Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, September 10, 1995 TAG: 9509080127
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: MEGAN SCHNABEL STAFF WRITER
DATELINE: LENGTH: Long
Joan Dean called it potentially confusing.
Dean was unpacking egg-shaped trinket boxes in the store's gift department - or what by later this week will become the gift department, once the packing boxes are cleared out. She was talking about Roanoke shoppers who have been trying to catch a glimpse of the new Stein Mart through the front gate.
"I think they're curious," said Dean, one of about 70 Roanoke-area employees hired to staff the Tanglewood Mall store, which opens Thursday. "I think they might be a little confused."
Confused, perhaps, because they may never have heard of Stein Mart Inc., the Jacksonville, Fla.-based retail chain that calls itself a hybrid of better department stores and off-price retailers.
Confused as well because the store's design may appear a bit schizophrenic at first.
As in most discount stores, Stein Mart customers pay for their purchases at check-out stands at the front of the store, rather than in each department. And a stack of grocery store-style shopping baskets sits near the entrance. Price tags on Stein Mart merchandise carry two figures, a "compare at" price and the chain's price, intended to draw attention to the 25 percent to 60 percent discount.
But unlike other discounters, Stein Mart's presentation - and the merchandise itself - is typical of upscale department stores. Two display windows facing into the mall feature carefully designed displays of clothing and linens. In the store, name-brand and designer apparel hangs in color-coordinated groups on four-way and T-square racks, not in long rows of randomly assembled pieces. The lighting is soft, the walls soothing pink.
John Williams Jr., Stein Mart's president and chief operating officer, has come to expect some confusion when the company moves into a new market.
"Customers will want to know how long these prices will last," Williams said. They see the merchandise, check the prices, assume there's a catch.
But Stein Mart has built a reputation, and a network of 90 stores, around its strategy of offering name-brand and designer clothing at discounted prices in a department store atmosphere. As its slogan says, Stein Mart is all about "The look, the name, the price."
Stein Mart's split identity means that a number of existing Roanoke retailers may find their sales affected by - or may affect the sales of - the new store. Speciality clothing shops such as E.I. Randle, Davidson's and Frances Kahn may share some clothing lines with Stein Mart. Off-price retailers including Goody's and T.J. Maxx may offer competitive prices. Department stores - Hecht's and Leggett - may appeal to the same clientele that Stein Mart is after.
But neither established Roanoke merchants nor Stein Mart expects much competition from the other side.
"You can't compete with a 30,000-square-foot store," said Rose Stavale, manager of the 5,500-square-foot Frances Kahn women's apparel shop. "We don't want to try. We're a specialty store."
Armani, Donna Karan, DKNY and St. John Knits are top sellers at Frances Kahn, she said; Stein Mart doesn't carry those labels.
"I don't think it's going to be a problem," she said. "If it were Neiman-Marcus or Nordstroms, then I might worry."
Joe Curulla, manager of the Davidson's men's shop that sits directly across the mall from the Tanglewood Stein Mart, believes the new store may actually help his business.
"Stores like that bring a lot of foot traffic," Curulla said. "Hopefully, they'll come into our store." The two stores may see some crossover - both carry Polo sportswear, for instance - but he said Davidson's tends to shy away from carrying apparel lines that are widely available at department stores.
Tom Thomson, a retail analyst with Wheat First Butcher Singer in Richmond, said small specialty stores shouldn't worry too much about Stein Mart's arrival because they typically carry different apparel lines. And men's stores like Davidson's have even less reason for concern, he said, because Stein Mart usually doesn't compete well in tailored men's apparel, despite the fact that the company carries a full line of discounted suits and offers alterations.
"There's a certain type of customer that buys that $995 suit or that $695 suit," Curulla said. Those men, he said, shop at places like Davidson's, where a full-time tailor can custom-fit jackets and pants.
Debbie Grisso, manager of the Goody's Family Clothing store at Tanglewood, was optimistic as well.
"I think it'll help the mall," Grisso said. "Something new always attracts attention, but our customers will continue shopping here."
Speaking for Stein Mart, chairman and chief executive officer Jay Stein insisted that stores like T.J. Maxx and Goody's will provide "welcome synergy," but no serious competition, to his new store.
Jim McDonald, one of two assistant managers of the new Stein Mart, took a slightly different view.
"Realistically, they certainly carry a lot of the same merchandise," he said, and the prices are similar as well. He predicted some customer crossover, but said that T.J. Maxx typically attracts younger customers, while Stein Mart's clientele tends to be older and choosier - and thus less willing to sort through the racks at stores like T.J. Maxx.
At Stein Mart, shoppers will find seasonal merchandise in a range of sizes, said Susan Edelman, the company's director of stockholder relations. Only 35 percent of the store's stock will be the result of what she called "opportunistic" buying - purchasing overstocks or closeouts from manufacturers. The rest of Stein Mart's merchandise is bought at the same time that regular department stores are making their seasonal purchases, she said.
Stein Mart sets up a purchasing plan at the beginning of each year, Edelman said; only if overstocks fit into this plan will they be considered. "Jay [Stein] likes to say, 'We don't buy stuff,'" Edelman said.
Stein Mart's prices are a result, Thomson said, of several strategies.
First, the company relies on a distribution center for only 10 percent of its merchandise. The rest of each stores' stock is shipped directly to stores by manufacturers, eliminating both the costs involved in maintaining warehouses and the double-handling that occurs when merchandise must be shipped twice.
Also, Stein Mart does not follow the practice of many department and specialty stores, which typically ask vendors for a discount to cover merchandise returns, markdowns or promotions, Thomson said. Vendors who sell to these stores build these allowances into the cost of merchandise, which raises expenses for buyers. Because Stein Mart does not require such allowances, vendors can sell merchandise to the company at a lower cost, he said.
And the "opportunistic" buying that Edelman discussed helps keep prices down as well, he said.
Overall operating costs tend to be lower for Stein Mart than for many department stores, Thomson said. Because the chain usually locates in strip shopping centers, it avoids higher rents charged by enclosed malls. And while Stein Mart offers a higher level of service than most discount stores, staff levels still tend to be lower than those found in better department stores, Thomson said.
Unlike many department stores, Stein Mart does not rely heavily on weekly sales to promote its merchandise. According to the company's annual reports, a Stein Mart store typically advertises in newspapers two to three times a week. These ads, McDonald said, usually call attention to Stein Mart's everyday discounted prices rather than to special promotions. Further markdowns are taken periodically on merchandise that doesn't sell.
The original Stein's Department Store was opened around 1908 in Greenville, Miss., by Jay Stein's grandfather, Sam Stein. For nearly 70 years it was the only store bearing the Stein name. Then in 1977, a Stein Mart opened in Memphis, Tenn., and was followed two years later by a store in Nashville. By the end of 1988, 26 Stein Marts were operating in cities throughout the South and Southeast. Four years later, when the company went public, the number had nearly doubled. As of July 1, the company operated 89 stores in 18 states.
The company's goal is to expand at a rate of 20 percent a year, Williams said, which would mean opening at least 16 new stores in 1995. By the end of the first six months, nine had opened. The Roanoke store is the company's 92nd; other Virginia stores are in Richmond and Virginia Beach.
The bulletin board map of the United States that Williams keeps in his Jacksonville office illustrates Stein Mart's growth pattern. Colored pushpins represent existing stores; straight pins, like the one marking Roanoke, indicate cities where leases have been signed. So far, the pins are concentrated in the South and Southeast, with a few scattered outposts in the Midwest and West. But Williams said he wouldn't be surprised to see pins in California and the Northwest within two years.
Only five or six of the chain's stores are in enclosed malls, Williams said. Although the Tanglewood store won't fit this profile, Williams said the company liked the location, which is close to major roads and to some of Roanoke's upscale neighborhoods. Tanglewood management also was willing to work with Stein Mart's space requirements and come up with the 36,000-square-foot vacancy the company had requested. The Stein Mart will be smaller than the mall's department store anchors, which range in area from 100,000 to 120,000 square feet, but will be much larger than most Tanglewood stores, which range in area from 1,200 to 3,000 square feet.
Historically, the company had limited store openings to metropolitan areas with populations of 300,000 and more, Williams said. But they have been experimenting with smaller markets - like Roanoke - and the results have been promising, he said.
Ken Gassman, a retail analyst with Davenport & Co. in Richmond, said Roanoke is an ideal new market for a chain like Stein Mart.
"Roanoke's a market where there's not a lot of bargains," he said. "It's not a hotbed of discounting."
Despite its aggressive expansion and steadily increasing sales figures, Stein Mart has not been immune to market trends. In the first quarter of 1995, the company's same-store sales - a measure of sales in stores open at least a year - were down 4.7 percent from the same quarter last year. Same-store sales often are considered the best indication of a retail store's sales strength because they exclude the impact of store openings, closings and expansions.
The chain never had posted a decline in same-store sales until that quarter, Gassman said. But the downturn shouldn't be blamed on Stein Mart, he said. Apparel sales have been weak across the board for two years, and Stein Mart actually had been reporting consistent gains until that quarter.
"Like most apparel retailers, they are still feeling softness because consumers haven't loosened their purse strings or unzipped their wallets yet," Gassman said.
Based on an upswing in the sales of better women's apparel that began in April, Gassman has predicted a second-half recovery. Because better women's clothing usually shows the earliest gains in retail apparel sales, he believes the change prefaces significant strengthening in all apparel sales over the next four to six months.
For Stein Mart, the recovery already may have begun. Same-store sales decreased by just 0.7 percent from the second quarter of 1994 to the second quarter of 1995 - still a negative number, but an improvement over the previous quarter.
"I believe that this Christmas will be an apparel-led Christmas, and stores like Stein Mart will benefit from it," Gassman said.
But Thomson of Wheat First wasn't quite so optimistic. He foresees a slower apparel recovery and predicts that shoppers will make fashion statements by fixing up their homes rather than their wardrobes.
But either way, Thomson said, Stein Mart remains a strong retail presence that will see at least some apparel gains in the coming months. And the store's boutique departments, which sell designer women's clothing at discounted prices, will continue to be the chain's "secret weapon,' he said.
"They don't tend to make a huge splash with advertising and grand openings," Thomson said. "But they're very profitable."
Keywords:
PROFILE
by CNB