RETAILING Being edgier pays off for stores

Young shoppers are buying into department store makeovers.
CHICAGO -- Viewed as stodgy and irrelevant, the traditional department store has been on a steady decline for more than a decade.
A generation of shoppers strayed from their parents' way of shopping, preferring instead hip specialty stores such as Abercrombie & amp; Fitch and H & amp;M, where trends are clear cut and navigating the stores is easy.
But some old-line department store operators, led by J.C. Penney Co., Kohl's Corp., and Federated Department Stores Inc., are taking a page from their upstart competitors.
They're launching edgy advertising and adding clothing and furniture lines that appeal to the young trendsetters who have money to spend.
It's starting to pay off.
Department store sales surged 8.4 percent in September, the fastest pace since January 1997, according to the International Council of Shopping Centers. And a respected holiday shopping report is predicting big increases in store traffic for department stores this season.
More surprising, young adults, who once shunned department stores, are leading the charge back into them.
"Over the last couple of years, department stores, knowing that they are losing that customer segment, have been doing more things to bring them back," said Phil Rist, vice president of strategy for BIGresearch LLC, a market research firm in Columbus.
Convenience factor
And some young shoppers, like Jessica Mershon, 20, said they like department stores for some old-school reasons -- like convenience.
"It's just easier because it's a one-stop shop," said Mershon.
Indeed, 79 percent of adults ages 18 to 24 plan to shop at department stores for holiday merchandise, the National Retail Federation found in a new survey. That's up from 73 percent last year, 66 percent in 2004, and 60 percent in 2003.
The uptick is remarkable given that the department store industry has been shrinking for more than a decade. Department stores accounted for 3.96 percent of retail industry sales in 2005, down from 7.27 percent in 1993, according to the NRF. And the industry segment generated 86.7 billion in sales in 2005, less than in 1993.
Department stores' recent gains come as some specialty stalwarts for teens, including the Gap, are stumbling.
September sales at San Francisco-based Gap Inc., which includes the Gap and Old Navy chains, fell 3 percent.
Limited's decline
Columbus-based Limited Brands Inc. has had trouble with its namesake Limited Stores and offshoot Express. Both posted sales declines in the second quarter.
"Department stores are hitting the fashion cycle better than in the past," said Peter Morici, professor of business at the University of Maryland. "This is shaping up to be a catch-up year for department stores."
Most specialty stores bet on one big trend each season, and if they're wrong, sales can tumble quickly. Once the purveyor of fashion in the country, department stores became slow to react to shifting consumer tastes. Now, at least some of them are tapping into fashion trends more quickly.
Although the recent surge in department store sales has given new hope to a beleaguered industry, not all department stores are getting a lift. Sales at Sears stores have fallen for five years, and its owner, Sears Holding Corp., continues to search for ways to bring shoppers back.
Penney's progress
Penney's, one of Sears' oldest rivals, has turned around in part because it has found new ways to appeal to younger shoppers. The Plano, Texas-based department store chain introduced younger and trendier merchandise in the past year, such as a.n.a., a line of women's apparel including skinny jeans and hobo handbags. Another draw is cosmetic line Sephora, popular with young adults, starting to be sold at Penneys and slated for a broad launch at its stores next spring.
"For a while, J.C. Penney has had the image of, 'That's where my mom shops or where my grandma shops,"' said Penney spokeswoman Kate Parkhouse. "We are starting to see more younger people come into J.C. Penney."
Menomonee Falls, Wis.-based Kohl's and Federated, the parent of Macy's, have made similar moves, making over stores with modern fixtures and trendier merchandise.
Kohl's, traditionally known for its mainstream fashions and accessories, is in the midst of an image overhaul. It recently announced a deal with designer Vera Wang to launch an exclusive line of "Very Vera" merchandise in 2007.
For September, sales at stores open at least one year -- a key barometer of a retailer's health -- rose 16 percent at Kohl's, 6.2 percent at Federated and 8.7 percent at Penney's. That's far ahead of the 3.8 percent September same-store sales gain nationwide.
Another sign of the department store's comeback: Forever 21 Inc., the fast-growing, trendy off-price chain aimed at young people, plans to open a 30,000-square-foot prototype department store at the Shops on Butterfield at Yorktown Center in Lombard, Ill., next spring. The company, which started in 1983 as a women's apparel boutique, is expanding into men's and children's clothing, lingerie and accessories.

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