By  on April 26, 2005

NEW YORK — Specialty stores are looking for the niche inside the niche.

Driven by a need to please Wall Street and Main Street, rolling out new store concepts is back in vogue for specialty retailers to extend their customer reach and compete against department stores, such as Macy’s, J.C. Penney Co. and Kohl’s Corp., which are increasingly offering improved product assortments.

The latest to join the stampede are Aeropostale Inc., with its Jimmy’Z format set to open this summer, and Gap Inc., with the new Forth & Towne chain launching this fall, while American Eagle Outfitters Inc. and Pacific Sunwear of California Inc. are developing new concepts. Limited Brands is testing a new beauty format — Bigelow — as well as an innerwear format, Pink. Abercrombie & Fitch Co. is rolling out Ruehl and Polo Ralph Lauren is trying out Rugby. Chico’s FAS recently tried a new concept and failed, but is attempting another. Meanwhile, there’s speculation that Urban Outfitters Inc. and Ann Taylor Corp. are in the planning stages of launching new concepts, perhaps as early as next year.

The payoff of specialty retailers launching spin-offs is potentially big. If it’s a hit, the strategy creates cachet for the companies because it meets the needs of an increasingly demanding — and diverse — consumer. The goal is to grow market share, sales and the bottom line, which will hopefully drive the stock price up. Once matured, a new division can add hundreds of millions of dollars to top-line results. Abercrombie’s five-year-old Hollister division, for example, had sales of $210.1 million in the most recent fourth quarter, which made up about 30 percent of Abercrombie’s consolidated quarterly sales.

But it is risky business. For every successful concept launched over the past 20 years, there have been just as many flops, including Chico’s Pazo and Wet Seal Inc.’s Zutopia. Still, one thing is certain: Specialty retailers are aggressively pursuing ways to fill new niches.

New Concepts Are Back

The concepts in the pipeline are expected to cater to shoppers slightly older than the core demographic segments the companies currently target. In developing the spin-offs, retailers have asked themselves where their core customers — many of whom are teenagers — would shop as they grow older. The result is a niche of a niche. And there are many niches out there, analysts and consultants said.

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