DEPARTMENT STORES Furniture, home items are selling

Clothes aren't selling well, so retailers are turning to home furnishings.
ST. LOUIS POST-DISPATCH
For struggling department store chains, there is no place like home.
Faced with lackluster apparel sales, which make up the bulk of department store revenue, retailers are setting their sights on a category that has consistently performed well, despite the anemic economy: home merchandise/furnishings. It includes everything from dishes and tablecloths to towels and throw covers.
May Department Stores Co. of St. Louis, Mo., which operates chains including Famous-Barr, Hecht's and Foley's, said at its annual meeting in May that it will develop an exclusive line of home merchandise sold under the House Beautiful magazine trademark.
May has plenty of company.
In February, Federated Department Stores Inc. of Cincinnati opened a Bloomingdale's store in downtown Chicago that's devoted solely to high-end home furnishings. The three-story, 130,000-square-foot store, located at the historic Medinah Temple, features a garden shop, rug gallery, luxury mattress shop and design studio.
Kohl's Corp. of Menomonee Falls, Wis., has said it will add to its home goods department some of its best-selling brand names in apparel, which may include Liz Claiborne and OshKosh B'Gosh.
What's planned
Sears, Roebuck and Co. of Hoffman Estates, Ill., will sell most of its home merchandise under its exclusive Whole Home brand, according to HFN, an industry trade publication. Sears will roll out Whole Home Gourmet cookware, Whole Home Holiday, which includes embellished towels and home accent products, and Whole Home Juvenile bedding.
Department stores "are attempting to offset challenges they have with apparel sales," said Bob Gordman, president of strategic planning at Meridian Inc., a retail consulting firm in Troy, Mich. "They are now trying to look for alternative business."
Apparel sales, including footwear and accessories, fell 2 percent last year to $220 billion, according to the NPD Group Inc., a market research firm in Port Washington, N.Y. It was the second consecutive year of declines, after annual gains of as much as 4 percent in the 1990s.
In 2002, a difficult retail year, sales of home furnishings, excluding furniture and home improvement goods, grew 3.7 percent to $42.42 billion, according to the U.S. Commerce Department. During the past decade, sales in this category have seen an average annual growth rate of 8 percent.
"It's actually one of the very few segments that is growing," said Michael Collins, vice-president of retail for Bain & amp; Co., a consulting firm based in Boston.
For department stores, the home category "is a little more of a stable market in terms of fashion trends," Collins said. Unlike clothing, "it won't change dramatically."
Here are figures
At May, weak apparel sales are depressing the company's profit margins. Clothing, which makes up 53 percent of May's merchandise mix, remains "extremely disappointing," said Deborah Weinswig, an analyst with Smith Barney Citigroup, in a recent research report. As a result, sales at stores open at least a year have fallen for 15 consecutive months.
However, Weinswig said, home and furniture, which represent 16 percent of May's sales, continued to outperform other categories.
"Home and furniture are some of our best-performing businesses," Gene Kahn, May's chairman and chief executive, said in an interview at the annual meeting.
Whether the House Beautiful brand succeeds depends on the style, quality and price of the merchandise, said Gordman of Meridian.
Brands "add a small level of credibility and differentiation," he said. "But labels tend to not carry the product."
Kahn said May has no immediate plans to build a home furnishings store like Federated's, but "we continue to look at that."
In any case, House Beautiful is only part of May's effort to transform itself into a "lifestyle" retailer that can more effectively compete with discounters and moderately priced department stores, such as Kohl's and J.C. Penney Co.
The company has developed several proprietary brands in women's clothing and introduced "Superior Value" pricing. May is also is testing new store formats that are brighter and less cluttered. The company held its annual meeting in Greensboro, N.C., to showcase its new Hecht's lifestyle store, a two-story stand-alone department store near a Wal-Mart and Kohl's.
"Department stores need to evolve to meet the customer's need and respond to their perceptions," Kahn said. "We still need to reach our core [apparel] business, but we need to deal with their perceptions in order to re-energize the business. [Home merchandise] provides us with that platform."