How Ashley Stewart Came Roaring Back from Bankruptcy

You're a 22-year-old fashion retailer catering largely to plus-size women in urban areas. You've been hemorrhaging money for years (as much as $6 million annually for as long as you can remember) and you'd already filed for bankruptcy only three years earlier. You're on the brink of collapse. Who comes to mind as the ideal savior for your darkest hour? How about a Harvard Law-educated son of Korean  immigrants who grew up on Long Island, spent two years teaching high school, and went on to enjoy a highly successful two-decade career as an investment professional?

To say that James Rhee backed into his role as CEO and executive chairman of Ashley Stewart is an understatement. A member of the retailer's board of directors with no prior retail experience, Rhee saw an opportunity to revive a brand whose customers were fiercely loyal, and to gain his first experience managing a company as a W-2 employee. "The customer stood by this brand despite all the failings at corporate for 20-plus years," he says.

The "failings" are hard to fully reconcile. When Rhee decided to commit six months to the company in August 2013, resigning all of his other commitments, Ashley Stewart's business model was obsolescent, he says. It had posted more than a decade of losses, lacked any sort of corporate credibility, had a defunct ecommerce site, no Wi-Fi and relied on antiquated DSL to operate stores. The company was based in a converted warehouse that's now a distribution center. The conversation between customers and corporate was one way, he adds, and certainly not in the right direction.

"It was a toxic culture," Rhee says. Chief merchandising officer and president Kristen Gaskins, who returned to the company in 2013 after working there from 2007 to 2012, echoes those sentiments. "There was not a lot of communication between stores and headquarters, and there were some fashion misses, too. They were going in the direction of basics, and our customer is driven by what's new and hot," she explains. "The company lost sight of the customer." After her time away, Gaskins was excited to revive the brand under Rhee's new brand of entrepreneurial leadership.

The secret — though not a secret to anyone in this business, really — to turning the ship around was a relentless laser focus on the customer. "We talk about her like she's right here," says Gaskins. Who that customer is is precisely what convinced Rhee that Ashley Stewart was a brand worth saving in the first place.

Customers shopped in stores an average of two to three times a week; store managers were so close to some shoppers that they would visit sick customers in the hospital; and women often cried with happiness when they found an outfit that actually fit and flattered their figures. Multiple generations of women — mothers, daughters, grandmothers — would shop together for coordinating outfits for church. "I saw joy," says Rhee, "and saw something very different, and frankly it reminded me of my mom."

Ashley Stewart was quickly running out of money and about two months away from filing for Chapter 7, Rhee notes, when he began the steep uphill climb of turning the company around. "There would have been well north of 1,000 jobs gone," he explains, a pressure that weighed heavily on him.

Rhee spent a good portion of those early days meeting with staff and trying to understand the company and what went wrong. "I told them, ‘I'm probably the least qualified person to run this business. Can you help me?'"

Many of those initial conversations focused on the importance of kindness and how it's often misunderstood to be a sign of weakness. "There's so much womanto-woman friendship in our stores. Customers come in wearing sweats and no makeup. It's a very safe place," Rhee says. As he built the vision for the future Ashley Stewart, Rhee told corporate staff that one day, people would beg to work for their company. "People laughed," he says. "I said, ‘you'll tell your friends you work for a hedge fund fashion startup business.'"

Rhee was dead serious about translating the startup mentality to a company on life support. Shutting down the C-suite, employees worked collaboratively across departments for the first time. A number of staff walked away, but it was the dawn of Ashley Stewart's customerat-all-costs approach. "A lot of people weren't happy with the change and couldn't keep up," says Gaskins. Among those who stayed, "most people haven't experienced this before in their lives," she adds. Any initial hesitation toward Rhee quickly melted away.

"He takes the time to understand every person and every department," says Gaskins. "He's very thoughtful about his approach to people. After a month of his spending time with people there was a shift that, okay, he seems to know what he's doing." Over the next four months, Rhee and staff ignored everything that wasn't important to the customer. When Rhee couldn't get his questions answered at corporate, he visited stores in search of understanding what customers cared about when they're not shopping. "What is she thinking about and worrying about?" he says. To this day, customers call store managers "Ms. Ashley." "It's not a just a job," Rhee explains. "For many of these women, the store manager opportunity we give them is their life."

Ashley Stewart as it exists today was officially reborn on April 23, 2014. The company shut down most of its mall stores, replatformed e-commerce on Demandware, and remapped its distribution flow. To make it all possible, Rhee says he begged investors for money. After all, who would support a company that had not made a profit in recent memory?

By fall of last year, Ashley Stewart found its footing. "We did the best we could for spring and summer but by the time October rolled around, we were better," explains Gaskins. Ashley Stewart spent much of the year focused on selling through old product and winding down stores. "We were trying to make sure we weren't canceling every single order," she adds. "We wanted to be sure we weren't hurting supplier relationships we've built over 20 years."

In 2015 Ashley Stewart posted sales of $150 million and adjusted EBITDA of $20 million. The company experienced double-digit sales growth at the stores and more than 60 percent sales growth on e-commerce. Additionally, year-over-year mobile sales growth accelerated approximately 130+ percent. On e-commerce, the company did more sales on Black Friday weekend and Cyber Monday than the entire month of November 2013.

The online business has been so successful partly because it has managed to attract a new customer who probably wouldn't have visited a store, says Gaskins. The company now ships to Canada, the Caribbean and the U.K. "We need to work on that," she says. "We didn't expect the international demand."

Marrying math, algorithms and emotional intelligence, Ashley Stewart has settled on a business model that will continue to fuel future growth. "There's no line between the customer and the company," says Rhee. "Some people call that social commerce. I like to call it disintermediation."

The company boasts a highly active community on social media, with nearly 600,000 engaged fans on Facebook alone. Quality and engagement are more important than just "likes," says Rhee. "Do you have good friends, or a lot of friends? "For one day I want to manage the business with just emojjs," he concludes. "We want that level of intimacy with the customer. Emojis convey so much more than words can."

— Jessica Binns is a freelance writer in New York City.


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