LNT makes it a priority to raise productivity

Jennifer Negley, Carole Sloan, May 7, 2001

CLIFTON, NJ — Driving productivity tops this year's agenda for Linens 'N Things, chairman and ceo Norman Axelrod told shareholders at last week's annual meeting.

In the linens area, the company has set a number of strategic initiatives to that end, including this quarter's launch of the Nautica Home program, a proprietary solid-color towel program and a major proprietary quilt program, president Steve Silverstein told shareholders.

Fattening the average transaction will be one of the key components of boosting productivity during 2001. In the recently concluded fiscal year, average net sales per store remained at the 1999 level — $6.2 million — after having grown 5 percent in 1999 over 1998's average $5.9 million per store.

"Ultimately, it's about the average transaction," Silverstein said.

Sales of private label goods under the LNT Home brand are slated to grow from 10 percent of sales, or roughly $157 million last year, to 15 percent in 2001, approximately $280 million. For the long term, the company sees private label accounting for 25 percent to 35 percent of overall sales, Silverstein said. Product areas being targeted for LNT Home programs are those where the company believes it can "improve performance on a sales and margin basis, especially in areas not served by major vendors," Silverstein said.

LNT also will focus this year on growing its area rug business, Silverstein said, although he declined to elaborate upon specifics about area rugs or any other merchandising program.

On the branded side of the business, the company has picked up the Nautica Home program, giving it a department store-level label. Produced by Glenoit's American Pacific division, the line has been installed in 80 units so far and will be rolled out "as quickly as possible," Silverstein said.

In addition, LNT is "taking a look at the quality of the promotional bedding," he told HTT, but has not yet determined whether its strategy in this area needs adjustment.

Addressing the company's business as a whole, Silverstein told shareholders: "2001 has opened as our most challenging year since our IPO." However, he added, the company believes its initiatives will ensure that the pace of growth remains on par with its historically robust performance levels. In 2000, LNT increased net income by 25 percent to $64.9 million, grew sales by 21 percent to $1.6 billion and fattened operating profit by 30 basis points.

The company also installed radio frequency technology during the year in all of its 283 stores to improve efficiency. This year it is upgrading point-of-sale technology to speed checkout, Silverstein said. LNT also is making improvements in fixturing, merchandise presentation and impulse merchandising to help boost productivity, he said.

As part of its strategy to grow share in the home furnishings market — which it defines as a $75 billion business — LNT opened a record 57 stores in 2000 and launched its first international operation with six stores in Canada. The company plans to open more than 200 stores over the next two years. In Canada, it will add at least 10 this year, Silverstein said.

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