Teen apparel retailer Rue21 on Saturday abruptly replaced CEO Bob Fisch after 15 years at the helm. No reason was given for the move.
Keith McDonough, who has held the role as CFO for the previous 13 years, will take over as Rue21's interim CEO while the board of directors searches for a permanent replacement.
Rue21 also appointed Target women’s apparel chief Nina Barjesteh as chief merchandising officer, succeeding Kim Reynolds. Elizabeth Hodges, most recently SVP of customer experience at Chico’s, will also join Rue21 as chief customer officer, a brand new role for the retailer. Hodges, who has also held leadership positions at J.C. Penney, American Eagle and Lane Bryant, will lead the retailer’s customer experience operations, as well as its brand marketing and advertising initiatives.
Rue21, which operates 1,213 stores in 48 states, is still struggling in the teen apparel space after being taken private by private equity group Apax Partners in a $1.1 billion sale in 2013. The executive shakeup comes just after the company was cited as one of seven retailers on a slippery slope to bankruptcy in a report released last week by credit ratings firm Fitch Ratings.
As a private company, Rue21 finally entered e-commerce in late 2013, so it may now be suffering the slimmer margins that come from selling online. Barjesteh said in a statement Saturday that she is focused on "expanding our omnichannel offering," but that won't be easy an easy undertaking. The retailer is also struggling with a lukewarm attitude from teens toward buying clothing. That age group tends to focus its limited spending on experiences and electronic devices.
It’s a dangerous set-up, and retailers like Rue 21 with little by way of differentiated merchandise have only a small chance of survival, according to Fitch’s report, which bluntly stated such retailers have “little reason to exist in the marketplace.” That makes bankruptcy hard to avoid, and the bankruptcy process, ideally a time to regroup, a dire situation because such retailers will find it hard to attract investors to support them.
“The lack of proprietary products in many categories leaves retailers vulnerable to permanent traffic decline resulting from the rise of competitors (for example, discounters and online-only players),” according to the Fitch report, which points out that mall-based apparel brands in particular can quickly become irrelevant as consumer sentiment changes. “The outcome in either case is that the bankrupt retailer has lost its place in the market and thus has limited value as a going concern."