The Right Start catalogue and the stores don't sell kids' clothes, but instead specialize in expensive but useful items--such as $80 ear thermometers, a $60 combination lamp and cassette tape player, a $40 vaporizer shaped like a dragon and a $40 baby bathrobe.
Such items might be popular with yuppie parents, but Right Start's move into retail still carries plenty of risks. "Retail and mail order are very different methods of selling," said Paul Miller, senior news editor at the trade publication Catalog Age. In retail, "you have to deal with real estate and sales help."
To help with the transition, Right Start has hired former executives from retailers such as Brookstone and The Gap. But analysts warn that the company must still lower its catalogue costs, plus find ways to pay the roughly $300,000 it costs to open each new store.
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Fridstein also acknowledged that the catalogue business still needs fixing. He said the company has cut its mailing list by 30% to try to cut costs and increase its response rate by targeting people more likely to place orders. Right Start has also begun providing telemarketing services for two other catalogue companies, and hopes to land more such customers to help cover its overhead.
And there's danger in adding too many stores too fast, which could lead to a cash crunch, Fridstein noted. With Right Start's stock now hovering below $3 a share--down from more than $8 a share just over a year ago--it's not likely to be able to raise cash by selling more stock. Analysts also don't expect American Recreation Centers Inc., a Rancho Cordova bowling center operator that owns 63% of Right Start's stock, to provide additional financing.
The company is looking into taking on debt to help pay for new stores, but doesn't yet know how a deal would be structured. For now, Fridstein said, Right Start will focus on taking one baby step at a time. "We're being tremendously cautious."
