By  on June 11, 2007

SAN FRANCISCO — Gymboree is adding a third leg.

It's been 21 years since the retailer branched out into children's apparel after building a following with its original business: storefront early-learning play centers emphasizing yoga and music. Now the company is launching its third children's clothing store concept, Crazy 8, targeting a lower-priced end of the market to compete with retailers like Target, the Children's Place and Old Navy. The first Crazy 8 stores will open in August in northern and Southern California, the Houston area and sites in the Northeast.

Gymboree in January closed the last of its 17 Janeville stores — a concept launched in 2004 selling casual fashions to women in their mid-30s and older. The boutiques never took off and dragged down earnings. In announcing Janeville's closing last October, Matt McCauley, Gymboree's chief executive officer and chairman, noted in a statement the need to focus on "developing new opportunities that are more in line" with Gymboree's core kids' business.

Crazy 8 plans to clothe infants to size 14, roughly up to 10 years old, in attractively priced fun fashion that doesn't scrimp on fabric and has sturdy buttons and secure stitching, said McCauley in an interview at company headquarters here.

"If you look just at the prices, you might expect cheap. We believe in offering the opposite," said McCauley.

As an example of how Crazy 8's prices run, $25 will buy an outfit of embroidered jeans with hidden elastic waistband and a T-shirt stamped with a graphic design. In the mid-$30 price range, shoppers will find a sleeveless olive cable-knit hoodie, long-sleeved white shirt in a periwinkle print and cuffed brown trouser shorts.

This year, the company plans to open 10 Crazy 8 stores in the U.S. in three or four major markets, but locations have yet to be announced. Eventually, McCauley expects Crazy 8 to be the size of the company's core apparel business, Gymboree, which operates 581 stores in the U.S. and Canada.

Gymboree's move into the lower-priced, high-quality realm is strategic, said Marshal Cohen, chief industry analyst for The NPD Group, describing a niche with a lot of elbow room where shoppers want something more than Wal-Mart's discount prices and quality. Overall, U.S. children's retail apparel sales last year were $36 billion, or 18 percent of the total $200 billion domestic apparel market.

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