Baby Superstore: building sturdy stock - children's clothing chain

Discount Store News, June 19, 1995 by Susan Reda

Taking a company public can be a bit like having a first baby. Everyone with whom you share the news feels compelled to tell you just how dramatically things will change.

Since Baby Superstore became a public company late last September there have indeed been a few changes. The IPO left the 46-unit Duncan, S.C.-based baby products retailer financially strengthened. It also made it subject to constant Wall Street scrutiny.

But when it comes to Baby Superstore's commitment to offering new and expectant parents broad assortments of baby products and apparel at everyday low prices, it's business as usual.

"Going public hasn't changed how we run the business," says Jodi Taylor, chief financial officer, who solemnly swears that she doesn't check the firm's stock price more than once a day. "Our attitude is that if we're true to our mission and to the strategies that have helped us to get to where we are now, the rest of the business will take care of itself."

Staying true to its mission means offering a depth of selection for newborns and toddlers up to age 3 that is virtually unmatched by the competition. It also means offering an everyday low pricing strategy that enables the chain to play hardball in the always-volatile kids market. And unlike some retailers that do little more than talk about service, Baby Superstore delivers.

Last year this combination of assortment, price and service brought sales to $175.3 million--a 68 percent increase over fiscal 1993 figures. Comparable store increases were a record-breaking 31 percent.

Earnings for fiscal 1994 were equally impressive. The company posted a net income of $7.1 million, up from $3.8 million a year earlier. The stock, which opened at $18 per share last September, now trades at about $36 per share.

And while most retailers would like to throw out this year's first quarter financial reports with the dirty diapers, Baby Superstore posted a 72 percent sales increase and a comp store gain of 19 percent.

Executives explain their success by their ability to compete effectively based on selection, service and price with a host of competitors--particularly discount stores--which hold a commanding share of this market.

"We have competition from every tier of retailing," explains Taylor, who has helped to shape Baby Superstore's growth for the last nine years. "But no one else is as focused on the newborn to 3-year-old market as Baby Superstore, and no one else provides the breadth of assortment in that age range."

More than 25,000 skus from 500 suppliers of baby-related products comprise the total assortment at the chain's newer stores, which average 40,000 sq. ft. That compares to a total of 15,000 skus typically stocked at Toys "R" Us stores.

"Baby Superstore has struck a chord with consumers with its combination of great brand names and dominant assortments," observes Doug Hyde, chairman, president and ceo of OshKosh B'Gosh. "They've been around for a long time and they're very sophisticated merchants. In a market that can be erratic at times, Baby Superstore is a long-term, significant player."

Merchandise assortments at Baby Superstore are organized under six major product categories including furniture, clothing, baby needs, toys, commodities and shoes. While furniture is the firm's largest business, comprising almost half of Baby Superstore's revenues, apparel is a key component for stimulating repeat business.

Its apparel business is a microcosm of the total store, with broad assortments from a variety of vendors. Brand names include Alexis, Baby Dior, Carters, Gerber Childrenswear, Healthtex, Little Me and OshKosh B'Gosh--to name just a few.

"We segment the apparel business by size--layette, preemie, newborn to 9 mos., 12 mos. to 24 mos., and 2T to 4T --and then again by gender. We try to treat each as a separate niche," explains Laura Tate, apparel buyer and chairman Jack Tate's daughter. She notes that the sale of clothing and related items comprised 20.3 percent of Baby Superstore's 1994 revenues, or $35.6 million.

The most dominant merchandise selection for apparel is in babywear--layette/preemie/ newborn categories.

"Most stores carry just a handful of preemie items. It's not unusual for me to go into Little Me or Alexis and buy the whole line," says Tate. "We've developed such a reputation for our preemie business that shoppers tell us they're being referred to Baby Superstore by hospitals and pediatricians."

"Research shows that 6 percent to 7 percent of newborn babies are underweight or preemies. For most stores that's just too small to pay much attention to," explains Sam Schwab, president of The Schwab Co., makers of Little Me. "This talented group had the insight to realize that hardly anyone is prepared for a preemie, and when one arrives the customer is more anxious than average for service and product."

Baby Superstore executives make effective use of signs to designate their niche businesses. As customers stroll through the newborn area, Take Me Home toppers stand out on the fixtures. With a growing number of new parents paying more attention to how they dress their newborns for the first trip home, buyers merchandise dressier cotton and cotton-rich outfits, embellished with satin and bows, on these fixtures.