It’s a drizzly morning in Charlotte, N.C., and Rack Room Shoes president and CEO Mark Lardie is reflecting on what it means to run a 100-year-old company. But there’s a sense he doesn’t spend a lot of time ruminating on the past.
“Retail is a relentless game. Every morning, across the country, 520 of our store managers will open their stores and start their business again. So there aren’t a lot of chances to pause,” he says. “But I guess a 100-year anniversary is cause to do so for a moment.”
That point comes up again and again during FN’s visit to the company’s headquarters, during sit-downs with Lardie and members of his leadership team. Retail is 365 days a year. And with the emergence of real-time data, you find out quickly whether you’re winning or losing.
For Lardie, a longtime runner, it was that competitive aspect that first attracted him to the business and led him to abandon a planned career in chemical engineering. “I loved that each morning brought an opportunity to beat the targets,” he says.
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And after more than 10 years at the head of Rack Room Shoes, the industry veteran, who rose through the ranks at Footstar and Caleres, is still passionate about the business. (He confessed that looking at spreadsheets over the weekend is one of the ways he unwinds.)
That drive has helped the family footwear chain grow both its physical presence and its standing within the industry.
As a private company under the longtime ownership of Germany’s Deichmann Group, Rack Room’s wins over the years have not garnered the same level of attention as other major footwear chains — especially in comparison to its publicly traded cohorts Famous Footwear and Shoe Carnival.
But quietly and steadily, it has expanded throughout the South and parts of the Midwest, with 512 stores open at press time, eight under renovation and six doors set to debut by year’s end. Simultaneously, Rack Room has strengthened its product assortment by investing heavily — and early — into the booming sneaker business. In 2016, Lardie spearheaded the establishment of The Athletic Shop, a shop-in-shop concept that has helped cement its position as a sneaker destination for both parents and kids. “For many of the families that shop with us, we are their athletic authority,” said the CEO.
Joe George, sales director at Converse, said other retailers could learn from Rack Room’s ability to advance fashion trends and create opportunities. “The Rack Room team understands that in order to fully serve their customers, it requires strong partnerships with the companies and brands that connect them to their customers.”
Across its shoe floor, the retailer’s brand roster ticks off many top names in the athletic space, including Nike, Converse, New Balance and Puma, as well as top casual labels such as Birkenstock, Crocs and Dr. Martens. But for Lardie, ever the competitor, there is always more to accomplish. “We’re not sitting idle. We have to continue to extend and push harder,” he said.
Here, the CEO reveals his perspective on the retail business and gives insight into the inner workings of the Rack Room organization.
A 100-year anniversary is an incredible feat for a company. How are you feeling in this moment as a leader?
“From our perspective, it’s not so much a celebration as a responsibility. We think back about all of the associates, all of the tough decisions, all of the investments that have been made to keep our brand fresh and relevant over 100 years. So our job now is to make sure that we’re investing in the right places, the right people and the right systems to ensure that it can stay as vibrant and fresh and relevant over the next 100 years. And that’s a pretty tremendous responsibility.”
During your tenure, what have been some of the biggest changes to the business?
“I think there were moments over the last decade where all of us wondered how far digital sales would take us and how big that could be. How far will the American psyche allow that to go? Because shopping is deeply invested in American culture. But we believed there would always be a place for brick-and-mortar shopping, and fortunately, there’s been some leveling out of that digital surge over the last three or four years, taking pandemic skewing out of the equation. That reinforced our belief that there’s plenty of room for us to continue to provide an excellent experience for our customers and in a brick-and-mortar environment.”
Where are the top opportunities for Rack Room in the months and years ahead?
“We are convinced that we can continue to grow our brick-and-mortar footprint. That doesn’t mean you’ll see us change our model, though. We play really nicely in suburban environments, so it’s unlikely you’d ever see us in downtown Chicago or New York. But on the outskirts of all those places, where suburban families live, we think we have the right and authority to play. Most of our effort will be around backfill. And we live across the southern part of the United States — it’s the population growth part of the country. We think we can continue to modestly grow at about 3% to 5% a year in our units. Digitally, we continue to be underpenetrated compared to our competition, and part of that is our desire to be focused against only Rack Room customers. We don’t try to go mine a bunch of customers that currently shop at a more national chain or at brands, and I think that’s one of the things that’s appealing to some of our brand partners.”
What is the biggest challenge in footwear right now? What’s keeping you up at night?
“First and foremost, the service workforce is a great strain on the entire industry, and we’re feeling it for sure. So you need to invest properly in your store personnel — reward them, compensate them in a proper way. But, adjusting for this inflationary period that we’re in and ensuring that you don’t break your model for the long term by making short-term decisions about how much you can afford to pay associates, that’s probably one of the biggest challenges that we have today.”
How is Rack Room remaining competitive in this tough hiring market?
“We’ll do whatever we need to do to protect the core of our sales team. One of our advantages is we have a really dedicated, experienced sales team. And we intend to continue to invest in that, especially at the top of our sales team pyramid — managers, district managers. But that takes its toll on profitability. We have to be willing to invest and give up a little bit on the bottom line to ensure that we have the same kind of service experience as we go into the future. We’re fortunate to be owned by a parent that understands the long-term view of things, and they were willing to work with us and give up a little short-term profitability in order to invest in our future.”
You’ve said publicly that Rack Room is focused on diversifying your leadership. How are you going about that?
“We’ve always had a focus on diversity. It shows up in our sales teams most directly. Where we rub with our customers, they will see faces in our store that are very familiar to their community. Where perhaps we’ve been stymied a little bit is within our headquarters group, and that’s probably from a lack of investment — by the entire industry, frankly — to ensure that the strong associates joining our organizations are rising up and being put in positions of power. Now, as our organizations start to ‘gray out,’ it’s given us the opportunity to rethink and reshape our teams. So we’ve been purposeful and placed people into some more junior positions over the last 10 years and let them learn and elevate themselves. We think that’s the best way to do it. So that when we reward them with more responsibility, it gets applauded by their peers as opposed to questioned by their peers. It always takes a little longer when you do it that way, as opposed to using a quota system, but we like where it’s gotten us. We’re also investing in our entry-level associates through scholarship programs and internship programs, for even better diversity in our headquarters group as we go forward.”
Deichmann Group has been Rack Room’s parent company for almost 40 years. How involved are they in operations?
“Deeply and heavily involved. Heinrich Deichmann, our owner and chairman, has spent a fair amount of time here in the U.S. with Rack Room Shoes, so he understands the brand deeply. Even though he’s European, he gets the U.S. consumer and he gets the Rack Room Shoes business — because they have owned it for so long. At the same time, he also understands there are inherent differences, so where he probably could have more say over some decisions, he tends to have a strategic view and interaction with regard to the decisions we make. He allows the American leadership to make good decisions for the U.S. business. He speaks with us at least on a weekly basis and sometimes several times a week. More formally, we send him a recap note every week. So he tracks the business closely.”
Your sister company, Snipes, has been growing rapidly here in the U.S. through acquisitions. What drove that strategy?
“Here in North America, Deichmann Group had a nice presence in the family footwear business, but we did not have that urban specialty business, like we have in Europe. So we worked pretty hard to identify some targets over the last four years and executed a number of deals that allowed us to leap to a presence — and that’s what we had to do. In that game, it’s very hard to follow [Rack Room’s] organic growth model. In the Snipes world, you have to have the blessing of brands to participate, and to do that effectively, we needed some massive muscle behind us, so we had to go the acquisition route.”
How much interaction is there between your teams?
“Even though we don’t participate directly in what they do, we sort of back their team up with some consulting support. But we couldn’t be happier to have them in the fold and to play in our two different consumer segments. And there are insights they can provide oftentimes in the athletic market — the trends they see will eventually be interpreted down in our world, so we feel like we get a couple-year head start on what’s happening there.”
You started integrating Off Broadway Shoe Warehouse with Rack Room in 2016. What are your plans for that banner?
“In 2020 we took the final steps to blend together [the operations]. Now our Off Broadway stores are in the process of being rebranded into Rack Room stores. What we found is that with Off Broadway, with the limited number of locations that we had, we never had enough mass behind the brand to bring it to life for customers. And generally, we opened stores and marketplaces where we already had a Rack Room presence, and Rack Room tended to cast a pretty large shadow. So over the next five years, you’ll see the two brands start to turn into a single brand.”
The athletic category has been a major focus for you the past several years. Have you accomplished what you hoped?
“We’ve worked hard to create an assortment and an experience that our customer can feel comfortable with. Athletic has been top of mind for them for a long time, but they didn’t always have an efficient place to go, with relevant styles from the best brands in the athletic world. We think we’ve been able to accomplish that and deliver on that experience. But there are a couple of brands that we’d still like to add into the mix that our families feel are important and we don’t have access to yet, so we continue to campaign with them. And we continue to expand the options that we have with our existing brands and deepen our partnerships with those.”
