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This Company Loves to Move Into Locations Where Sears Fails


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athome household decor retailer
By John Jannarone | @jannarone

When Sears or Target abandon one of their big, underperforming locations, one retailer licks its chops: home decor chain At Home.

The Texas-based company, which sells 50,000 items ranging from patio furniture to carpeting, has increased its store count to 81 from 48 in the last five years. Most of the additions come from stores it rents or leases from retailers that decided to close their doors. At Home has scooped up stores from a range of retailers including Sears (SHLD), Target (TGT), Walmart (WMT) and Lowe's (LOW).

The plan is to keep growing at a 20 percent rate, with another 15 to 20 stores expected to open in 2015 -- most of them at locations other retailers have shuttered.

"There's still a lot of empty boxes out there and there will be for a long time," At Home CEO Lewis Bird III said in an interview this week. "We're the only retailer looking for a big box format."

While At Home isn't usually the only bidder for abandoned locations, supply has outweighed demand in recent years. A confluence of factors including the financial crisis and resulting recession, along with tough online competition, has forced many retailers to close stores that make little or no profit.

Bird acknowledges that struggling retailers have created an opportunity since the financial crisis. "It would have been harder 10 years ago," he said. These days, retailers simply get in touch with At Home when they plan to close stores, making the hunt even easier, he said.

Of course, it's not all about capitalizing on the failure of other retailers. At Home has built five out of 26 of the new stores added in the last two years, Bird said.

But it appears that abandoned locations are often too good to pass up. In 2013, for instance, Target closed eight stores and At Home took six of the locations, Bird said.

Bird pointed out that there are usually other bidders for the spaces he seeks, but they aren't his rivals. "There are churches and charter schools, but not retailers," he said.

If you want it to look like Restoration Hardware, we've got it. If you want it to look like Ethan Allen, great.

Low property costs allow At Home to keep prices down, which has supported sales growth. In addition to expansion, the company continues to generate positive same-store sales, Bird said.

How does At Home succeed where others failed? The strategy is to offer consumers absolutely every style of home decor imaginable at lower prices than narrowly focused rivals do. "If you want it to look like Restoration Hardware (RH), we've got it. If you want it to look like Ethan Allen (ETH), great," he said.

Big boxes are a perfect match for such a business because of the space required to store so many items. Someone shopping for, say, patio chair cushions, will have 65 styles to choose from.

The diverse selection helps At Home attract a wide range of customers from both high- and low-income brackets. The average customer shops in the stores for two hours a visit, Bird said.

Product costs are kept to a minimum by sticking mainly to private-label items that the company buys directly from their sources. The company also has to keep labor and corporate costs down to ensure profitability. "Gross margins are not great, so it's important to watch other costs," Bird said.

At Home appears to be holding up against online competition. Amazon.com (AMZN) has an extensive furniture and decor offering and offers very competitive prices.

Online shopping may eventually be available for At Home but Bird suggested the in-store experience seems to suit his model well. "We're testing delivery but customers aren't really jumping on it," he said.

Asked if the privately owned company would go public, Bird suggested At Home was still focused on rolling out the new store format. The company was bought by private-equity firm AEA Investors in 2011. At the time, the company operated a chain of stores called Garden Ridge, which was renamed At Home.


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