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RETAIL FACE OFF: Home Sweet Home

Household accessories and décor sales topped $78 billion last year, and Suntrust Robinson Humphrey equity research predicts mid- to high-single-digit growth this year. The booming segment is a hotbed for expansion, since it is highly fragmented and its two largest players — Bed Bath & Beyond and Linens N Things — control only a combined 7 percent of the market. Kirkland's, Cost Plus World Market and Pier 1 Imports, which together account for 5 percent of the market, are the most aggressive expanders, and Bombay Co.'s same-store sales have exploded at a high double-digit clip for the past three quarters. That's good news for power center and lifestyle center owners, since most of these chains are searching for freestanding or open-air sites. Here's how they compare:

Kirkland's, with a 1 percent market share and $1.4 million in average sales per store, is opening 30 new stores this year and expanding into Delaware, Massachusetts, Nevada, Utah and Minnesota. Kirkland's plans a 60/40 split for mall and non-mall openings. Non-mall stores produce lower sales figures but are more profitable due to lower occupancy costs. Kirkland's has made an art of selling low-ticket merchandise ($12 item average) in higher rent areas. Its unique merchandise, including exclusive knick-knacks, lets it operate in a more expensive, but less competitive environment. Management hopes to have 900 to 1,000 stores.

Stores: 249
Avg. Size: 4,500 sq. ft.
Annual Comp Sales Growth: 6%
Total Annual Sales: $348.8 million
Sales Per Sq. Ft.: $317

The Prognosis: “Small-market opportunities represent an intriguing differentiating factor, as Kirkland's can operate profitably in markets where its competitors cannot, due to favorable unit economics,” says Morgan Keenan & Co. analyst John Lawrence.

Pier 1, with 3 percent of the market, expects to expand its North American space 7.8 percent in 2004 and another 13.2 percent to 9.4 million square feet in 2005. Look for it to continue expanding square footage 10 percent annually. New stores have been performing at or above plan and achieve 60 percent-plus cash-on-cash returns in year two. But Pier 1 is older than some competitors and will reach market saturation within five years, analysts say. That will put pressure on the company to further expand children's furnishings-oriented Cargokids concept, which saw comp sales rise 1.6 percent in the second quarter.

Pier 1 Imports
Stores: 1,100 (including 27 Cargokids stores)
Avg. Size: 9,500 sq. ft.
Annual Comp Sales Growth: 2%
Total Annual Sales: $1.773 billion
Sales Per Sq. Ft.: $239

The Prognosis: “Competitors such as Cost Plus and Bombay seem to be ramping up their merchandising efforts and may prove to be more serious threats,” says A.G. Edwards analyst Brian Postol.

Cost Plus World Market, with a 1 percent share, appears well positioned to more than double its size in coming years as its new stores are exceeding expectations. A value focus and a traffic-driving consumables department, including imported wines, cheeses and gourmet foods, have resulted in strong top-line sales. In recent years, the chain added 25 to 30 stores, or 18 to 24 percent more square feet, annually. That should stabilize at about 15 percent going forward.

Cost Plus World Market
Stores: 181
Avg. Size: 18,000 sq. ft.
Annual Comp Sales Growth: 6%
Total Annual Sales: $717.2 million
Sales Per Sq. Ft.: $261

The Prognosis: “Cost Plus has a relatively high percentage of new stores in its base compared to many other chains, which bodes well for sales momentum,” Suntrust Robinson Humphreys' John Roberts says. “The chain will not reach market saturation before 2011.”

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