Stor faces new threat as Ikea opens Burbank outlet.

Stor faces new threat as Ikea opens Burbank outlet

Even as the stock of furniture retailers Stor is getting battered on Wall Street a new worry looms on the horizon. Ikea U.S. Inc., a $18.7 billion worldwide merchandiser of products similar to Stor's, is scheduled to open its first Southland outlet next week in Burbank.

City of Industry-based Stor Furnishings International Inc. sold for between $2 and $2.50 a share on Oct. 23, off from a high of $8.50 recorded since stock's initial public offering April 27. And analysts said they see Ikea as a threat.

"It'll be a big splash. Stor is about as close a knockoff of Ikea as you can get," said Carl Steidtmann, chief economist with the retail consulting firm Management Horizons in Dublin, Ohio. "I would think it would have a very direct and negative impact on their (Stor's) business."

Ikea, based in Sweden, founded the contemporary furniture super-center concept 40 years ago and operates 87 stores worldwide. Only five are now open in the United States. In contrast, Stor is a relatively new company, founded in 1987 and operates three stores, all in Southern California.

Each Stor is typically 150,000 square feet, while Ikea's new location, in Burbank's Media City Mall on San Fernando Boulevard, will be considerably larger - 240,000 square feet. The two offer such similar merchandise - aimed at middle-class buyers - that in April 1988 Ikea sued Stor for unfair competition, copyright and trademark infringement. That case was settled after Stor agreed to change some of its marketing strategies.

But neither company plans to change its operating strategy to adapt to the new competition.

"We look at it as normal competition. We have no plans to have a special way to compete with Stor," said Ikea President Rene Hausler.

"We've been aggressive and very successful in the market and we'll keep doing the things that make us successful," said Jim Stadtlander, Stor president and chief executive officer. "They're not in our market yet. Obviously we are strong believers in following our customers carefully and being quite responsive to them."

However, an Oct. 10 report published by Los Angeles-based Bateman Eichler, Hill Richards, which underwrote Stor's $16.7 million initial public offering, stated that Stor is believed to have planned an aggressive advertising campaign to counter the publicity of Ikea's arrival.

Ikea launched an extensive advertising campaign earlier this month on radio, television and billboards to publicize the new store. The company plans some print advertising as well, Hausler said.

The Burbank Ikea outlet is about 30 miles from the nearest Stor, but consultant Steidtmann said he believes the distance is not great enough to prevent competition.

"Ikea draws from a tremendously wide area. People are willing to travel some distance to make a furniture purchase," he said.

In addition to the Burbank location, Ikea plans to open stores in the Inland Empire, the South Bay and Orange County within the next three years, Hausler said.

The retail furniture industry in Southern California is depressed right now, which could be one reason why Stor's stock price is so low. "It's a business that is largely tied to housing," Steidtmann said, noting the housing market is slow in California. Stor officers and directors hold 46 percent of the outstanding common shares of stock.

Stor has incurred big losses each year since it was founded. During 1990, the company lost $4.9 million on revenues of $65.65 million. Revenues were up substantially from 1988, when Stor lossed $6.87 million on revenues of $33 million. During the company's first year, it lost $6.87 million on revenues of $8.3 million.

The Bateman Eichler report said Stor is relatively young and the company incurs substantial cost each time it opens a new location. The company plans to open additional locations and the revenues of the sixth store will be sufficient to bring the company into the black, the report said.

Stor has announced the opening of a fourth outlet in Texas and is considering opening stores in Denver, Phoenix, Seattle, San Francisco and San Diego.