PRINT THIS STORY:

CHANGE TEXT SIZE:

DENIM DESTINATION

Tommy Bahama launches store for its Indigo Palms apparel line

BY GLEN A. BERES

Tommy Bahama, the purveyor of upscale casual island chic, is launching a new jeans and denim concept store that it considers a prototype for future expansion.

The lifestyle company, based in New York City and Seattle, opened its first Indigo Palms store in November in the prestigious Fashion Island mall, Newport Beach, Calif.

Indigo Palms, Tommy Bahama’s existing line of island denim sportswear for men and women, is getting star treatment in the new shop. According to George Santacroce, president of Tommy Bahama’s retail division, the new unit “isn’t just a jeans store.” The shop stocks some 80 to 100 men’s and women’s fashion denim items, including sweaters, blouses and accessories. The concept store targets a broader reach than the traditional tropical island point of view that Tommy Bahama is known for.

“We’re targeting better customers who wear jeans,” Santacroce said. “It’s a new venture for us, but it’s based on the successful launch of our Indigo Palms concept in our wholesale division. Based on the success of the prototype, we’ll look to roll out the concept.”

The concept “makes sense,” considering the overall climate toward casual fashion, says Jeffrey Klinefelter, a senior research analyst at U.S. Bancorp Piper Jaffray who follows the apparel market and covers Tommy Bahama’s parent, Atlanta-based Oxford Industries.

“The Indigo Palms concept should bring price points that are more palatable to consumers [seeking upscale casual wear], and the focus on denim should allow for slightly smaller shops, which will keep costs down,” he said. “We like the concept and think it will add incremental sales for the company.”

Indigo Palms builds on what has already been a highly successful Tommy Bahama brand at both the retail and wholesale level. Sales per square foot at Tommy Bahama stores are “north of $700,” company executives say.

The company, established in 1992, carries a diverse range of branded products, including upscale casual men’s and women’s sportswear, swimwear, denim, footwear, handbags, luggage, watches and related accessories, as well as a complete home furnishings collection. The Tommy Bahama line is carried by upscale department stores across the United States, among them Macy’s West, Neiman Marcus, Nordstrom and Saks Fifth Avenue, and by high-profile resort units around the world. This wholesale division is run by Viewpoint International, which Oxford acquired in June.

Tommy Bahama also has an independent division for its own stores, of which there are 35 in the continental United States and Hawaii. These include seven signature retail-café “compounds” and four outlet stores for closeout merchandise; the rest are its regular stores, or “emporiums,” as the company likes to call them. At press time the company expected to open at least two more emporiums before the end of 2003 — in Washington, D.C., and Tucson, Ariz.

Going forward, Tommy Bahama plans to open between five and 10 stores per year (including one or two café-compounds), and company officials believe the division has the potential to reach between 80 and 100 stores nationwide.

“We’re not aiming for 300 to 400 locations,” Santacroce said. “That’s not who we are. We want to maintain a sense of exclusivity; we want to be wherever our target customers are. As we move into more traditional malls, we’re looking for a unique mix of luxury co-tenants on one end and mid-market co-tenants on the other. A lot of people haven’t experienced us yet, and we think there’s a tremendous opportunity there.”

The company’s mall-based stores measure between 700 and 800 square feet, though its resort shops can run to about 1,100 square feet.

The store-café compounds range between 10,000 and 12,000 square feet, with the restaurant side accounting for about 55 percent of sales and 45 percent coming from the retail. According to Santacroce, the typical retail store in a compound generates sales per square foot of about $1,500 — significantly higher than the emporiums. The company never holds sales, favoring instead an everyday regular pricing format.

The largest store is the Scottsdale, Ariz., compound, in the Kierland Commons mixed-use project. That 16,000-square-foot store, which opened in November, showcases all of the company’s products and brands, including its signature men’s and women’s lines, its home furnishings and a full restaurant.

Going forward, Santacroce says, Tommy Bahama will focus on new formats, including a 3,800-square-foot emporium prototype and some resort stores in the 1,500-to-2,000-square-foot range that will feature a more focused product presentation.

Units on tap include a compound in the Mauna Lani Resort, Hawaii; and stores in The Shops at Mission Viejo, (Calif.); The Somerset Collection, Troy, Mich.; and SouthPark Mall, Charlotte, N.C.

Tommy Bahama has ventured outward from its original resort concept, specifically, into the Sun Belt and the Midwest. The company is looking at the Northeast too, but high rental costs, competition and a crowded retail arena make expansion there somewhat less feasible. Existing markets in Arizona, Florida, Hawaii and Southern California are ideal regions for additional store growth, however. “Our biggest challenge is finding enough of the right locations,” Santacroce said.

The retailer has also seen its fashion focus shift over the past decade. Santacroce notes that when the company started, the Tommy Bahama line was heavily focused on men’s silk fabrics, with an emphasis on tropical fashion. The brand now includes an array of luxury fabrics that don’t denote tropical as much as a casual, comfortable (not trendy) lifestyle. The customer demographic has broadened to encompass upscale customers 30 to 50 years old, about 55 percent of which are male.

“We still sell a tremendous amount of silk tropical shirts and shorts, but there is a tremendous opportunity for us in solids,” Santacroce said.

On the home furnishings front, the Tommy Bahama brand includes island-themed outdoor furniture, rugs, lamps, bedding and table linens, as well as a collection of casual lifestyle home furnishings for the bedroom and the dining room.

With 35 Tommy Bahama stores now, the chain plans to expand to about 100 units, seeking malls offering a mix of luxury and midmarket tenants.

Viewpoint and Tommy Bahama appear to have had a positive impact on Oxford’s fortunes. (Oxford makes private-label clothes for a range of retailers, from Wal-Mart to Federated Department Stores. It produces licensed apparel from Geoffrey Beene, Tommy Hilfiger and other designers. It also makes its own line of Oxford golf shirts.) For the fiscal first quarter ended Aug. 29, Oxford posted an earnings increase of 52 percent to $6.84 million, or 84 cents per share. This compares to earnings of $4.5 million, or 60 cents per share, a year ago. Sales rose by 41 percent to $242 million from $172 million a year ago. Viewpoint contributed $63 million in sales during the quarter. In a financial release Oxford said that Viewpoint’s wider margins improved Oxford’s total gross margin to 29.3 percent, compared with 22.3 percent in the first quarter of fiscal 2002. The company expects sales for the fiscal year to reach somewhere between $1.05 billion and $1.1 billion, up from last year’s sales of $764.6 million.

“Tommy Bahama is clearly a standout in the industry,” said Klinefelter of U.S. Bancorp Piper Jaffray. “Their stores are very attractive and seem to be very well-executed. They really bring the brand to life in terms of representing casual island lifestyles. They haven’t received a whole lot of specific visibility at retail, but they are still doing very well.”

Although Tommy Bahama is still first and foremost a wholesale company, Santacroce notes that the restaurant and retail operations support the brand in no small way. “The retail division makes a significant contribution to both the top and bottom line,” he said. “Our goal is to create a total, successful restaurant and retail shopping experience that drives our brand.”

© 2010 ICSC. All rights reserved. | Terms and Conditions | Privacy Policy | Contact ICSC | ICSC Home |