Brown Sugar managing director quits in a sign of tough times in retail

The man who led the rescue of fashion chain Brown Sugar has resigned after a disagreement with its owners about the fashion retailer’s future plans.

David Mullen was credited with Brown Sugar’s revival after the fashion retailer was saved from administration in September last year.

The then 40-store strong Brown Sugar chain was placed in administration last August. After the store network was cut back to 16 and the workforce pared to 100, it was rescued by Brand Directions with offshore investment in October.

Mullen’s role will be taken over by Winfred Fan, director of Brown Sugar. Mullen wrote to suppliers yesterday informing them of the changeover.

“Since taking up the challenge of reconstructing the business, I have firmly believed in our strategy which was based on building a reliable supply chain of quality, on-trend product in a cohesive collection,” Mullen wrote.

“This strategy was designed to ensure we restored trust in the Brown Sugar brand internally, with our suppliers and to our loyal customer base.

“We have ensured that new product has been focused on our brand identity, which I believe is critical to Brown Sugar’s success in the difficult economic and retail environment.

Mullen said Brown Sugar’s investors had provided the financial backing required to support the business during its return to profitability.

“Unfortunately, over the past few weeks it has become apparent that we have significantly different strategic approaches with regards to the future growth of the Brown Sugar business,” said Mullen.

“As their approach differs from my own belief of what is required to restore the brand, I have decided to resign as managing director, effective immediately.”

Brown Sugar director Winfred Fan, who is also a director at Brand Directions, told SmartCompany Mullen had quit as he wanted to rollout 15 to 20 stores over the next two to three years, but Fan felt the fashion retailer was not ready for the expansion until it got its supply chain right.

“We want to get our products right before we open a large number of stores,” says Fan.

“We are still hoping to open up to six stores over the next few years, but David wanted to open 15 to 20.

“David is retail-focused, not a product person, and we both decided the company would not need his skills over the next few years.”

Fan says there is no bad blood between the pair and the idea is that Mullen will eventually work with Brown Sugar again as “he is one of the best people in the industry when it comes to retail.”

“Brown Sugar is like a 25-year-old start-up company, although it has a long history the whole staff is new, so it is a rare opportunity to shape the business as we want it to be without the baggage of the past,” says Fan.

Fan says despite the recent collapses of fashion brands including Bettina Liano, Satch and Ed Hardy, he is still optimistic about Brown Sugar.

“It is very tough for the larger players. I think the reason they collapsed is mainly because they were never very profitable businesses and when things are tough their weaknesses are exposed,” says Fan.

“Bettina Liano and Satch mainly experienced debt problems, Brown Sugar is different as it hasn’t been profitable for an extended period of time, it has been losing money for the last three years in a row and they are not small numbers.

“The main reason is that the previous management has not had the vision to see out the changes.”

Russell Zimmerman, executive director of the Australian Retailers Association, told SmartCompany that having a seamless brand strategy was key for retailers like Brown Sugar.

“In the current retail environment, the importance of brand strategy cannot be underestimated.

“It’s imperative to know exactly who your customers are, where they’re shopping and what they’re looking for,” says Zimmerman.

“There’s no longer any room for a blanket approach to retailing, but rather retailers need a clear and targeted approach to reaching customers and streamlining operations in order to cater to their needs and values.

“Many retailers are going above and beyond in order to facilitate the interests of their particular communities. For example, Lululemon’s free yoga and goal-setting classes and Sportsgirl’s styling sessions and seamless multichannel brand strategy.”

Zimmerman acknowledges it is a tough retail environment for fashion at the moment.

“At the moment consumer confidence is at an all-time low, with household budgets stretched to the limit because of the cost of living and mortgage stress from unmanageable interest rates.

“Retail is the industry largely bearing the burden of stressed consumers, especially in the clothing, footwear and department store categories, which are most reliant on discretionary spend.

“Retailers in the fashion category will be hoping for an interest rate cut this afternoon by at least .50 basis points in order to maintain employment levels, but also to concentrate on business innovation and growth.”