How ‘Charming Charlie’ Built a Hit Fashion Chain in Under a Decade
Charlie Chanaratsopon is a young man in a very great hurry. “I hate downtime!” exclaims the 35-year-old Thai-American, chopping the air for emphasis. With his slicked-back hair and sleeves rolled up to the elbows, he’s always ready to get down to business — even as he weaves frantically in and out of Houston traffic in his black Mercedes S550, eager to show a visitor one of his stores. “I’d probably be the worst lawyer, worst doctor, worst engineer on the planet because of my ADD-ness,” says Chanaratsopon (cha-na-ROT-suh-pon).
No examples of botched cases, mangled surgeries or shoddy construction in his world. But there’s an element of reckless endangerment in Chanaratsopon’s rush to build a retail chain of accessories. In less than a decade the young founder and CEO of Charming Charlie has built a $400 million-plus (sales) mini-empire of watches, necklaces, scarves and handbags — 284 stores in 40 states that FORBES values at $1 billion-plus. With an estimated net worth of $500 million he’s careening toward billionaire status before his 40th birthday.
Since launching his first store in Houston nine years ago, Chanaratsopon hasn’t slowed down a whit. He’s now opening five stores a month, mimicking the model of fast-fashion giants Zara and H&M by selling attractive but cheaper versions of trendy items, sourced from Asia. Examples: $15 scarves, $9 sunglasses and $7 to $15 iPhone cases. Customers spend, on average, $30.
Is he making money? Chanaratsopon insists that all but one of his existing locations is profitable. The company’s Ebitda is an estimated 15% or so — better than most apparel chains but far below luxury retailers like Coach COH -1.76% and Michael Kors. Chanaratsopon refuses to comment on a key index — same-store sales growth — though it’s probably safe to peg it at 10% (Francesca’s, a clothing and accessories boutique with 360 outlets, does 10% to 15%). One former Charming Charlie buyer claims on her LinkedIn LNKD +% page that her division, apparel and accessories, expanded 26% across same stores in 2012.
Charlie Chanaratsopon says he’s in a race to capitalize on a burgeoning trend. Accessories are a $9.2-billion-a-year business in the U.S. and expanding swiftly. As a category, paired with beauty and footwear retailers, it grew six times as fast as other mall-based apparel stores from 2007 to 2012, reports Credit Suisse. “We’ve spent years brute-forcing things across the finish line,” says Chanaratsopon.
His drive runs deeper than business, supercharged as it is by a familiar immigrant success story. His maternal grandfather worked at a gas station in Houston to put his two daughters through college. As the first generation born in the U.S., Chanaratsopon always felt the heat to keep pushing. Perhaps a frightening childhood episode played a part, too. Burglars broke into his house at 2 a.m., tied up his family and forced his father to give up all their valuables. “They put me on the floor and started kicking me,” he recalls. “They took the revolver out, shoved it in my throat, clicked it back. I’m 13, and all I remember thinking is, ‘Well, I think I had a great 13 years.’ “
His parents, who immigrated in 1974, had founded Silver Express, a sterling silver jewelry outfit that sourced production from Thailand and sold on consignment to the likes of J.C. Penney, Nordstrom JWN -3.11%, Target TGT -1.46% and Wal-Mart. Chanaratsopon grew up with the business, watching his parents work 18-hour days, overhearing dinner-table discussions of employee issues and traveling with them on sales calls and sourcing visits.
Some of that business education surely stuck, since Chanaratsopon ended up in the elementary school principal’s office after charging first-grade classmates $1 a day to rent his Nintendo games. Profits fueled more game purchases and, hence, more rentals. Today, he says, “I’m still buying and selling — that’s what I love.”
There were detours. After graduating from Loyola Marymount in Los Angeles with a degree in finance, he became a real estate analyst at Sanwa Bank, then came back to Houston to help his dad find a new headquarters, persuading him to build rather than lease. Chanaratsopon supervised construction of an office building as well as an adjacent strip mall, which he quickly filled with tenants. That venture was so successful he started financing construction of other shopping centers in Houston’s suburbs, building seven in two and a half years. “It wasn’t being smart, it was kind of luck at the time,” he muses. “The real estate market was so hot, and they were valuing it so high, whatever you built you could make so much refinancing and selling it.”
But Chanaratsopon couldn’t sit still. He dreamed of building 100 such malls and making more money by owning the store that anchored them all. But what kind? Apparel had too many players. Harwin Avenue, Houston’s stretch of discount stores offering cheap imports in warehouse settings, offered inspiration. With leftover consignment returns from Silver Express as the merchandising backbone, the first Charming Charlie opened in October 2004.
It nearly died after the first month of desultory traffic. On a whim Chanaratsopon decided not to pull the plug and re-lease the space but to stay open another couple of weeks. Thanks to dumb luck, or a direct-mail drop, women started queuing up outside the doors before Charming Charlie opened each morning. “It became the ‘in’ place for suburban moms’ day out,” recalls COO Steve Lovell, who joined the company after the third store. “Word spread like crazy. My wife heard about it from her friend before it ever opened near us.”
Charlie Chanaratsopon didn’t need much encouragement to start fast-tracking. “Own the store, own the complex — that was the idea,” he says. “That kind of turned when I realized you couldn’t physically build 100 shopping centers in six years. The stores were getting so much traction. It was a better business — a faster business.” Each cost, on average, $750,000 to open.
So he appended a grandiose plan to his business school application to Columbia in late 2005. Over the next two years he flew back and forth most weeks between New York City and Houston, where he not only wrote checks but also hung display racks and swept floors at new locations. Monday mornings he was back in Morningside Heights, soliciting advice from professors and speakers.
Slapping “the go button even faster” after he returned to Houston full-time in 2007, Chanaratsopon raised an undisclosed amount from private equity firm Hancock Park Associates, to double the store count from 7 to 14. (He and Hancock today control 95% of the company.) As the economy crumbled, Chanaratsopon squeezed desperate shopping mall operators for the best terms. “Landlords were freaking out,” he recalls. Charming Charlie more than doubled in size to 36 units in 2010, jumping to 96 in 2011. Its cheaper wares hit the mood of the times, offering what Hancock Park managing partner Mike Fourticq calls “the perfect shopping experience for a hurting economy.”
But as the economy mends and the chain grows, Chanaratsopon pegs his overall performance at six out of ten. As he walks into store number five, it’s obviously in need of a face-lift. He shudders at the warehouse-style fluorescent lights, beige slat wall and water-stained ceiling panels — all part of a discount store vibe that “drives me nuts.” As the company fanned out across the country, it replaced those features with higher-quality fixtures but still organized merchandise according to color instead of type (walk out of teal and into orange).
The newer stores are smaller — averaging 5,300 square feet instead of 8,000 — and assert more fashion confidence, leaving little to a wandering imagination. Push on the hot-pink doors and walk into walls of bold navy and white stripes and blaring pop music. The floor is packed with mannequins and flat-panel TVs to demonstrate hot looks using different Charming Charlie products. New trend tables show off the latest bubble necklaces and sand-blasted bracelets; cubby walls hawk higher-margin handbags.
One slight problem: The redesign isn’t making the stores more lucrative. Average sales are slightly lower than they are at the company’s traditional stores, though costs per square foot are up 25%. So why do it? Customer surveys suggest that store experience has dislodged low prices as the chief reason for shopping there. Put another way, Chanaratsopon is trying to develop Charming Charlie into a brand — one he hopes to export to the Middle East and South America (as well as to New York City’s Fifth Avenue next year). “Where I think we have an opportunity is 5,000 stores globally,” he blurts without hesitation.
You want to tell him to chill. “A few stores in Canada are a whole lot easier than in Europe and Asia,” says Laura Champine, retail analyst at Canaccord Genuity, the New York investment bank. “There’s still plenty of runway in the U.S.”
Chanaratsopon might also put more horsepower behind his e-commerce efforts. The first attempt, two years ago, was a painfully expensive mistake he refuses to quantify. “We didn’t really focus on it, didn’t complete the thought,” he says. Take two, launched in October, is a clean if unexciting website that isn’t yet mining a potentially rich vein of customer data.
If there are speed traps ahead, Chanaratsopon seems determined to ignore them. Says Bill Moreland, the new vice president of real estate, “It’s 100 miles per hour all the time around here.”