Retailer Cotton

It was heady times for California real estate in 2009, when Australian retailer Cotton On launched Stateside.

The Great Recession was in full swing and the other shoe had dropped on commercial real estate, making it a tenant’s market and good timing for a chain that swooped in, setting up U.S. headquarters first in Carson and later in La Mirada, Calif., to take up prime store locations.

Today, the Cotton On Group is in 13 states, with 118 stores across three brands, the largest of which is Cotton On with the majority of stores on the West Coast. The company saw more than $1 billion in revenue, based on current exchange rates, for the 12 months through June and projects at least 20 percent growth in fiscal year 2016 amid plans to ramp up its presence in the U.S.

“Even though we’re across those 13 states, we’re still concentrating on this part of the country,” said U.S. general manager Mark Pan. “Obviously, it’s an Australian brand and the aesthetic and the things that we’re best at lend themselves to the warmer clients but also a bit of that California lifestyle. And so while we have a footing in other parts of the country, the more near-term growth focus is on the West Coast.”

The company will open six stores by Nov. 1, a conservative figure given Cotton On’s more rapid rate of openings in recent years in the U.S. They are all California stores, located in San Diego, Valencia, Long Beach, West Covina, Santa Ana and Torrance. A seventh, in Long Island, is slated for sometime in 2016.

The company operates in some 17 countries with more than 1,300 stores across eight brands: Cotton On, Cotton On Kids, Cotton On Body, Rubi, Factorie, T-Bar, Typo and Supre. The lines represent everything from men’s, women’s and children’s apparel to stationery and footwear.

The fast-fashion retailer’s namesake and largest brand competes against the likes of H&M, Zara and Forever 21 with trendy basics such as anorak jackets for $49.95, T-shirt dresses that go for $19.95 and $39.95 ripped denim pants. Its target demographic is 18 to 45 with the sweet spot right around 22.

“We’re opening around 200 to 300 new stores a year globally and that’s fairly well-balanced in terms of the size of the scale of the countries we’re in today. There’s not one country that we’ve stopped the growth in or that we’ve matured that’s not working for us at the moment,” said Cotton On Group chief financial officer Michael Hardwick, during a recent visit to Los Angeles. “The U.S. was really important for our global strategy because it was the first Northern Hemisphere country so when we first came here in 2009, we opened a lot of stores in those first two years and have probably then spent the last couple of years perfecting that offering and also that range.

“Now we’re actually at that point that we’re ready to now start expanding again in the U.S.,” Hardwick said.

The company is flexible in its real estate needs and could go as small as 800 square feet for its stationery brand Typo or as large as 25,000 square feet for a multibrand store.

Cotton On employs about 1,500 workers in the U.S. with about 125 of those employees working at headquarters, where it has a 150,000-square-foot distribution center.

While additional leases beyond the seven are not yet signed, unit growth next year will be more than this year, Hardwick said.

“It needs to be much larger than [this calendar year],” he said. “To put it in context, in Australia, we’ve got 800 stores across eight brands and there’s still growth in that market. So the opportunity here in the U.S. is far greater. We’ve only introduced three brands here….We’re pretty hungry for future growth globally and that doesn’t change for anything here in the U.S. as well.”

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