Chico's Hired GunBy Larry Dignan Print
The high-flying retailer brings in an interim chief information officer to avoid technology missteps.Wanted: Technology executive for company with annual sales topping $1 billion and growing 40% a year. Job: Fine-tune wide range of systems implemented in 2003 that were to improve everything from hiring to the way goods were presented in retail outlets.
That's essentially what high-flying women's apparel retailer Chico's FAS is seeking since chief information officer Ajit Patel abruptly left the company. Patel, who was responsible for upgrading the company's merchandising, production and sourcing, financial, human-resources and supply chain systems, left May 21. The company didn't announce the departure until June 17 pending negotiations over severance.
It's not clear why Patel left, but Chico's chief executive Scott Edmonds says the company's staff should be "more than capable" to manage the company's systems." Chico's executives and Patel weren't available for further comment.
Patel appears to be leaving Chico's in good stead. He completed a series of implementations under Chico's "Bridge to a Billion" project designed to replace outdated systems with a more modern infrastructure, but there are projects that need attention. The company's biggest efforts—new point-of-sale systems from CRS Retail Systems, merchandising systems from NSB Group, warehouse management applications from Manhattan Associates and financial tools from Lawson Software—are finished but haven't made the company significantly more efficient yet.
To oversee the projects until a permanent replacement is found, Chico's hired an interim chief information officer, K. Scott Merrill, a consultant for Capgemini and a former executive at retailer Lowe's Home Improvement.
Merrill's tasks will include hiring more staff to train employees to leverage newly installed systems, and implementing budgeting applications from Hyperion, says Bear, Stearns analyst Dana Telsey in a research note.
How Chico's handles Patel's departure and maintains its current implementations is worth watching because a technology misstep could hurt its stock price. The Wall Street darling trades at 28.5 times 2004 earnings estimates compared to 17.8 times earnings for similar companies, says Telsey. Why? May same-store sales were up 17.9%, and first-quarter sales for the quarter ending May 1 were up 52% to $257 million, with net income up 52.6% to $36 million.
Thomas Pettibone, principal of Transition Partners, a Reston, Va., firm that provides interim information management, says Chico's move to hire an interim CIO makes sense but raises questions for a company that's performing well. For starters, Merrill's hiring indicates Chico's doesn't have the management bench to replace Patel, Pettibone says.
Hiring Merrill should give Chico's time to find the right manager for a technology staff that has tripled over the last three years to 90 staffers, according to Pettibone. The cost of Merrill is expected to be double Patel's 2003 annual salary of $576,000, Telsey says.
"You don't want to rush and make a fast decision and hire the wrong CIO," Pettibone says. "You've got to bring in someone who can gain the confidence and respect of the I.T. staff and take you to the next level."
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