King of the house - Crate & Barrel CEO Gordon Segal - Nota Bene

Chief Executive, The, Nov, 1995 by Jonathan Burton

Stepping briskly onto the second floor of the new Crate & Barrel store in Manhattan, Gordon Segal fixes upon a green wicker chair near the escalator. The finish bothers him. "It should have come in with a matte glaze," he says disapprovingly. "Maybe it's the way the spotlights are on it, but it's awfully shiny to me, and I don't like shiny stuff."

Details, details. Segal is a fanatic about details. In another life, the chief executive and founder of Crate & Barrel, the Chicago-based specialty chain, might have made a good theatrical producer. In fact, that's just how he sees himself. For Segal, all the retailing world's a stage, with him as an impresario. "To be a good retailer," he exults in a flat Chicago accent, "you've got to have that theatrical ego-centricity. You're setting an atmosphere and the architecture; you've got the spotlights on, you've got the players."

Last March, the Crate & Barrel players came to Broadway. Or more exactly, the retailing equivalent of Broadway: tony Madison Avenue. Here, among haute couture and the ladies who lunch, around the corner from bejeweled Tiffany's and the landmark Plaza Hotel, Segal has raised a tasseled curtain on a carefully laid set of upscale furniture and housewares. "We wanted to open a store that had some meaning," Segal explains. "Most retailers are somewhat egomaniacal. It's because you're competitive by nature - you're constantly trying to make a more important statement."

It's been that way since 1962, when 23-year-old Segal and his newlywed wife took $10,000 in savings and another $7,000 borrowed from Segal's father and opened a small store in a converted elevator factory in Chicago's Old Town. The young couple had no retailing experience but thought the work could be fun. They hawked European-made china, glass, pots and pans, and, since they couldn't afford store fixtures, stacked it all on packing crates and barrels.

Today, their closely held company is a power in the multi-billion-dollar home furnishings industry, with 60 stores from Maine to California and a worldwide catalog network. A loyal following has embraced Crate & Barrel's promise of quality goods at reasonable prices, handsomely presented, and backed up with customer service. Staff is versed in the merchandise, prices and descriptions of items are clearly displayed, and customers are never grilled about returns.

Crate & Barrel is popular with newlyweds and first-time home buyers, younger customers with more style than money. But Segal recognizes that people don't redecorate every couple of years, so he positions his stores as high-fashion emporiums for the home. Retailing analysts are among Crate & Barrel's most hard-core fans, giving Segal and his operation high marks for exceptional merchandising and marketing savvy.

"He's brilliant," says June Erlick, retail editor of trade publication HFN. "An innovative genius," adds New York-based retailing consultant Alan Millstein. "They make you want to buy," says Emma Hill, specialty retail analyst at investment banker Furman Selz. "Just wonderful stores," gushes Karen Sack, a Standard & Poor's retail analyst.

But analysts agree that Crate & Barrel faces hurdles that will put it to the test. By Segal's own admission, at 56, he is thinking about how to transition his business to a successor. Of more immediate concern is generating a healthy return on what is obviously a substantial investment in New York.

Doing business in Manhattan is expensive, margins are thin, and the natives can be unforgiving. High entry costs will hurt Crate & Barrel's earnings into 1996, Segal says. The Madison Avenue store, at roughly 55,000 square-feet, is by far the largest in a chain that typically fills spaces slightly more than half that size. Streamlining the effort are two New York-area stores, in White Plains, NY, and Short Hills, NJ, which followed Madison Avenue and are located in suburban shopping malls - the core of Crate & Barrel's traffic. Another store in the wealthy Long Island, NY, suburb of Manhasset is slated to open next year.

At the same time, Crate & Barrel plays against a tough field of indirect competitors - including Williams-Sonoma and its Pottery Barn unit; Bombay Co.; Bed, Bath & Beyond; Pier 1 Imports; Ikea; and leading department stores. "There are a lot of moderate-priced furniture sellers," says Coopers & Lybrand LLP retail consultant Mark Kingdon. "It takes good fashion sense and good consumer information to stay on top."

Crate & Barrel is highly sensitive to the U.S. economy, and with homebuilding strong and inflation in check, economic conditions seem mostly in Segal's favor. But many forecasts look for a weaker economy in 1996. A private company, Crate & Barrel does not release income figures, but Segal says 1994 revenues were $272 million, compares with $235 million the year before. Stores account for 90 percent of sales, with the rest from catalog orders.

Segal says he looks to grow the company at 18 percent to 20 percent a year from existing and new store sales. Analysts also point to an emphasis on building an international catalog business - both the Manhattan Crate & Barrel and the flagship store on Chicago's Michigan Avenue attract shoppers from abroad. Segal estimates Crate & Barrel will ring up revenues of $335 million in 1995, and targets $400 million for 1996.