Ross goes downstream in search of gold

Brent Felgner, Staff Staff, February 23, 2004

Ross Stores is readying the launch DD's Discount — a downsized, downmarket, off-brand version of its off-price Dress-for-Less operation.

The company has named a quartet of executives to run the chain, including former Bed Bath & Beyond and Linens 'n Things merchandising executive Jane Gilmartin, who will head the effort in home as senior vice president, general merchandise manager. (see page 14)

The chain, scheduled to debut with 10 West Coast stores near Ross' base, was first mentioned but never formally announced — at least not with the typical fanfare reserved for a new entry — by Ross executives last fall, according to Katie Loughnot, senior vice president of investor and media relations.

The company announced the senior appointments now, she said, to facilitate recruitment for other positions in the fledgling chain.

While new for Ross, the market entry appears somewhat similar to the MarMaxx group's debut several years ago of A.J. Wright, also directed downmarket at a more urban-centered clientele.

It's probably a similar strategy in many ways but targeting a different demographic, Laughnot explained. Yet in many ways, it's executing a little differently, and the mix is different with an emphasis on lower-end brands, she said.

"It will be very similar in terms of the merchandise departments to Ross Stores with apparel, family shoes, home-related items and bed and bath," Laughnot said. "Although penetration levels within the store will be somewhat less, because dd's are somewhat smaller than the Ross stores."

The units will average 25,000 square feet compared to Ross' average 30,000-square-foot stores. They will be sited in smaller, older, less prime neighborhood shopping centers in smaller, denser more urban areas where apartments and multi-family dwelling reign. Co-tenants might be dollar stores or value grocery stores, she suggested.

"DD's will be much more moderate in terms of brand content, although it will use many of the same off-price buying techniques, taking advantage of imbalances in the supply chain (to achieve) values everyday and pass them on to the customer," Laughnot said.

She declined to identify specific brands or assortments citing sourcing and brand sensitivities coupled with the currently evolving status of the mix.

"It's a real opportunity to serve a customer who's not currently shopping Ross in a meaningful way right now," Laughnot said. "Their average income will be about $30,000 versus $50,000 for a Ross customer."

Ross, which generated $3.9 billion in sales last year, operates 568 off-price stores in 25 states. It entered the home accents business in 1992 and ventured into bed and bath in 1994, rolling the departments out to the entire chain by 1997.

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