HomeGoods: Right at Home

       

       

By David Gill

Expect to see a lot more HomeGoods stores.

Since the first HomeGoods unit opened in Massachusetts in 1992, the chain has grown at a creep and crawl, slowly expanding to its current number of about 375 stores, most of them concentrated in the Northeast.

Following a consistently solid financial performance while many of its competitors are struggling, HomeGoods is on a fast track for expansion. Over the past three fiscal years, its net sales have grown by more than 24 percent to total nearly $2 billion for fiscal 2011, which ended in January of this year. Its same-store sales increased by 9 percent in each of the last two fiscal years.

“We have raised HomeGoods’ long-term store potential from 600 stores to about 750 stores,” said TJX’s CEO Carol Meyrwitz, in a recent conference call to industry analysts.”

It’s notable that HomeGoods is still sparse in several U.S. regions, especially the South, the Midwest and the West outside of California. Jeffrey Naylor, chief administrative officer, chief financial officer, chief accounting officer and senior executive vice president, said that the 750 store goal is based on real-estate opportunities from potential sites in certain cities and markets.

Naylor told the analysts, noting that TJX’s Marmaxx division (TJMaxx and Marshalls) has become a $15 billion business annually, “We don’t ever see (HomeGoods) being a $15 billion business.” Then he paused, and added, “Carol is scowling at me now. Maybe we can get it to (a) $15 billion business.”

Other opportunities are coming HomeGoods’ way. Meyrwitz told the analysts, “What’s exciting about HomeGoods this year … is that for the first time, we’re going to be on network TV… . So that would go in markets that have never seen HomeGoods commercials before.”

HomeGoods is currently well behind its nearest competitors in locations, Bed Bath & Beyond at about 960 stores and Pier 1 Imports at about 970. In other ways, however, HomeGoods is right up there with its competitors.

HomeGoods has the high regard of its vendors. The chain “excels at bringing value, quality and fashion into sharp focus,” said Sal Gabbay, president of Gibson USA. “Their product assortment is thoughtfully crafted and designed for quick turnaround. No statement ever ages or stales on their floor.”

HomeGoods and its parent company, TJX, are also admired by the investor community. HomeGoods is part of TJX’s “truly powerful business model,” as described in a note to investors prepared by Barclays Capital Equity Research, after TJX held an update for retail analysts on Oct. 26. The note said TJX had raised HomeGoods profit margin target into double digits (from its current level of high single digits), and observed that the parent has a high opinion of the chain’s long-term growth potential.

In terms of merchandising, HomeGoods fits right in with the rest of TJX’s family of retailers, which include TJMaxx, Marshalls and TKMaxx. Its merchandising strategy, as described in a TJX statement, is as an off-price store that provides high-quality home fashions, including branded and designer-name merchandise, priced at 20 percent to 60 percent less than upscale catalogs, specialty stores and department stores.

The TJX statement said HomeGoods employs an “innovative buying approach and positive relationships with vendors around the world, which enables our buyers to obtain the most unique and well-known, brand-name merchandise, and offer it to shoppers at incredibly low prices.”

Indeed, the chain has geared its shoppers toward finding unique and irresistible values. “They’ve taken the concept of a treasure hunt and brought life to it, with fun fashion and inspiration,” Gabbay said. “Certainly, they know their customer well. And their buying style is the best.”

The average HomeGoods store measures 27,000 square feet. In layout, the chain has taken pains to differentiate itself from Bed Bath & Beyond and Pier 1 Imports. Whereas Bed Bath relies on its beloved floor-to-ceiling racks and floor fixturing, and whereas a Pier 1 has merchandise placed with no obvious pattern in mind, HomeGoods presents a highly organized layout that pulls shoppers from one department to another along clearly planned pathways.

Each segment in a HomeGoods—bedding, bath, tableware, decorative accents, for example—features a wall display of shelves of product, fronted by aisles with more merchandise. The rest of the layouts are consistently inconsistent. In lighting, the wall shelves are fronted by aisles of products. Bed and bath includes a towel wall fronted by floor fixtures of various types, such as a three-level bench fixture with towels and coordinated accessories, and a fixture of beds in a bag.

“Merchandise is coordinated by department and displayed to showcase decorating ideas and trends, ensembles and accessories,” according to TJX.

HomeGoods features its own branded merchandise along with national brands. Much of its bedding is under the HomeGoods label, but it also features Avanti, Ralph Lauren, Sealy (in basic bedding), Hollander and Raymond Waites. Its furniture offerings are almost all under the HomeGoods brand, but occasionally one can find pieces from a national brand such as Lane Furniture. Housewares offers a plethora of national brands including Cuisinart, T-fal, Le Creuset, Oneida and Capresso. In drinkware, Libbey and Waterford can be found.

 

 

Just the Facts

First store opened: 1992
Number of stores: 374 in 37 states (as of Nov. 2011)
Projected number of stores: 750
Annual sales: $1.96 billion (fiscal 2011, ended Jan. 2011)
Product categories: bath, bedding, furniture, gourmet housewares, home decor, tabletop