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Proffitt's buildup in home: growth plan includes private branding push.

ALCOA, Tenn. -- Home furnishings will continue to be an area of focus for Proffitt's Inc., which says it plans to build the category in its stores through private branding and possible expansion of freestanding furniture outlets.

Proffitt's management last week outlined some company goals, including more emphasis on private brands in several areas, continued acquisition of department and specialty stores, and the opening of new stores.

Proffitt's, based here, officially merged with Carson's of Milwaukee, which will now operate as a division of Proffitt's, on Jan. 31. Together, the two retailers have 229 department stores and four furniture stores in 24 states, making it the fourth largest traditional department store retailer.

R. Brad Martin, chairman and chief executive of Proffitt's Inc., said the company will concentrate on private branding in five areas, including home furnishings. Consumers can expect to see new brands and new product offerings in those areas -- which include apparel --in stores by the fall.

Martin said he expects Proffitt's private-label business, which between the two companies is now at 7 percent, to rise to 12 percent of the retailer's business over the next two years.

"Private branding initially will enhance our margins by allowing us to lower our operating costs through brand development," he said.

The merger extends Proffitt's presence into the Midwest, Chicago, and central Illinois area, with very little overlapping in any geographical areas. All of the stores are located in mostly regional malls.

The new company, which expects to have combined annual revenues exceeding $3.65 billion, will benefit from significantly enhanced buying power, operating margin and merchandising margin, according to Martin.

The combined chain expects revenue to grow 8 to 9 percent per year, with operating income growth of 20 percent annually. "The Carson's synergy targets outlined also reflect the substantial opportunities to improve the merchandising operations of the combined business through strengthened vendor relationships, development of key businesses and key brands, and further private brand development."

According to Martin, Carson's furniture business in its four freestanding stores has been profitable, and is a potential area of growth.

Stores such as the stand-alone furniture outlets, which are not contiguous to the department store, can be very successful, said Martin. "We believe there are opportunities to add additional stores which would help free up space in the department stores," he said, referring specifically to the furniture business.

Overall, he said he sees the furniture stores having modest growth over the next four to five years. He noted the home category in general was very good in 1997 and will continue to be good in 1998.

Last year, the combined entities spent $170 million in capital expenditures, in part for the opening of seven new stores and the renovation of existing units. The company expects capital spending for 1998 to be $185 million, with $40 million going toward new stores and $80 million for renovations.

"We see additional growth opportunities and are negotiating other new unit expansions," said Martin, noting that Proffitt's sees the potential for the expansion of Carson's and the Parisian stores as well.

Plans call for pursuing "other acquisition opportunities," in the department and specialty store segments, Martin said. "We like the financial characteristics of this business. It generates a lot of cash flow and serves the quality conscious high-income older consumer.
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Title Annotation:home furnishings
Author:Silberg, Lurie
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Date:Feb 23, 1998
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