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Anna's 100th moves 'beyond' the usual

Las Vegas — As Anna's Linens pursues a pumped up expansion schedule, it's moving beyond its bed linens/bath linens/window treatments formula into new product categories — and even is experimenting with markets that are not as ethnically saturated as its base.

Indeed, the opening of Anna's 100th store here last week was ripe with evidence of evolution. The new Vegas store — Anna's fifth in the city — marked the debut of dinnerware and flatware sets. In addition, the store offered fairly broad presentations of candles, dried flower arrangements, potpourri and scented oils. A back wall featured area rugs hung on swinging arm displays. Fixturing was also upgraded with crown molding.

But the real kicker was the location. Rather than Anna's traditional inside-the-beltway, working class, highly ethnic neighborhood, the Spring Valley store is settled in the just-opened Tropicana Beltway power center on the edge of the city in an area where new home construction is sprawling rapidly across the desert.

All of which begs the question: Is Anna's shifting gears?

The answer, according to chairman, president and ceo Alan Gladstone, is no.

"Anna's will never pursue a two-pronged strategy," Gladstone told HTT. "You're not going to see us go head-to-head with Bed Bath & Beyond. There are so many places for us to go; we don't have to reach out for that customer."

While the ethnicity level in the new market is on the low side, the household density fits Anna's model, he said. So does the type of household: family homes priced at $150,000 to $200,000.

Nor is the Spring Valley store Anna's first in a high-growth, outer city area, he said. The company now operates one each in Houston, Atlanta and Southern California, and in October will open another in Las Vegas.

"In each case, as long as we stay below a certain level of household income and there's a certain density, it works for us," Gladstone said.

The dinnerware launch came about in part because Anna's is getting better real estate deals for larger properties. Rather than fill the extra space with more facings of the same product, Anna's decided to test the waters with add-on categories, he said.

At the new store, the dinnerware, flatware and storage canister sets were offered on a pair of endcaps near the front of the store, cross-merchandised with table linens. The program will roll out to another 25 stores this week, but will be limited to stores 8,000 square feet or larger, said Carie Gladstone-Doll, vp of merchandise. However, the company will offer dinnerware and flatware chainwide on a promotional basis in the fall, she added.

Alan Gladstone said the new product should result in a higher average ticket. "When you look at Bed Bath & Beyond and you look at Linens 'n Things, clearly the 'beyond' and the 'things' are good businesses," he added.

The year-old area rug program has already goosed the average ticket, he said. Priced at $99 for a 5' x 8 ', the rugs have rolled out to average-sized stores of 8,400 square feet or higher, and Anna's is looking to add the category to the rest of the chain.

Ditto the candles, flowers and scents products, which Anna's categorizes as impulse items.

"The more impulse items we add, the better the business is for us," Alan Gladstone said.

But like nearly all retailers, Anna's has felt the impact of the soft economy and rising unemployment. After six years of double-digit comp increases, Anna's this year is running "a very high single-digit comp increase" this year, he said said, although he believes the company can still end the year with a double-digit bump.

On the positive side, a $27 million investment by Rosewood Capital in late 2002 is allowing Anna's to accelerate its store openings without taking on debt. The company recently scooped up 11 of Strouds former outlet locations. And it will open at least 40 new stores next year — twice the number it opened in 2002 — as it looks to add 150 stores over the next three years.

Kmart's withdrawal from Texas has created opportunities for new market entries in that state in 2004, he said. Anna's will also move into Florida as well as a major city in the North — its first foray above the Mason-Dixon line.

To handle that growth, Anna's has broadened its infrastructure in MIS, planning and distribution. By September, it will add a third merchant to the organization, he said. Anna's also recently hired Pat Barber as senior vp of real estate. Barber held the same title at ethnically oriented grocery chain Ralph's Food for Less.

In addition, this year Anna's added a layer of regional managers. The roster of three will grow to six by spring 2004.

Anna's is now reaching the size where its primary challenge is not that of an entrepreneurial company looking to make a name for itself, but an ambitious corporation that must contend with rapid growth as it eyes a goal of becoming a public company operating 1,000 stores.

At a celebratory event with key vendors and Anna's employees following the opening last week, Gladstone acknowledged that in the retail business, no company can rest comfortably on its laurels.

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