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Yeah! High-Energy LP at Abercrombie & Fitch

EDITORS NOTE: Dennis Klein isvice president of loss preventionfor Abercrombie & Fitch where heis responsible for asset protectionand safety throughout the1,046-store specialty apparelchain. His career spans morethan twenty years working forsuch retailers as KB Toys, Lord& Taylor, Federated DepartmentStores, and Old Navy. Klein is afrequent presenter at industryconferences and was recentlynamed chairman of the lossprevention steering committeefor the Retail Industry LeadersAssociation (RILA).

E D I T O R : Abercrombie & Fitch has aunique image in the specialty retailsegment. Tell us about the company.

K L E I N : A&F is not a typical specialtyretailer. It is one brand with five distinctconceptsAbercrombie & Fitch,abercrombie, Hollister Co., RUEHLNo. 925, and our newest concept, GillyHicks. The company has grown to thepoint where it is an iconic Americanbrand and has become a powerhousein the retail industry. There is a certaincustomer out there that thrives on ourproduct and the atmosphere we provide.When you walk into our stores, it is notjust about the merchandise. We createa high-energy experience that includesthe sights, sounds, smells. You smell thefragrance. You hear the music. The lightsare spotlighting the merchandise. It isall intended to create an experience thatyou do not get in other stores.

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E D I T O R : What do you mean by highenergy?

K L E I N : A&F is focused on not just thetactile senses, but energy as well. Thestores are designed and the people aretrained to be high energy. You can feel itwhen you walk into the stores.

E D I T O R : Some retail corporate officesare not a true reflection of what goes onin the stores. If someone walked into yourcorporate office, would they sense thesame thing as they would in your stores?

K L E I N : We are set up much like acollege campus and that is intentional.When you walk in the front door, thefirst thing you notice is the music,just as in the stores. You can smell thefragrance. As you walk around, yousee photos of fresh faces and boardswith merchandise and drawings. In thesummer, everybody scoots around onscooters because it is a big campus. Andeverybody wears our style, which in thesummer is shorts, T-shirts, and flip flops.

E D I T O R : You have been at A&F forover three years. What did you seecoming into the job that was particularlyattractive?

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K L E I N : It started with a funny story.When I was coming to visit the campus,the recruiter told me not to wear a suitand tie. He said that employees wear theA&F style and I would feel out of place ina suit. But, I insisted that I was meetingwith the president and CFO and neededto dress right for an interview. WhenI got here, I realized the recruiter wasright. But I also learned not to let therelaxed atmosphere, the campus setting,and the informal clothing belie the factthat people work incredibly hard here.

When I met with everyone here, one of the things that intrigued me was that no one would tell me what the shortage was. I kept asking, “What is the shrink right now?” They would just say it was bad; that’s all I got from anybody. So, I figured the shrink was very bad, which presented an intriguing challenge.

The second thing that lured me here was that I learned the existing department was not a true loss prevention department. It was moreof a traditional security department that was not doing the things a conventional LP or asset protection department typically does. Their mainfocus was in apprehensions, and they did very well, but there really werenot any financial goals they were being challenged to achieve.

Those two factors made me walk away excited about the opportunity to build something here. It was an opportunity to put myself to the test. Itsjust been an amazing ride ever since.

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E D I T O R : When you came to A&F, you reorganized the LP program.How would you describe the culture and philosophy of loss preventionat A&F today?

K L E I N : This department does not resemble what existed three years ago.It is completely different. That is credit not to me, but to the people in thedepartment who actually do the work and, most importantly, to the seniorleadership of the company that has made shortage a priority. The CEO sentthe message down through management saying, Shrink is one of our topthree priorities and we will get it under control and it will stay under control.Period. To this day, he still issues that edict. That paved the way for peopleto understand that we have to take shrink seriously and go after it.

The goal from day one has been to integrate loss prevention throughout the company. It is not just in the stores. Loss prevention has to be embedded into our daily business in every department. Weve comea long way. It is great when we hear our business partners from otherdepartments say, We have a new initiative. Lets call loss prevention to seehow this affects them. Thats being successful.

E D I T O R : How do you develop those strong partnerships and relationships?

K L E I N : It comes from the philosophy we preach to our field people andeverybody in our departmentbe retailers first, loss prevention specialistssecond. When I first arrived here, I worked to understand the other partsof the business. I also worked just as hard to have those other parts ofthe business understand what we were trying to accomplish and why andwhere loss prevention fits into the business. You have to have a lot ofmeetings, talk to a lot of people, and visit a lot of stores. It is educatingpeople about what loss prevention is and what it can bring to the company.When people see that loss prevention can help them be successful, theybuy into it.

On the other hand, it was also important for the securitydepartment that was here to understand the retail business,which they were not challenged to do in the past. While theycaught a lot of bad guys, they were losing more money throughshrink every year and it wasnt working.

E D I T O R : Describe your organization for us.

K L E I N : At the store level, we have loss prevention agents incertain parts of the country that are more at risk than others.Loss prevention agent is our entry-level position. In 2007, weadded the district LP manager position. This may be surprising,but keep in mind this department is only three years old; sowe are still in our infancy in terms of what we can accomplish.Above the district level, we have regional investigators who aresolely focused on internal investigations. They report to regionalmanagers. Above that, we divide the country into east and westareas and have directors for each area.

E D I T O R : What staff do you have at the corporate office?

K L E I N : In the corporate office, we have our head ofinvestigations. We have a loss prevention analyst who does anamazing job of analyzing loss and trend analysis, doing research,and giving suggestions to the LP leadership team based on whatthe numbers are saying. We have a head of training and auditing.She had been a district manager in store operations. We broughther here to help bridge the gap between store managers and theloss prevention team in terms of the many policy-and-procedurechanges we were trying to make. She has helped us integratethe changes into the A&F culture. We have a head of operationswho runs the tactical and physical LP operations. He spendsabout half of his time partnering with store construction andoutside equipment vendors because we have integrated so manyelectronic LP controls into the new stores.

E D I T O R : How would your senior LP team members here atthe corporate office describe the primary objectives of the LPfunction, for them and for the company?

K L E I N : The first thing they would say is that their top priority isto train and educate. The average store manager is ten monthsout of college and often does not have a big retail background.Another aspect of the A&F culture is that we promote from withininstead of hiring store managers and assistant store managersfrom the outside. You can join A&F as a part-timer, overnighter,or manager-in-training. We promote those people as they growand move forward. Our challenge is to make sure the training isthere for them to understand their roles in both operations andloss prevention. Loss preventions job becomes easier when wehave district managers and store managers with the training andeducation to focus on loss prevention in their stores.

The second loss prevention priority is to deliver a financialresult to the company. This has been a big change for ourdepartment. We had to educate the lossprevention field people about what thefinancial result is and how it impactsthe company. Fortunately, we have agreat CFO who is probably the biggestsupporter of loss prevention Ive evermet. The loss prevention people areheld accountable to deliver the financialresult. They have to make sure theyare executing on all levels, with all thetasks that they are given, to deliver thatfinancial result. We have emphasized tothem that it doesnt matter how hard youwork, but that at the end of the day, it isabout the results.

The third priority is safety. We areconstantly looking at what we do withbank deposits, opening the stores inthe morning, and what happens whena shipment arrives. One small exampleof building safety awareness is a giantposter that goes over the back door inthe stores. It has a hole in it that goesaround the peep hole. In big letters theposter reminds employees to make surethey know who is on the other side ofthe door before they open it. We had todrill safety awareness and training intothe stores at the most basic level so thateverybody gets the message.

E D I T O R : Just as you talked aboutthe store people being promotedto store managers, I presume thesame commitment exists for the LPorganization. How do you go aboutpreparing your people for the next level?

K L E I N : It is all about mentoring. Weuse report cards and skills analysis. Wealso use the quarterly review processand travel with supervisors to build this.Of course, our growth has been so fastthat we have had to do some outsidehiring. That has been good, because inbuilding the department we can takeadvantage of bringing in people who havelearned different approaches from othercompanies.

We promote strongly from within. Wewill sometimes promote people quicklybecause we believe in them. These arepeople who have exhibited the skill setsand the wherewithal to execute well, nomatter what level we have put them at.They are the people that we are alwayswilling to take a chance on, becausethey have stepped up to the plate andperformed.

With promoting from within as wellas hiring from the outside, mentoringis critical. Mentoring is about taking thetime with the people to get them readyfor their next position, knowing that withour fast growth, new positions will openquickly.

E D I T O R : What are the initiatives orprograms that you are most proud of andthat have contributed to the LP successsince you have been at A&F?

K L E I N : When I first got here, shrink wasat a level where I realized we would needto take some steps that had not beentaken in the past at this company. One ofthem was using cameras in stores to seewhat was going on and help us managethe business. At the time, however, therewas a pervasive mindset that A&F was acompany that did not and would neveruse cameras in its stores. We were able tosell the idea by making it not just an LPinitiative, but also an operations initiativeto help regional managers. We showedthem how to use the cameras to help runtheir storesand they love it. They usethe cameras to look at the floor sets andto make sure the store is properly staffed.As we open stores internationally, remotemonitoring becomes more necessary andimportant. We can use the store camerasto virtually walk through a store. Camerasare now an accepted business tool. Allnew stores receive cameras, and we havea dedicated camera package for eachconcept.

A second initiative that was usefulin the beginning was a monthly LPreport. It was important not just tocelebrate publicly the LP successes,but also to keep up the momentum toeducate senior executives and peoplethroughout the company on what a lossprevention department can provide tothe company. Every month, we reportedLP-related information, such as inventoryresults, fraud schemes that go on instores, campus issues and incidents, andsafety initiatives. When people saw theshrink come down and the resultingfinancial results, it allowed us to getthe additional human and technicalresources we needed to keep investingin this department. Today, I just do anannual report, because there is a betterunderstanding of what we are doing.

E D I T O R : What is that single mostimportant idea you brought with youand instilled in the A&F loss preventionprogram?

K L E I N : Developing LP people and an LPculture within our company that is notonly good for the company, but good forthe LP industry is very important to me.The key is growing people. I inheritedpeople here who did not know what LPpeople should be doing. Initially, I said towhat was then the security department,Folks, look around the room, becausethis department is not going to look thesame. Youre going to start seeing morepeople doing different things. Your jobs,as you know them today, no longer exist.If you were to ask the people who arestill here how their job has changed, theywould tell you they cant even rememberwhat they used to do.

Our biggest challenge has been to takethe unique culture of each of our brandsand fit what we know as contemporary LPstrategies into each brand. The one thingthat I have brought here is the idea thatwe need to take a business approach andunderstand the different A&F conceptsand how LP fits into each one. We havedriven that down to the LP field people.LP has been successful here because wehave taken that approach, rather thansaying there is just one way to approachit. That has been one of the biggestsuccesses here.

E D I T O R : We understand you participatedin a test of soft tags. Can you share theresults?

K L E I N : We had some amazing resultsin reducing shortage through 2005; somuch so, that we felt comfortable testingsoft sensors given the success that otherretailers had seen. We tested in Hollisterin 2006 and the results were terrible. Wesaw all of the savings we anticipated, butshrink went right back to where it wasbefore I started. I think the technologycan work, but its just not for us givenour demographics combined with ourstore design. Our stores have a lot ofcorners, furniture, rooms, and even palmtrees that make effective loss preventioncoverage a challenge. The project,however, demonstrated the companyswillingness and ability to test new ideas.

E D I T O R : A&F recently opened their firststore in London. How did you approachLP in that store versus what you weredoing in the U.S. and Canada?

K L E I N : One of the lessons I have learnedin my career is that you have to stay intouch with other LP professionals andpeople in other retail roles. If I had notcalled colleagues in other companiesthat have international experience,we probably would have made a lot ofmistakes. I asked them to tell me aboutproblems and issues we could expectin opening stores outside of the U.S.You should never wait until annualconferences to talk to people; rather, plantime to pick up the phone, check in, andrun challenges by your peers all the time.There are a lot of great people out therewho are willing to assist.

E D I T O R : Did you recruit your LPprofessionals from the local market or doyou send U.S. citizens to those countries?

K L E I N : We did both. On the operationsside, we sent people from the U.S. tomanage the store. On the LP side, wehired nationals and then brought themhere to work in a store and spend timewith our top field people. It is importantthat they understand the A&F culture sothey can go back and open their storewith a sense of confidence knowing whatthe company expectations are. This isalso important for vendors. We often askoverseas vendors to come to the U.S. sowe can walk them through our stores. It isimportant they have an understanding ofwhat we are trying to accomplish. We donot want anybody approaching our storesas they would any other store. That isunacceptable. So, they have to come hereto learn us.

E D I T O R : How did you get started in lossprevention?

K L E I N : I fell into it like a lot ofother people. I needed a job to getthrough college. I initially took a jobas an undercover investigator in an artmanufacturing plant in Woodstock,Georgia. To show you how bright I was,two or three months later when wecaught the guy who was stealing, I wasout of a job because they didnt haveanother job for me. Then someonesuggested I look at department stores.I started my retail career with Richs inAtlanta. Joe Hardman, who is now atCracker Barrel, coached and counseledme. From Richs, I went to Lord & Taylorand then spent ten years at KB Toys.

E D I T O R : When did you realize youwanted to be a vice president and runyour own show?

K L E I N : I never thought that far aheaduntil I was at KB Toys. After five years inregional operations, I realized that I couldhandle a directorship; that I could makea career out of LP and make a significantcontribution to a company. That is when Igot it in my head that I wanted to run myown department, because I wanted to putmy fingerprint on it.

E D I T O R : You mentioned Joe Hardman.Are there others who have beeninfluential in mentoring you?

K L E I N : Walter Palmer is without a doubtone of them. He hired me at KB Toys.What a mentor he has been and continuesto be. I would also mention Earl (Duke)Welliver. I worked for him also at KB Toys.Duke is retired now, but still providesgreat advice on work and life in general. Itry to do the same thing for the peopleIm bringing here and pay it forwardbecause it is the right thing. Duke hasthese Buddhist sayings that he likes toshare. One of my favorites is, You can geteverything you want out of life by helpingenough other people get what they want.I try to teach that to people here, and Itry to do that as well myself.

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