Editor’s Note: This article is an excerpt from one of RetailWire’s recent online discussions. Each business morning on RetailWire.com, retail industry executives get plugged in to the latest news and issues with key insights from a “BrainTrust” of retail industry experts.
If at first you don’t succeed….
Four years after Forever 21 failed in an attempt to purchase Mervyns from Target, the discount apparel chain is now making another bid to acquire 150 of the department stores locations as it operates under Chapter 11 bankruptcy protection.
“Our vision has always been to get a bigger box,” Christopher Lee, senior vice president of Forever 21, told the Los Angeles Times. “We’ve been looking at these assets for many years.”
Most of Forever 21’s 430 U.S. stores are between 10,000 to 20,000 square feet and located in malls. Over the past couple of years, the chain has sought to open some larger stores such as converting a 40,000 square-foot site that had housed a Saks Fifth Avenue emporium. The average Mervyns runs about 80,000 square feet.
Liz Pierce, a retail analyst at Roth Capital Partners, told Apparel News, “If they can get this at a great price, if they have the capital to do it and it doesn’t cause any pain, it could be a wise move. And then I could make the argument of, ‘Whoa, really?’ I don’t know their return on investment on those big-box stores versus their smaller stores. And then there is the elephant in the room with the economy.”
Jeffrey Van Sinderen, a retail analyst at B. Riley & Co., said, “Real estate is low right now. If you can get it at the right price, it is probably not a bad move at this juncture. It diversifies their footprint. It’s an interesting idea.”
BrainTrust panelists weighed in on Forever 21’s bid, and whether or not the timing is right. RetailWire asked panelists if the Forever 21 concept will translate from the smaller store format that has driven the chain’s growth to a much larger footprint.
“It is easy to say now is a bad time to expand, but I agree that now is the time to get favorable lease rates and locations,” says Doron Levy, president of Captus Business Consulting. “And when the economy does turn around, strategically it is more profitable to be ready at the start of a turn around.”
“Forever 21 needs to ask…Is there enough assortment to support the content you need in 80,000 square feet?” says Richard Seesel, principal of Retailing in Focus, LLC.
“It isn’t just a matter of getting the real estate for a great price,” says Gene Detroyer, independent entrepreneur and consultant. “The Forever 21 concept may not fit an 80,000 square foot store. They must be prepared to extend their range to include additional targets as customers, or additional lines for their targets.”
“Forever 21 is another Steve & Barry’s waiting to happen,” predicts Lee Peterson, vice president of creative services at WD Partners.