Behind the Scenes of a Retail Turnaround: Lessons from Michael Appel on Reviving rue21

When it comes to retail turnarounds, few stories are as insightful and action-packed as the revival of rue21, the junior and young men’s fashion retailer. In a candid conversation on Corner of Fifth’s Street Talk podcast, Michael Appel, President of Appel Associates and a seasoned turnaround specialist, offers a behind-the-scenes glimpse of the challenges, strategies and leadership required to bring a struggling retailer back from the brink.

First, host Arthur Zaczkiewicz asked Michael to explain what a turnaround specialist does.

“A turnaround specialist is someone who steps into a business under significant stress — whether it’s teetering on the edge of bankruptcy, underperforming, or struggling to operate efficiently,” Michael said. In essence, the role requires stabilizing the business, assessing its position and implementing a strategic and financial plan to steer it back toward profitability.

The goal? Not just to survive but to thrive — while dealing with creditors, restructuring teams, and media scrutiny. “You’ve got to stop the bleeding first,” Michael added, “then develop a plan to rebuild.”

Understanding rue21: A Giant in Small Towns

Before its financial troubles, rue21 operated over 1,200 stores across the U.S., predominantly in smaller towns. Its core demographic: budget-conscious teens who loved trendy yet affordable fashion. Michael humorously refers to it as “the largest retail company nobody’s ever heard of.”

However, as he explains, overexpansion became a key pain point. Coupled with debt, fashion misses with its target demographic and operational inefficiencies, rue21 found itself in dire straits by 2017, filing for Chapter 11 bankruptcy. That’s when Michael stepped in.

The Turnaround Playbook: How Michael Transformed rue21

Michael said he didn’t walk into a thriving environment — he entered amid chaos. With an interim CEO stepping down, a depleted executive team, creditor challenges and a fleet of 750 stores still demanding clear direction, Michael quickly had to prioritize survival before progress.

Here’s how he did it:

Customer First, and the Power of Knowing Who You Serve: “Understanding your customer isn’t just important — it’s everything,” Michael stressed. Early into his journey at rue21, Michael noticed the absence of actionable customer data. So, he commissioned a large-scale consumer segmentation study to identify who the company was really serving and what they wanted.

The results? Insights that reshaped their approach to marketing and product development, eliminating reliance on guesswork.

Technology as a Game-Changer: One critical realization forced Michael to take a bold risk. Buyers weren’t selecting winning products. Inventory issues, especially in the girls’ category, resulted in excessive markdowns — and losses.

Enter First Insight, a Pittsburgh-based predictive analytics company. Their tools enabled rue21 to crowdsource customer opinions and run advanced data analysis to identify top-performing SKUs ahead of ordering. Buyers resisted — after all, who wants an algorithm challenging their expertise? But Michael stood firm. Eventually, First Insight became a cornerstone of rue21’s strategy, cutting down overbuying and matching demand with the right products.

Assembling a Winning Team: At the heart of Michael’s turnaround philosophy is leadership. With key roles vacated and a skeptical workforce, Michael urgently prioritized hiring talented individuals aligned with his vision. One notable hire was Dr. Mark Crystal, a former employee with expertise in planning, allocation and data analytics, who filled two crucial positions at once.

By rebuilding the leadership team and empowering them with clear directives, rue21 gained the momentum needed to steady the ship.

Run for Cash, Not Sales: With a troubled inventory and the holiday season looming, Michael pivoted rue21’s focus toward liquidity. “We’re not here to maximize sales — we’re here to survive,” he emphasized. By canceling forward orders, reducing markdowns, and streamlining operations, rue21 weathered a potentially catastrophic period while creating space to recover and recalibrate.

A Quick Turnaround, but Challenges Persisted: By mid-2018, rue21 began showing signs of recovery. Back-to-school collections outperformed expectations, marking a turning point that retailers rarely achieve so quickly. Michael credits the alignment of data, leadership and strategy for the company’s revival.

However, the story didn’t end there. After two and a half years, Michael parted ways with rue21 over differing priorities with the board. He believed it was too soon to distribute profits or sell, citing the lack of audited financials to validate the turnaround’s sustainability. “At the end of the day, you work for the board,” Michael said, reflecting on the tough decision.

Unfortunately, fresh struggles eventually led rue21 into financial troubles again, proving how fragile the world of fashion retail can be.

Key Takeaways from Michael Appel’s Turnaround Journey

While rue21 faced its ups and downs, Michael’s experience highlights enduring lessons for businesses:

1. Leadership Matters: Surround yourself with a capable team and make the tough decisions when necessary.

2. Data Over Instincts: Leverage technology and analytics to understand your customers and stock accordingly.

3. Focus on Cash Flow: In periods of crisis, survival trumps everything else.

4. Speed Is Crucial: Retail cycles move quickly, and delayed actions can spell disaster.

5. Adaptability Wins: Restructuring isn’t linear; it’s about juggling multiple priorities, stakeholders, and challenges.

Michael Appel’s rue21 turnaround showcases the power of vision, strategy and perseverance in the face of adversity. While the retail industry comes with unique challenges — changing trends, fickle customers, and thin margins — the principles of understanding your customer, building the right team and leveraging data apply across all sectors.

Michael’s story reminds us that while turnarounds aren’t easy, when done right, they can breathe new life into even the most challenged businesses.