Leto to Lead Mervyn's

Hayward, Calif. — Five months after coming under new ownership, promotional mid-tier department store Mervyn's has moved swiftly to appoint a new CEO and chief merchandising officer to steer it into the New Year.

The company announced its choice last week — Rick Leto, whose retail experience includes stints at Macy's East, Kohl's and Galyan's. He takes up his new post Jan. 5.

Leto most recently served as president and chief merchandising officer of Plainfield, Ind.-based Galyan's Trading Company Inc., where he was responsible for marketing, merchandising, planning and allocation. Prior to that he was executive vice president, merchandising, of Menomonee Falls, Wis.-based Kohl's Department Stores. And earlier, he was executive vice president of merchandising for Macy's East in New York.

At Mervyn's, Leto will be responsible for overseeing all aspects of marketing, merchandising, product development, strategic planning and allocation for the 257-store chain, which has a presence in 13 states.

“This is an exciting time at Mervyn's and the beginning of a new chapter in its 55-year history,” Leto said. “With a continued focus on new and innovative products at great values, I look forward to ensuring Mervyn's long and successful future.”

Before Target Corporation completed the sale in July of its Mervyn's retail subsidiary to an investment consortium including Sun Capital Partners Inc., Cerberus Capital Management L.P. and Lubert-Adler and Klaff Partners L.P., the chain was on a downward slope in sales.

To keep Mervyn's from disappearing from the retail map, retail experts say Leto will have to reinvent the store and consumers' perceptions of it.

“Mervyn's needs more than a little restructuring,” said Kurt Barnard, president, Barnard's Retailing Consulting Group. “Leto needs to diagnose what is wrong with it, and there are many things wrong, thousands of things.”

Barnard added that Mervyn's has the wrong merchandise, pricing, displays and store locations.

“It was poorly managed before, and the best interest of the consumer was not considered,” he continued. “Leto will have to reinvent the store. I don't know if he can do it, but miracles have been known to happen.”

Britt Beemer, founder, America's Research Group, also noted Mervyn's current state of “severe problems.”

“When I talk to consumers about it for my research, they tell me the store doesn't have the right locations,” he said. “Its biggest challenge is to get its stores at A locations, at the right shopping centers. Right now, they've got a lot of stores in B locations.”

Beemer explained that about a decade ago, B locations were 90 percent as strong in consumer traffic and sales as A location stores. But today, because consumers drive 20 percent less in distance to shop, B locations have stood to loose.

“The new CEO at Mervyn's should deal immediately with store locations,” he added. “Kmart had that problem and now they are dead. (Leto) has got to look and see how many stores he wants to close or relocate.”

Walter Loeb of Loeb Associates disagreed, claiming that Mervyn's has “many excellent locations.” Rather, its Achilles' heel is its lack of merchandising focus, he said.

“It has to figure out its target customer, which in my opinion should be a young, fashion-savvy, family-oriented customer,” Loeb said. “Mervyn's needs to define the profile of its demographic and needs a consistent merchandising strategy that is timely and exciting.”