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HomeGoods Opens Fire On Big Boxes

Brent Felgner -- Home Textiles Today, May 22, 2001

PARAMUS, NJ — The openings Saturday of two freestanding HomeGoods stores here and in Wayne, NJ, marked TJX Cos.' continued insurgence into home fashions in a head-on challenge to the dominant big box operations.

The challenge is so obvious, in fact, that the Paramus store location is directly across the highway — about 1,000 ft. away on State Highway 17 — from a Bed Bath & Beyond, and only about two miles from a Linens `n Things superstore. All three stores vie for a piece of an affluent marketplace — northern Bergen County. Likewise, the Wayne HomeGoods location is about two miles from an existing Linens `n Things.

Yet the merchandising and marketing concepts appear decidedly different — a factor that might play to HomeGoods claiming a successful niche or potentially overwhelm it against larger and possibly stronger competitors.

While the outcome remains to be seen, TJX has claimed outstanding success to date with the emerging chain. HomeGoods was originally born as a freestanding operation, then later as large breakout home sections in T.J. Maxx 'N More and Marshalls Mega-Stores. Now in a more aggressive roll out mode,HomeGoods currently claims 58 freestanding locations in 17 states located along the East Coast, from Maine to Florida, and in the northern Midwest. Combined with its Marmaxx (the company's reference to the two principal apparel chains) presence, HomeGoods now boasts 95 locations in 19 states. The chain will add a total of 30 new freestanding units this year, bringing the total to 111 units. TJX currently claims a $2 billion presence in home fashions and accessories.

"Ultimately we see the potential for about 500 HomeGoods [freestanding] stores and 150 [locations in] superstores," said Edmund English, TJX president/ceo, during last week's Q1 conference call with analysts.

The chain added several new markets during the first quarter in Connecticut, Tennessee, Kentucky, Virginia, Florida and Georgia, according to English. A new Midwest distribution center is scheduled to come on line this summer, with another planned for the Northeast by fiscal year 2003.

"We continue to expand with very strong new store openings for HomeGoods, which gives us great confidence in the future of this chain," he said during the call. The company's optimism is so strong in part because freestanding HomeGoods stores obtain higher sales per square foot in their first year than new Marmaxx stores, although he did not disclose the actual figures.

"Home has been outperforming apparel for a long period of time here at Marmaxx," English said. Even in an otherwise difficult retail environment, HomeGoods registered a 4 percent gain in comp store sales during the first quarter vs. 10 percent a year earlier. And it's modestly profitable, recording just under $1 million in operating income during the same period.

While HomeGoods may find itself butting heads with the big boxes, it's marketing and merchandising strategies offer striking differences. For example, the 25,000 sq. ft. stores that opened here over the weekend are located in older highway strip centers, offering significantly lower occupancy costs and adding to the chain's ability to work on tighter margins. The downside is that the stores are somewhat less visible to passing highway traffic.

The merchandise is roughly a 65/35 percent mix of hardgoods to softgoods. Bed and bath dominate the home textiles floorspace, positioned at the front of the store and wrapping around the racetrack for nearly the entire length of the sidewall. Rugs, decorative pillows and kitchen textiles are broken out elsewhere in the store.

At first blush, the stores are somewhat reminiscent of the now disappeared HomePlace chain, particularly in home decor items and positioning.. Yet the differences go much deeper than the similarities. There are no bays. Straight five and six foot high,16-foot long gondola runs display the merchandise with occasional breakout display ensembles.

The chain appears to take the same strong off-price tack employed by Marshalls and T.J. Maxx stores. The price-value equation is driven home to the consumer at every opportunity — from large wall signage emphasizing everyday low prices to "WOW" endcap signs, to individual item price stickers showing "compare at" pricing. A wide 13-foot racetrack aisle allows dump bins and set-ups to display additional value merchandise.

A sizable portion of the home textiles assortment appears to be bought opportunistically — either as closeouts or irregulars, clearly marked — further protecting costs and margins.

But the brands are clearly there, among them: — Towels from Fieldcrest and Tommy Hilfiger, bath accessories and shower curtains from Croscill, Joseph Abboud shower curtains and bath rugs from Park B. Smith, and others — Bedding from Fieldcrest Royal Velvet, Cannon Royal Family, Ralph Lauren, Anichini, Revman, Laura Ashley, WestPoint Stevens and others.

A rear rug wall — about 20 feet long — displays area rugs in a variety of sizes showing their source countries, fabrication and manufacture (hand- vs. machine-made), again with the strong price-value comparisions. For example, one room size area rug was priced at $699.99, showing a "compare at" price of $1,400.

Offered one observer outside the store: "It looks like a combination of a Linens `n Things with a Pier 1 Imports."

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