Filene's Basement alters merchandise mix

Discount Store News, Nov 7, 1994 by James Mammarella

WELLESLEY, MASS. -- Filene's Basement, in an effort to restart stalled growth, will roll out its tested expansion of several new departments in 1995: big and tall men's, children's wear, boxed and tabletop housewares.

The 52-unit, off-price apparel chain will also add new leased departments for gourmet food, furs and cosmetics.

While some competitors in the off-price apparel segment showed robust growth last year, Filene's Basement suffered, losing $4.2 million on sales of $579 million. President Jim Anathan told DSN, "We need to understand how to more profitably operate lower-volume stores. We do better volume than competitors such as T.J. Maxx, Marshalls and Ross Stores--but earnings are off."

Filene's Basement rang up over $10 million per store in 1993, close to twice the industry average, while store size is roughly equivalent between the leading chains.

T.J. Maxx is the leading off-price chain with 1993 revenues of $2.745 billion. The chain's average store volume is about $5.5 million; the unit of TJX Cos. earned $234 million in 1993. Like Marshalls, T.J. Maxx has already added tabletop and giftware to its mix.

In comments to financial analysts gathered at an October conference hosted by investment bankers Robertson Stephenson & Co., Anathan listed additional points of attack. Beyond the new merchandise mix, Filene's Basement will offer: faster and more lenient customer service policies; differentiation from competitors through more choices in branded and private label career apparel; and elimination of its young men's assortments--which had provided 1% of the comp store gain--in favor of big & tall, expected to contribute more sales and higher margins.

He asserted that boosting the lower-margin children's wear department will draw in more shoppers more often, resulting in additional sales of higher-margin women's wear.

Anathan's overall strategy seems aimed at wringing more profit out of current volume, rather than reducing volume in favor of margin. He admitted that stores opened in 1993 had far better volume than those opened in 1992, crediting improved established policies for the change.

As a measure of long-term growth, Anathan pointed to 24 new locations since 1991. He said the chain's sales are close to $500 per net selling sq. ft.