade for Cache. With department stores gaining more and more ground in the retail industry and the upscale apparel industry facing increasing competition from both individual designers and upstart small labels, Cache began by 1984 to go into a sales slump. That year, the company lost $1.7 million in sales, and the following year it fared even worse, with a loss of $2 million. By this time Cache owned and operated a chain of 30 separate stores, located primarily in the eastern part of the United States, and, despite the company’s vibrant beginnings, such losses proved to be insupportable. Because of the company’s back-to-back losses, it was having trouble getting the credit it needed to keep its merchandise updated and well-stocked in all of its stores. Attributing its troubles to rapid growth and a slow-moving inventory, Cache sought protection from its creditors by filing for reorganization under Chapter 11 of the Federal Bankruptcy Code. By taking such action, the company was allowed to continue operations—that is, purchase new merchandise from its many vendors and pay its employees—while simultaneously plot with a team of financial planners a way by which to make itself once again fiscally viable.

Within a year Cache had pulled itself out of the red, without having had to close a single store, and by the end of 1987 was once again experiencing solid growth. By decade’s end Cache’s stores had expanded throughout the eastern and southern part of the country and, despite the company’s few troubled years, was becoming a small but solid presence within the retail industry.

The Early 1990s: Continuing Growth

The late 1980s and early 1990s saw many changes in the retail industry, the most important of which was the explosive growth of large shopping malls. Such malls, if they were upscale in focus, usually were anchored by huge national department stores including Saks Fifth Avenue and Neiman Marcus, with smaller, niche-market stores filling the remaining retail space. Indoor malls offered the consumer more choices than ever before, with a myriad of products and brands presented in a condensed, customer-friendly area. No longer did a customer have to seek out a store for a particular item or product; malls made it possible to offer almost anything one could buy under one roof.

Although this type of product presentation was of an obvious advantage and convenience to the consumer, it made competition all the more intense for those who manufactured and marketed the products, and competition was particularly intense within the apparel industry. Stores like Cache had to effectively manage competition from two separate sources: the large, increasingly powerful department stores and other, smaller boutiques who held a customer base similar to that of Cache’s. To flourish, it was necessary for a company to maintain a fine balance between offering merchandise that was of a look and quality similar to that of the company’s competitors while simultaneously making that merchandise somehow unique and original, thereby allowing it to stand out in an increasingly flooded market.

By the early 1990s Cache had proved that it could maintain just such a balance, and as the popularity of malls grew, so did the popularity of Cache, with the company’s stores gaining a strong presence in upscale malls throughout the eastern part of the United States. Continuing to focus on younger customers interested in trendy, dressy day and evening wear, Cache in 1992 opened 16 new stores nationwide. In 1993 the company’s growth continued at the same pace, with the company opening another 16 stores, all of which were located in high-end malls. Internal changes took place within the company that year as well, with Roy Chapman resigning as Cache’s CEO. Replacing him was Andrew Saul, a board member who along with his family owned almost 75 percent of the company’s common stock.

As of 1993 Cache owned and operated 93 stores and the company’s net income had risen to $1.9 million. The company purchased its stock from high fashion vendors from the United States, Western Europe, and Asia, choosing not to maintain its own warehouse, and thus kept overhead lower than it would have been had the company manufactured and stored its own inventory.

Much of Cache’s success was due to its presentation: though located within huge malls, the company’s stores were kept relatively small—2,000 square feet was the average space of any given store—and were designed as intimate boutiques with a carefully selected inventory, a definite contrast to the sprawling and, to some customers, overwhelming, layout of the larger department stores. This mix of strategic planning in both location and store design proved to be quite successful for the company, and in 1995 Cache experienced record growth, opening 24 new stores in one year.

An Expanding Customer Base: The 1998 Acquisition of Lillie Rubin

By 1997 Cache, which that year had done a record volume of $135.8 million, was looking for ways in which to expand without having to greatly increase the company’s overhead costs. Because of the tough competition within the apparel industry, several of Cache’s competitors were not faring well, thereby making it possible for a small but vibrant company like Cache to look at the possibility of growth through acquisition. In 1998 just such an opportunity became available for the company, as an exclusive, small apparel chain by the name of Lillie Rubin declared bankruptcy and began actively seeking a buyer.

Lillie Rubin’s stores sold expensive, high-quality apparel and accessories specifically designed as “special occasion” ensembles and appealed directly to high-income women in their 40s and 50s. Lillie Rubin’s inventory consisted primarily of sequined, formal evening gowns, tailored pantsuits, and jewelry that was crafted with well-made faux jewels. The conception of the stores’ layout was similar to that of Cache’s, in that the Lillie Rubin stores presented to the customer a small, low-lighted, and intimate boutique located within a large mall. The Lillie Rubin chains differed from Cache, however, in two important ways: the former had both a higher priced inventory and fewer stores. In addition, competition from large, upscale department stores proved to be more than the small chain could handle, as many department stores, such as Saks Fifth Avenue and Lord & Taylor, specialized in the same type of formal attire found in Lillie Rubin’s stock. In an article by Thomas Ryan, writing in Women’s Wear Daily, the CEO of Lillie Rubin blamed the company’s failure on “‘a major slowdown’ in business over the past three years caused by the expansion of department stores and mass merchandisers into better-priced apparel; an overall decline in spending on apparel, and a shift away from dressier items as a result of casualization in the workplace.”

Lillie Rubin’s 1998 declaration of bankruptcy was the business’s second Chapter 11 filing in two years, making potential buyers wary of the unstable chain. A plus-sized apparel company called The Forgotten Woman came forward with an offer of $2 million, only to walk away from the deal at the last minute. Several months later Cache entered negotiations with the beleaguered chain, and in August 1998 bought the company for only $775,000.

During the time in which Cache acquired Lillie Rubin, the latter had closed all of its remaining two dozen stores. Within months after Cache’s purchase of the company, 12 of the Lillie Rubin stores were reopened. Cache’s marketers continued to focus the Lillie Rubin inventory on formal attire, in particular clothing that would be appealing to a more mature clientele, and at the same time attempted to revamp the chain’s image into something slightly more stylish and a little less flashy. According to this strategy, the Lillie Rubin stores were updated, making the clothes sophisticated and dressy yet also suitable, in some cases, for day wear—an important trend during the 1990s.

With the acquisition of the Lillie Rubin stores, and the location of some of its own boutiques, Cache had a presence in some of the most expensive malls in the country. Before its failure, Lillie Rubin was to be found in such retail centers as the Galleria in both Houston and Dallas, the Fashion Show in Las Vegas, the Biltmore Fashion Park in Phoenix, Arizona, and, among others, two locations in Los Angeles. During the same year in which Lillie Rubin was acquired, Cache opened four more stores of its own, bringing the number of Cache boutiques around the country to a total of 172 stores. The acquisition of Lillie Rubin helped Cache round out its presence in the niche market of formal attire, allowing the original Cache stores to continue the focus on a younger, fashion-conscious customer base while also, through Lillie Rubin, establishing recognition with the even more upscale market of formal attire for the slightly older consumer. Although the explosive popularity of the shopping mall had killed many of its competitors, Cache by the end of the 1990s had used such popularity to its advantage and had developed into a steadily growing, vibrant apparel company.

The Late 1990s: Further Plans for Expansion

In 1999 Cache had locations in Puerto Rico and 35 states and owned 184 stores. That year, the company announced an ambitious plan for expansion and began planning to open 150 stores within a five-year period. Because of the company’s initial success in reviving the Lillie Rubin chains—a success that exceeded Cache’s initial predictions—plans were laid in place to open 100 new Lillie Rubin stores nationwide, as well as an additional 50 new Cache boutiques.

In the late 1990s it became clear to retailers that to remain fiscally healthy and competitive it was necessary in considering expansion to include in the company’s plans computer space as well as retail space; the Internet had become an integral part of the consumer environment. Cache made plans to meet this new challenge head on, and in 1999 revealed plans for an internal special-order system by which the company’s customers could order merchandise online. By using a system it designed internally, without the aid of a subcontractor or programmer, Cache both maintained control over its online business and saved on overhead. Unlike many special-order systems, Cache’s system was almost entirely automatic, requiring very little human, manual manipulation and, therefore, saved the company on labor as well.

Although Cache’s beginnings were not entirely free from financial pitfalls, the company since the late 1980s was moving forward at a rapid pace and, with the acquisition of Lillie Rubin in 1998, appeared to maintain not only a steady presence within the apparel industry, but one that had great potential for expansion as well.