Building Plans: Q&A With Tim Belk

Shoes are getting the royal treatment in Belk Inc.’s master plan to revamp its store network and reach $6 billion in annual revenue in five years.

In an exclusive interview with Footwear News, CEO Tim Belk said the retailer expects to spend $15 million on remodeling the shoe departments in 24 doors this year. It’s part of a larger plan to spend $600 million over the next five years to modernize the chain, which is celebrating its 125th anniversary this month.

In many cases, the remodel involves moving the entire shoe department to the outside wall of the store, from its current position in the center. It’s intensive construction work, but worth it, according to Belk. “It’s a better location with higher visibility,” he said.

The impetus for the facelift isn’t just that Belk’s national competitors have made recent steps to transform their shoe departments. For the Charlotte, N.C.-based firm, footwear was the fastest-growing category in 2010 and 2011, though in 2012 it slipped to third place after home and children’s, despite growing 9 percent year-over-year.

According to Belk, the square footage of its shoe departments has been slowly increasing for the last three years.

“We’re on a mission to get all our stores to have footwear be 9.5 percent of the total store,” said Belk. “By year-end, we’ll have about 170 [or more than half the 301-door network] completed.”

All told, $270 million will be spent over five years on remodels and expansions; $263 million will be spent on new technology; $42 million has been earmarked for branding; and $14 million will be devoted to enhancing service.

Meanwhile, Belk continues to keep the footwear offering unique by ensuring store exclusives with 60 percent to 70 percent of its branded vendor partners, including Anne Klein, Bass Men’s, Frye, Michael Kors, New Directions, Nine West, Steve Madden and Yellow Box.

In addition, shoes will be added to Cynthia Cynthia Rowley, Belk’s exclusive line with women’s wear designer Cynthia Rowley, now in nearly half the chain’s doors for fall ’13.

Vendors praised Belk for its investments in the footwear category.

“The Belk team has done a great job over the last couple of years reinventing the store and having the shoe floor really pop, through enormous investments in systems, fixtures and all,” said Diane Sullivan, president and CEO of Brown Shoe Co. “They talk about ‘modern, Southern style’ and they seem to really understand and serve that market extremely well.”

Jason Lazar, EVP of Harbor Footwear Group, a key supplier for Belk’s private labels, agreed: “Footwear makes for a visually compelling story and will help set the fashion tone for consumers as they enter the store.” The vendor’s current exclusives with the department store include a G.H. Bass & Co. men’s driving moc and a signature Bass Weejun designed for Belk’s anniversary, as well as a Bass boat shoe for back-to-school this fall.

Here, Belk — who will chair this year’s Two Ten Footwear Foundation fundraising dinner — shares his thoughts on staying true to his customer, growing the family-owned chain and catching up with technological changes in retail.

What will drive your growth to $6 billion in sales in five years?
TB:
Growth is going to come several ways, and investments we’re making in the company will help drive [comparable-store] sales. We’re also investing in technology, in our e-commerce business and in the transition to omnichannel. We did $135 million in digital sales in 2012 [or about 3.4 percent of total sales] and we expect to be at 10 percent three years from now. The third source is filling in our footprint and growing in the contiguous markets. This fall, we’ll open in New Braunfels, Texas. Together with the Galleria Mall flagship in Dallas, the two stores will add to Belk’s current total of 13 Texas locations.

Do you plan to do everything organically?
TB:
There could be some acquisitions. Although there’s nothing on our radar right now, as we look over the next five years that’s a good possibility. They could be digital acquisitions — we’ve seen our competitors do good stuff, [for example, Nordstrom’s 2011 acquisition of online retailer HauteLook], or it could be some brick-and-mortar things.

What are the firm’s biggest strengths?
TB:
[Staying] close to our customer and identifying what she wants in our footprint. We believe strongly in “modern, Southern style,” and our positioning is focused on that. Our assortments can be categorized into three lifestyle segments: Classic, Modern and Contemporary. We’ve seen through surveys that Modern is growing [twice as fast as] Classic, so we’re putting a lot of effort into the growth of our assortment there.

What exactly is “modern Southern style?”
TB:
Compared with New York or New England, where black and dark colors [reign], our customers want color. They want to see it in their dresses, shoes and handbags. It’s part of the expression of who they are and an important piece of their wardrobe. In the past year, we were fortunate that some of the fashion trends played to that customer, such as colored denim and [color-blocking] in footwear. Prints also are big here and feminine details, like bows, lace and frills. For guys, bow ties are a fashion statement for the younger set. It’s no longer what their grandfather used to wear; it’s dapper.

With the rise of specialty and brand-operated retail stores, how do you keep Belk relevant?
TB:
Technology is bringing a sea-change to retail as the customer shops with us in different ways. We’re all trying to keep up with her. We’ve realized it’s not about separately driving each channel — desktop, mobile, tablet, stores — it’s about allowing her to start and stop in any of those channels, then move seamlessly among them. Our goal today is to make it easier for her to do that.

How important is customer service in the world of omnichannel?
TB:
It will stay important, and we look at it as a point of differentiation. We have to recognize that customers come in with more information at their fingertips, so we have to put the same tools in the hands of our associates. We’re going to test new registers this summer in 15 stores, as part of finding easier ways for customers to transact in the store, and we hope to roll them out the following year.

Where are the opportunities in footwear?
TB:
Our biggest growth has been in the bridge category. Perhaps the second biggest is in contemporary and juniors’. We have an opportunity in athletic since we have a small presence there, and there’s a lot of great fashion in athletic.

Last year was choppy and rather promotional. What are your expectations for this year?
TB:
We’re planning for comps to be in the 4 percent range. The impact of government on consumer psychology could put a damper on that, but the improvement in housing and continued improvement in unemployment is a positive. It’s a little bit of a bumpy ride, but we are feeling better.

What is the roadmap for expanding your store network?
TB:
We’re at 300 now and will have two new locations next year. Even though we’ll add new locations and expand existing stores, my guess is we’ll also continue to prune the portfolio. Over the next three years, we’re planning to grow to $6 billion in annual sales from $3.9 billion, while keeping square footage quite flat.

What do you see as Belk’s legacy in the history of American department stores?
TB:
We like remaining private and family-owned, and being involved in the community. Those are the three hallmarks of Belk.