Sunday, Jun. 07, 2009

Forever 21 is thinking big

Retailer's growth plan includes stores in valley

If women's clothing retailer Forever 21's bid for 14 Gottschalks locations is successful, several valley stores will be on the leading edge of the retailer's aggressive expansion into bigger locations.

The shift to bigger stores in more cities fits with the retailer's growth strategy, and is something it already has done in 12 former Mervyn's stores. Yet many Gottschalks locations are even larger.

It would be new territory, but a Forever 21 executive says the retailer has the strength to be successful, even if the stores take time to fill and all the details haven't been made public.

The Gottschalks leases were auctioned May 29 and a judge is expected to approve the winning bids Wednesday.

Forever 21 was the prevailing bidder on 14 locations, including three properties it wants to buy.

Forever 21's original bid included stores at north Fresno's River Park shopping center and the Visalia Mall. But the company agreed to drop those offers, enabling Macy's to bid on those sites.

Earlier this year, the retailer made the jump to some former Mervyn's stores, most about 80,000 square feet. Although some of the Gottschalks stores it bid for

are about that size, many are even bigger, with Fashion Fair and Modesto's Vintage Faire Mall stores at more than 150,000 square feet each.

Larry Meyer, Forever 21 executive vice president, said it would do what it did in the former Mervyn's stores: expand shoes and accessories and add menswear, its Faith 21 line of larger sizes and the Love 21 line of more contemporary clothing suitable for the workplace.

"We will become the true future department store," Meyer said. He declined to elaborate on that idea, except to say that the stores potentially could expand to offer such things as food or preteen clothing.

Sales boom needs space

The bid for the stores comes as other retailers are closing locations amid weak sales during the recession. But Meyer said its booming sales as well as lines for the dressing room and the cashier are proof that the retailer needs to grow.

The Los Angeles-based retailer is known for putting trendy merchandise on the shelves quickly at affordable prices. With most products priced less than $40, Forever 21 is weathering the recession.

In 2008, the privately-owned company raked in $1.3 billion in sales from its more than 450 stores, according to the Information Access Co., a subsidiary of the Thomson Corp. Co.

Lawsuits over alleged knockoffs of high-end fashion haven't slowed it down.

"Their sales performance has been outstanding and certainly above average in the apparel category," said Bruce Johnston, a Napa-based retail consultant.

Forever 21 does particularly well in California, said Jeff Green, a retail consultant in Mill Valley. "They do especially well in strong ethnic areas," particularly with Latino customers, he added.

Forever 21 generally has two sizes of stores in malls today: one about 7,000 square feet and the other about 20,000 square feet.

Its success with smaller stores means it's time to move to larger locations, Meyer said.

"We've always had smaller stores, and we've always had people waiting at the dressing room," he said. "For our existing customers, we want to make it easier for them to shop."

The larger stores, especially those with multiple floors, might not use the entire site, Johnston said. And the transformation into a new, bigger store probably will happen gradually.

"Over the next year or so -- two years -- we will be adding more and more categories to fill that space," Meyer said.

Johnston said the store will evolve. "As anybody expands into categories that aren't their strength, they need to make sure they're doing a good job in the new merchandise categories that they're adding," he said. "I don't think you suddenly see them having a For- ever 21 brand of housewares and sofas."

Still, Green wonders how the larger spaces will be filled. He questioned if moving to a bigger store would be worth the investment and said sales per square foot might drop.

Meyer acknowledged that it's possible initially, but said he isn't worried.

"Over time we'll build it back," he said. "We have the wherewithal to make that happen."

Johnston noted that although some Gottschalks locations are much larger than Forever 21 is accustomed to, most of the stores it's bidding on are under 90,000 square feet and closer in size to Mervyn's stores.