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Penney Plans to Open 107 Clothing Boutiques

October 08, 1987|CHRIS KRAUL | San Diego County Business Editor

SAN DIEGO — Despite recent nervousness on Wall Street about specialty retailing, J. C. Penney is proceeding with plans to open 107 women's clothing boutiques within its existing department stores, the chain's principal supplier said Wednesday.

The boutiques to be opened in February would be called "Mixit" stores, and up to 60% of the clothing will be supplied by Beeba's Creations of San Diego, a contract clothing manufacturer, Beeba's Chairman Arjun Waney said.

If the Mixit concept is successful, he said, Penney plans to open another 500 to 600 of the stores, including many of them 2,000-square foot stand-alone stores separate from Penney department stores. Of the first 107 Mixit stores, 45 will be in California, Waney said. Described as a "store within a store," these units would be separate from the regular women's departments. They would have a separate look and identity, but would not be walled off from the rest of Penney stores, he said. The clothing would be geared to working women between the ages of 18 and 30.

Penney executives were not available for comment late Wednesday. The company acquired a 20% stock interest in Beeba's in August, paying $20 million.

A source close to the new chain said Penney hopes the Mixit stores will have sales of between $250 and $300 per store square foot. That is more than double the $103 in sales per store square foot that, according to Standard & Poor's, Penney reported in its metropolitan stores during fiscal 1986.

Beeba's contracts with foreign manufacturers to produce "knock-offs," or reproductions of current clothing fashions, with low-cost labor. However, Waney said the goods for the Penney line, which will carry the Mixit label, will be predominantly original designs.

The company specializes in the effective use of foreign clothing-manufacturing quotas, or the amount of goods in a given merchandise category that the United States allows a country to export for the U.S. market per year.

Penney, which operates more than 1,900 department stores in the United States and Puerto Rico, has long professed a desire to move into specialty retailing, analysts said. Penney is following demographic trends that show younger buyers prefer the better service and more focused merchandising that specialty stores can offer, said Richard Nelson, a retailing analyst with Duff & Phelps Inc. in Chicago.

And young working women are one of the fastest-growing retail clothing market segments, Nelson said, due to greater numbers of women entering the work force and to their steadily increasing incomes.

However, many large specialty retailers, including Gap, the Limited and Clothestime, have seen their rates of growth flatten out in recent months. That's because of the "fashion sameness of so many these store's formats," said Barry Sahgal, a co-director of investment research at Ladenburg, Thalmann & Co. of New York. "The consumer seems to be bored and confused."

"(Mixit) is a low-risk entry for Penney into specialty retailing, but it's not a slam dunk," Sahgal said. "The import environment has gotten a lot more difficult, and the consumer is showing signs of consumer weariness as evidenced by the fact that retail sales have been lackluster of late."

Waney said Beeba's, a publicly held company that he founded in 1973, this week will report net sales of $107 million for the fiscal year ended Aug. 30, compared to $94 million last year. Full-year earnings will be close to analysts' projections of $1 per share, compared to 93 cents last year.

Beeba's announced Wednesday that Waney is the company's new chairman, replacing Luther Henderson, who becomes vice chairman. Waney and Henderson are both former executives of Pier 1, a retailer of largely imported housewares.

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