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Jennifer Marks

Linens 'n Things Declares 'Year of Textiles'

Fixing its lackluster textiles business will be a priority this year at Linens 'n Things as the company, now under private ownership, moves into the second year of its nine-year turnaround plan.

"'07 is the year of textiles," chairman and ceo Robert DiNicola told analysts during the company's quarterly conference call this month. The goal, he said, is to "stabilize" the business by the end of the year.

LNT's soft home business now accounts for just one-third of sales, or roughly $900 million — just below the amount of textiles the retailer sold in 2000, according to HTT's annual Top 50 Retailers report for that year.

The category lagged last year as Linens Holding Company — created when equity firm Apollo Management acquired the retailer — concentrated on revamping the merchandising team, clearing out bad inventory, and pumping fresh housewares and hard lines goods into the store in time for the fourth-quarter holiday season.

"Most significantly, we were able to stem the loss of market share that Linens had been experiencing for some time," said DiNicola, pointing out that comps have now been flat — as opposed to in decline — for the past three quarters.

Phase 1 of the company's repositioning consists of a three-year effort to stabilize major components of the business: housewares, textiles, and home décor. LNT rid itself of 25% of discontinued inventory last year, taking in about $100 million that it used to ensure in-stocks on holiday goods and its "top 100" key items. Top 100 items now represent about 20% of sales.

By the end of this year, the company expects to have shaken off at least 80% of obsolete inventory, with home décor the largest hurdle in the effort, DiNicola said. "There are long lead times there, but also a lot of ownership," he explained.

Speaking roughly 11 weeks into the first fiscal quarter of the new year, DiNicola told analysts that home textiles comps are beginning to nudge into positive comp territory, with top of bed, sheets, and pillows "giving a far better performance than they have in the past." He added that new super-set programs were also boosting business.

Still, the focus will remain on everyday basics. "We're not going to become, nor is it our objective to become, a fashion house," he said. And with sales per square foot still stuck around the $155 level, "That really doesn't entitle us to step out and do something unique and dramatic."

Once its product categories are stabilized across the board — projected to happen by the end of 2008 — "We'll be able to go back and put in some of the more exciting components of the business, be it [expanding] bridal or something … that would make us somewhat more of a unique place to shop," DiNicola said.

However, he cautioned that even once LNT reaches that point, "We should step out in an orderly way by taking our top stores, our top 50, our top 200, and make sure everything is in place before rolling [unique programs] out to every store."

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