Is it the CFO’s job to rescue a brand by reformulating what it stands for?
Not usually, but at Caché, CFO Tony DiPippa is doing  just that.

By Julie Barker

An exciting turnaround opportunity is what many CFOs crave, and Tony DiPippa is one of them. DiPippa likes an entrepreneurial environment. He has an appetite for challenges. But the single biggest contributing factor that brought him to his current job as executive vice president and chief financial officer of Caché, Inc. in August of 2013 was the opportunity to work with a great merchant, CEO Jay Margolis, to turn around a struggling company. The niche retailer of eveningwear, special-occasion dresses, and sophisticated daywear for “confident and chic” women had shifted its product mix to more sportswear, broadening its appeal to drop-in shoppers but landing Caché in a crowded retail segment. Caché was in trouble. To take just one measure, gross margins had dropped from 47.7 percent in 2006 to 37.4 percent in 2012.

With Q1 2013 barely under way, Caché’s board brought in Margolis as chairman and CEO. His retail background is strong (president or CEO of seven retail apparel corporations including The Limited and Reebok, and director positions on the boards of retailers such as Godiva Chocolatier, where his path crossed with DiPippa’s, the vice president, North American finance from 2005-2010). The management team Margolis assembled is studded with retailing star power, including DiPippa. Margolis took over in February 2013 and by August had his whole team in place.

“The turnaround starts with product,” says DiPippa. “It starts with getting back to what the business has been known for historically… [so the target is] a product mix of over 50 percent dresses.” Caché will offer other products, too, including accessories, date-night separates, and more.

Like a Tech Startup

The management team, being entirely new, has no preconceived notions of how things should be done. Though the company was founded in 1975, the atmosphere feels new and exciting. “The way that Jay talks about it, it’s almost like a tech startup,” says DiPippa. Among the changes: a new web provider, new loyalty program, new brand look, new ways for customers to shop, more frequent product deliveries to stores to increase newness and to chase trends, as well as a heightened focus on customer service. DiPippa’s challenge is to define the right metrics to pursue, so the team can determine if it is making progress or needs to correct its course — the way startups do, learning from errors and making constant adjustments as they go.

The two most important metrics are store sales productivity, in terms of dollars per square foot, and gross margins. “Earning better margins is absolutely critical to the survival of the business,” says DiPippa. This starts with “elevating the product, and then elevating the customer experience.” But he’ll have to decide how to get that done in a very cash-constrained environment, and then prioritize for years two and three. For instance, he’d love to give stores a new point-of-sale (POS) system now, but that’s not an urgent need.

In the mid-2000s, the company had double-digit EBITDA margins, and that’s the level where DiPippa wouldlike them to return. “In our business, the initial markup is an important component of gross margin,” he says. “But the real key for an apparel business is your sell-through — in addition to having the right product, your planning-and-allocation process is critical.” Sell-through (commonly represented as a percentage) equals units sold divided by inventory units received in the store. But that definition doesn’t take into account the product lifecycle, which in a retail apparel store involves taking markdowns so as not to have racks of yesterday’s merchandise when today’s new items arrive.

The Markdown Effect

Well in advance of the season, Caché determines what quantities of which products it will manufacture or purchase for its stores. “The product comes in — we have a delivery at least once a month —and a certain percentage of that product sells at full price. At some point the next delivery will arrive, whether you’re ready for it or not,” says DiPippa. “So you’ll have to sell through the remainder of that product. If it’s a product that resonates with consumers, if you’ve allocated to the right stores, if you get all this right,” your gross margins will look great.

Conversely, if you have excess product, you lose. “With the first markdown, you’re still making money, a lot of money,” says DiPippa, “but with your second and third markdown, you’re just trying to make room for your new products.”

Long Way from the Air Force

If it seems that DiPippa has a lot riding on his decisions, it’s true. But this is a man who once wanted to be a fighter pilot. He changed his mind on that but spent five years in the Air Force, much of it as an intelligence officer in Omaha, NE. The Air Force paid his way through the University of Virginia, where he did a double major in economics and foreign affairs. He is someone who loves a challenge, but also believes in preparation and hard work.

DiPippa credits the service for teaching him about discipline, goal setting, and meeting those goals. At the age of 22 he led a team of 14 people working on a classified intelligence project, “an experience that helped me grow very quickly.” He earned his MBA taking classes nights and weekends, and then in 1996, joined Procter & Gamble’s finance development program, another valuable training ground. There he worked in a variety of finance roles including supply chain, where he partnered with purchasing and outside vendors, looking for ways to eliminate waste. He also partnered with marketing, sales, and manufacturing to turn around a struggling business unit, and was even embedded in a field sales team — all great preparation for his work today as CFO of Caché.

As for CFO experience, just prior to Caché, DiPippa spent three and a half years at W.B. Mason, “a very fast-growing company in a declining industry, office products.” There he was able to create a finance team, significantly upgrade the accounting team, and build an internal controls and business-process reengineering function for the company.

His advice to middle-market CFOs looking to grow in their jobs and careers is to “always look for roles that in some way broaden your skill set. If you haven’t been part of a business that had an international component, do that. If you have an opportunity for a role that gives you responsibility for HR or IT or legal, take that on…. What I’ve tried to do is avoid situations where it’s comfortable because it’s all very familiar.”

Now DiPippa is in his first role as a public company CFO and he’s putting his prior experience to work — and loving every minute of it.