County Seat Stores Inc. Business Information, Profile, and History

History of County Seat Stores Inc.

County Seat is one of the nation's largest mall-based specialty retailers of casualwear for teens and young adults. With more than 630 jean stores in 46 states, it is the seventh largest "single concept" retailer. Jeans and jean jackets account for more than 50 percent of the company's sales in 1993, with shirts, shorts, t-shirts, socks, belts, fashion jewelry, and other accessories accounting for the rest.

The first County Seat store opened in Minneapolis in 1973. Beginning as an offspring of the grocery store chain Super Valu Stores, County Seat was intended as a budget-priced chain of stores offering casual clothes for the entire family, with about 3,500 square feet per store. The stores featured Levi jeans and other Levi apparel and had a distinct country western look with a rustic wood decor. That decor predominated for 12 years, as the chain slowly grew.

In 1984, Carson Pirie Scott and Company, the second largest department store chain in Chicago, acquired the County Seat's 275 stores. The following year, it brought in a management team headed by Barry J.C. Parker as chief executive officer. Parker had begun his retail career at F&R Lazarus in 1971 as a buyer, became vice-president and general merchandise manager of the Children's Place in 1975, and eventually became that company's chief financial officer and senior vice-president of finance and systems. Richard H. Gundy, who had 28 years experience in retailing, became County Seat's senior vice-president and general merchandise manager in 1984, and was promoted the following year to executive vice-president of merchandising and marketing.

Parker and his team retained the name of the store and the core merchandise theme--jeans--but almost everything else about County Seat changed. The company took on a new look and an aggressive expansion drive. During the next three years, 374 stores were added. The new stores used glass and matte black fixtures for a contemporary look and used colorful signs and rock music to appeal to young people for whom shopping had become recreational. Most of the existing stores were also remodeled so that County Seat stores across the nation were easily identifiable and familiar.

Furthermore, the new management team targeted a narrower clientele--high school and college age shoppers, the largest of the markets of the original County Seat stores. According to Parker, the store doubled the average price of merchandise and drastically changed its merchandising. He called the new County Seats a more youthful version of rival chain, The Gap. County Seat began selling only premium brands of jeans--Levi, Girbaud, and Guess. Although denim remained a staple, the stores also began offering fashion merchandise and even developed private labels: Nuovo jeanswear, Shore Club activewear, and Cotton Cargo sportswear. The average sale increased to about $42. By 1989, there were 415 County Seat stores mostly located in malls of at least 500,000 square feet.

To control costs during this period of rapid growth, County Seat purchased the technology necessary to track construction expenses and negotiate prices competitive for the specific region. The program computed average square foot costs for each subcontractor trade by region and based on costs for projects completed during the previous 12 months.

When P. A. Bergner and Co., a Milwaukee-based midwestern department store chain, acquired Carson Pirie Scott and Company in a hostile takeover in 1989, the new owners retained the department store divisions but sold off other businesses under the Carson Pirie Scott umbrella. A management team, led by Parker, and partially financed by Donaldson, Lufkin & Jenrette Securities Corporation investment group, acquired County Seat in late 1989. Parker became president and chair of the board as well as chief executive officer.

Unlike many other chains which encountered serious financial problems following leverage buyouts, County Seat continued to expand and profit. County Seat management attributed its continued success to its nearly recession-proof market of teens and also to the strength of the chain. The management team had already been running the company very successfully for several years before the buyout, so they had made many of the strategic moves necessary for their long-term success. The new owners did not have to sell off assets, revamp operations, or bring a new management team on board.

According to Parker, who had doubled sales since taking over in 1985, the teen market was less vulnerable to recession and was often the last market to be negatively affected by the economy. This was attributed to the three major reasons young people replace their clothes: they outgrow them, they wear them out, or their tastes change. This translated into high turnover of merchandise for County Seat. While County Seat's competition, The Gap and the Limited clothing stores began to target older customers, County Seat management remained focused on the 14-to-22-year-old market. Their major sales periods remained back-to-school season in late summer and the holiday season in December. Parker also cited private labels as a reason for their success; private labels offered County Seat cost controls and high margins.

By 1990, County Seat owned and operated 492 stores in 39 states. Stores were located from the Rocky Mountains to the East Coast and from Florida to Washington D.C. The greatest concentration of stores was in Illinois, Texas, and Florida. Sales revenue was $330 million.

Within the next few years, County Seat expanded into New York and New Jersey, and increased its presence in the Washington D.C. area. It also established stores on the northern Pacific coast and had targeted southern California, New Mexico, Nevada, Utah, and Idaho as important expansion markets.

The chain traditionally has done little advertising other than participating in ads sponsored or required by the malls and advertising back-to-school clothes in Rolling Stone, Seventeen, and other youth magazines. For the most part, however, the chain relied on colorful point-of-sale graphics.

Looking to the future, County Seat built its own 152,000-square-foot distribution center near Minneapolis, Minnesota, which could service as many as 800 stores. County Seat saved on time and labor costs by generally distributing items that were pre-ticketed and packaged by the vendors. The company considered its weekly store deliveries unique in the retail industry, maintaining that the short delivery time allowed the company to adjust inventory frequently to maintain tight control over inventory for individual stores and the chain.

County Seat anticipated healthy increases in sales through the end of the century as demographic studies showed that the 14-to-22-year-old population would continue to increase. The nation's more than 34 million young people were spending more than $16 billion annually on clothing purchases. Teens do their shopping in the malls, according to County Seat research, and the company expected its growth to continue with the growth of regional malls. Although some industry experts were pessimistic about the future of malls, County Seat remained confident, predicting that malls would remain very much alive as a "healthy environment for the youth of America."