Two Guys Who Get It

Posted 02.16.2009

Meet Andres Izquieta and Dee Murthy, co-CEO’s of the menswear company Five Four.  These days, stories about retail are at the top of the list of the economic train wreck genre of reportage.  As the Wall Street Journal reported last Friday, though, Andres and Dee are completely rethinking their business model and living to tell the tale in the process.

Twoguys This time last year, Five Four was making a pair of jeans for $14 and selling them for $110.  Nice margins if you can get them, but in a world where luxury retailers are knocking prices back by 70% just to get the clothes out of the store, those days are gone.  If you take a look at the WSJ story, there are a lot of lessons that any business leader can learn from Andre and Dee about how to survive and, in the long run, maybe even thrive in a down market.

In reading the article, I counted at least 10 different things they did to adjust to a market that changed overnight back in October.  Their moves included price cuts, finding cheaper suppliers and extending very flexible terms to their customers.  (We could have some fun with this by you going into the article and finding your favorite move they made and calling it out in the comments section of this blog.   It could sort of be like that old puzzle game from Highlights magazine where you see how many objects you can find hidden in the picture of the tree.  Come on, you know you read Highlights when you went to the doctor’s office.  It was all about “fun with a purpose.”)

But, I digress.  There are two big lessons that I learned from Andres and Dee that the Journal didn’t explicitly call out.  The first is that they didn’t sleep through the change.  They were paying attention to their metrics and when the bottom dropped out, they sprang into action.  The second lesson is they didn’t spend a lot of time grieving over what they lost.  When $110 jeans were no longer reality, they moved onto products and deals that were the new reality.

So, how are they doing?  Well, their 2008 net stayed flat at $8 million.  Not too shabby for the worst retail environment in forever.  The other thing I love about these guys is they still have big, hairy audacious goals for the new reality.  As Andre says toward the end of the article:

"I want to create our generation's Polo. You can't be a megabrand in the U.S. today if you're selling a woven shirt for $200. I think the concept of luxury is passé."

They are still adjusting to the new world, however.  Early in the piece, Andre acknowledged that he had gone out and bought a new Aston Martin sports car (you know, a James Bond-mobile) when times seemed fat.  Now,  he says, “'What a stupid purchase. What did I think I was proving by buying that?”  Still, some luxuries can be affordable even in this economy.  In looking closely at the picture above, I’m pretty sure the bottle on the floor beneath the desk is a bottle of Veuve Clicquot champagne.  Not bad, especially when you get it for around thirty five bucks at Costco.