Eddie Bauer Case

EDDIE BAUER CASE

Ashley Johnson

1. What is Eddie Bauer's strategy upon emerging from bankruptcy? What are the key successes and risk factors associated with this strategy?

Spiegel Inc. sold its Catalog and Newport News divisions reorganized the company to establish Eddie Bauer Holdings, Inc., which would operate as an independent company. Thirty million shares of Eddie Bauer common stock were issued to the former Spiegel’s creditors. They took several strategic steps to reorganize the company. They want to revitalize their reputation as a premium brand for the “modern outdoor lifestyle” and increase profitability by increasing traffic and sales per square foot by re-sizing its stores and selling premium-priced products. They also want to increase sales in the direct channels by balancing product offerings and their presentation in their catalogs and on their website. Additionally, they want to create appealing window arrangements and continue augmenting its senior management team. Lastly, they plan to optimize productivity by reducing the number of vendors, streamlining IT, and improving inventory controls. As a result, they planned to close 22 underperforming retail stores and open 16 new ones, as well as getting rid of their 36 home furnishing retail stores.

Some of the key successes revolve around the fact that Eddie Bauer is trying to decrease their costs. They are closing underperforming retail stores and trying to optimize their productivity. Focusing on revitalizing their brand is a positive step in the right direction, as long as they differentiate themselves from other clothing retailers, such as Gap, and stick to their roots of being an outdoor lifestyle company.

The new reorganization also brought on many risk factors for the new Eddie Bauer Holdings, Inc. First, the company took on a large amount of debt with the issuance of the $300 million new term loan. This largely increases their debt amounts and I would be concerned about their...