SHOPKO: THE FUTURE IS NOW

Byline: Sophy Fearnley-Whittingstall

CHICAGO--ShopKo's Vision 2000 seems to be sharply focused.
The three-year-old program, blending store renovations with increased apparel offerings and what executives describe as better values on fashion, home and health products, is moving ahead.
The 122-unit ShopKo, based in Green Bay, Wis., opened a prototype in 1991. By the end of this year, two-thirds of ShopKo units will feature Vision 2000. The company plans to convert all stores by the end of 1996. Vision 2000 stores feature:
An increase in apparel space to 40 percent from 36 percent of total space.
A streamlined vendor structure.
More fashion-forward and focused assortments.
Sales increases at Vision 2000 stores are running 6 to 7 percent higher than those at stores not yet converted, said Skip Chustz, senior vice president and general merchandise manager of soft lines.
Women's apparel sales overall this year are ahead in the low single digits, Chustz said, and he expects them to grow 7 to 10 percent next year. But he noted that last year, the chain ran 15 to 20 percent more clearances, making comparisons difficult. In the second quarter ended Sept. 10, earnings were $2.8 million, or 9 cents a share--topping Wall Street estimates of 5 cents--against $2.1 million, or 7 cents. Sales in the latest quarter rose 7.3 percent to $381.3 million and same-store sales inched up 0.8 percent.
Earnings for the year ended Feb. 26 were $32 million on sales of $1.74 billion. According to ShopKo executives, Vision 2000 is geared to distinguish ShopKo from the lower-priced giants, such as Wal-Mart and Kmart, and the higher-priced chains such as J.C. Penney and Sears, which are reaching for better-quality goods.
As part of the program, new merchants were hired to reshape apparel assortments. Chustz joined the chain a year and a half ago from Maison Blanche in Baton Rouge, La. Three new divisional merchandise managers were hired to oversee women's, men's and children's wear, bringing with them expertise from Higbee's, Prange and Mervyn's.
The company is searching for a senior merchandising/marketing executive to succeed Mark R. Kennedy, who will remain with the company through Jan. 1, 1995.
One important innovation is the "trend stage" found at the front of stores to highlight major fashion statements each season. On stage this year was rugged, outdoor-style merchandise, such as heavy cotton and colored denim separates in earthy colors; also this season: textured knits and plaids.
"Now there is more clarity in offerings because of the cohesive statements," Chustz said.
Innovations extend to other display areas. New fixtures have been added. For example, old-fashioned rounders have been replaced with contemporary four-way fixtures, tables are used to display folded separates and movable screens delineate departments and serve as display fixtures.
The chain has streamlined its vendors by about 25 percent, Chustz said, to make operations more efficient and build stronger relationships. "We moved away from imports and overseas sources and became more focused on domestic sources," enabling the chain to cut its cycle time and buy closer to need, he said. "We deleted some vendors who were opening price point and mainstream in taste and added more updated, value-driven vendors."
"On basics, we want to make sure we are in stock at all times. If it's trend merchandise, we want to be on top of the trends and expect vendors to provide us with insight," he added.
Examples of new vendors include Memphis and Rio denim. For spring, the chain added a new casual dress category that has been very successful, Chustz said. Private-label apparel has been reduced by about a third in the past year, to about 25 percent of total apparel.
During a recent walk-through of a medium-size Vision 2000 store in Dixon, Ill., the apparel area was immaculate, with wide aisles and uncluttered, clear displays. Assortments were clearly focused on key themes, such as fleece and tapestry vests, long denim dresses and plaid baby dolls. Key vendors included True Blue, Red Rover, Nexxit, Lee/Riders, Chic, Britannia, Hanes and Fruit of the Loom.
In addition to value-priced basics, such as cotton turtlenecks by Willow Bay at two for $15, more fashion-forward merchandise included raw silk camp shirts and drawstring pants by Daniel Caron on sale at $18.74 and $14.99.
Stores range in size from 74,000 square feet to 99,000 square feet. The chain's strategy has been to target small and medium-size markets with populations of 25,000 to 50,000, and metropolitan areas of 100,000.
"We think there's a niche that's being underserved by the competition today," Chustz said.
New Vision 2000 stores are slated to open this month in River Falls, Wis., and Kalispell, Mont. Four more stores are scheduled next spring, in Spokane, Wash., Delevan, Wis., Freeport, Ill., and Rice Lake, Wis.
On the technology side, better replenishment systems, including EDI, have improved the chain's in-stock positions by 20 percent in the past two to three years, Chustz said.
According to John Hughes, associate analyst with Piper Jaffray in Minneapolis, ShopKo has taken a "step in the right direction," but may have some work still to do. Hughes noted that apparel presentation had improved greatly in the new stores, but assortments were a little too narrow.
"They are not beating anyone on price and may need to get more aggressive," he added. "They are holding their own against Kmart, but not doing so well against Wal-Mart and Target."
"It's a sound strategy," said Steve Ashley, vice president of research with Cleary Gull Reiland & McDevitt, a Milwaukee research firm. Noting that hard lines, health and beauty aids are the most competitive areas for discounters, he said, "ShopKo has chosen to be aggressive with apparel--the most strategically defensible area. They are trying to compete with Target and be more fashionable."

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