via WWD: http://www.wwd.com/issue/article/122001?page=0 Is Target losing its cool and Wal-Mart finding its way at last? For years Wal-Mart Stores Inc. struggled to find the right apparel formula as its competitor, Target Corp., solidified its reputation as the go-to discounter for affordable style. But the apparel fortunes of Target and Wal-Mart seem to have taken dramatically different turns of late. Wal-Mart has tweaked its George collection to give it more currency and is selectively expanding its fast-fashion line, Metro 7. The company is also zeroing in on the under $10 price point for apparel. The latest move came earlier this week when the retail giant restructured its apparel organization, eliminating jobs in two divisions sourcing and product development while fortifying the areas of brand merchandising and buying. A spokeswoman for Wal-Mart, Linda Blakely, said the moves were all part of Wal-Mart's increased focus on what works in apparel. "Our goal is to strengthen the relevance of apparel for our customer and the speed of product to market," she said. "We are not stepping away [from apparel] at all." John Fleming, executive vice president and chief merchandising officer for Wal-Mart, put responsibility for the success of a brand's survival squarely in the hands of the apparel division. "The restructured apparel organization is built around brands that make clear statements and whose teams are accountable for financial returns and fully leveraging suppliers to efficiently deliver the product the customer wants," he said. As for the competition, the economic downturn has been squeezing Target's aspirational low- and moderate-income customers. The retailer's comp-store sales were down 5 percent in December, versus a 2.4 percent gain at Wal-Mart. Target said it expects same-store sales for January to come in at the low end of an earlier estimate of a decline of 1 percent to a 1 percent gain. The chain acknowledged its apparel sales were off in November and December. Over the last year, Target's stock price has fallen 12.8 percent to close at $52.38. During the same period, Wal-Mart's rose 3.2 percent to close at $49.16 on Wednesday. Now Target faces the task of replacing a major revenue generator for its clothing business: designer Isaac Mizrahi, whose contract is not being renewed at the end of the year and who is becoming creative director for the Liz Claiborne brand. Mizrahi's line did about $300 million at Target and analysts estimate the retailer will have to replace $400 million to $500 million of lost revenue upon his departure, given that shoppers buying Mizrahi clothes also bought other products while there. Some experts said Mizrahi's collection and Target's apparel in general was beginning to look a bit tired. "I think it's always a challenge for someone like [Mizrahi] to continue to reinvent themselves," said Wayne Hood, a retail analyst at BMO Capital Markets. "I don't believe one designer should have such a large role that, if they falter, it creates a risk to the apparel offering. It's better to be diverse. Department stores stayed with certain labels for too long" and it hurt them. Target has bigger issues to deal with, as well. First, its longtime chairman, Robert Ulrich, is retiring on May 1 and will be replaced by company president Gregg Steinhafel. And while for the last decade Target's performance has bounded past Wal-Mart's with an emphasis on design and style at slightly higher prices those attributes become less important to consumers as the economy slows. The difficult macroeconomic climate seems to be working in Wal-Mart's favor as the Bentonville, Ark., giant benefits from its position as the low-price leader. Wal-Mart continues to hammer home its low-price message. On Tuesday, the retailer said it was cutting prices on "thousands" of items by 10 to 30 percent this week, calling the initiative an "economic stimulus plan for shoppers." Products include everything from grocery items to home theater systems. "[Wal-Mart] is more in tune with their target customer than they've been for several years now," said retail consultant Robert Buchanan. "They're doing a better job of interpreting trends for their core customer. They're emphasizing juniors more in terms of floor placement. After all, juniors is the best trend opportunity they have, so why not lead with it? George is less dowdy than it was. The stores with their transitional products look better than I've seen them look." For example, George features bell-sleeve blouses, Empire dresses and faux wrap dresses, many in black or geometric prints in a sophisticated color palette of black, teal and beige. There's also a black pinstripe one-button jacket and a navy jewel-neck cropped jacket. "George has taken the spotlight in terms of trying to highlight a more fashionable look," said Neil Curry, a retail analyst at UBS Securities. "It's more about fashionable basics." The design direction seems to be "a relatively young look without taking too many risks. They're making good inventory decisions so they're neither out of stock on key items nor left with too many items. Wal-Mart has always been good on basics. Now they're trying to move toward a more fashionable look." The company is intent on avoiding its fashion blunders of 2006 when it bet too heavily on skinny-leg jeans and jackets with faux fur collars in the Metro 7 collection. Tuesday's restructuring of the apparel division is meant to avoid such miscalculations in the future. Brand merchandising, which is responsible for building private label brands, will be responsible for brand positioning, assortment development, textile design, vendor selection, sampling and cost negotiation. The group will be based in New York. The buying organization, which will continue to be based in Bentonville, will be responsible for maximizing space productivity; selecting the product, both private label and from national suppliers; setting pricing, and in-store allocation in conjunction with the planning and replenishment departments. Blakely declined to say how many jobs would be lost. "Some positions on teams were eliminated," she said. "The sourcing and product development positions were eliminated, but look for the team to grow in New York." Buchanan characterized the overhaul as positive. "I certainly don't see Wal-Mart stepping back from its penetration in apparel or home fashions," he said. "Fashion is becoming faster and faster and faster. With the pace of change when it comes to fashion trends, the more Wal-Mart can do out of New York, the better. It's easier to do that out of New York than anyplace else." According to industry sources, Metro 7, which is now sold in more than 500 doors, is being expanded in about 100 of those stores. "Wal-Mart has decided to expand the product offering substantially," said one source. "For example, if Metro 7 has six racks in a store now, they might double that to 12 racks. It's a broader assortment and point of view. It's giving the consumer additional options and developing an item-driven business. The focus of Metro 7 has shifted from a collection point of view to one of key items." Asked about Metro 7, Blakely said: "We've been making changes in our apparel offering on an ongoing basis and our customers are responding well to some of those changes. We're flexing the floor all the time." Some of the initiatives have been attributed to Dottie Mattison, senior vice president and general merchandise manager of women's, who was promoted after Claire Watts, vice president of merchandising, resigned in July. Mattison is based in the company's New York fashion office, which occupies a 50,000-square-foot space in the Garment District. The office had a staff of about 10, has grown to more than 80 people and will swell again.