VALUE CITY
DESIGNS ON NEW YORK MARKET

Byline: Valerie Seckler

NEW YORK — With the opening of its newest store, in nearby Paramus, N.J., Value City has shipped its treasure-hunt atmosphere to the New York metropolitan area.
The store, in the Bergen Mall Shopping Center, is Value City’s first in this area since the company was founded 76 years ago by E.L. Schottenstein. It represents the first step in Value City’s plan to speed up growth by entering new urban areas.
Markets slated for openings this spring include St. Louis, which will get a store just across the Mississippi River in Fairview Heights, Ill., opposite the St. Clair Mall.
Value City will also open two stores in the Philadelphia area in April, augmenting its single door in that market. The new stores will be in Bucks Mall in Feasterville, Pa., and Cheltenham Shopping Center, in Cheltenham, Pa.
Located in the heart of populous and affluent Bergen County, the 93rd store opened by the Columbus, Ohio-based off-pricer pitches 50 to 70 percent discounts on everything from designer labels in regular and special sizes to gourmet food and housewares.
The special or large size women’s department and the designer area are stocked with high profile names, including CK Calvin Klein, DKNY and Harve Bernard, while the men’s area features labels such as Hugo Boss, Donna Karan, Ralph Lauren, Ungaro and Christian Dior.
Private labels also reflect a play for the better off-price customer, with tags from Saks Fifth Avenue to the Gap displayed near the aisles to grab attention. Brands aren’t advertised and sometimes are merchandised without signs in the store, leaving it to shoppers to find the quality labels buried somewhat deeper in the racks.
“This area will support better goods, so we’re shipping more of them to the store than we would to other locations, where we have moderate or budget formats,” noted Jay L. Schottenstein, chairman and chief executive officer at Value City Department Stores Inc. and grandson of the chain’s founder.
“Some ask us not to use in-store signs promoting the brands, or ask us to differentiate the discounted goods [from those sold in other channels] by marking the label,” added Schottenstein, who until this opening has kept a low profile — like many of his resources.
A gray windowpane wool and rayon blazer from DKNY, for instance, bore a red line on its still-legible label — and a price slashed to $69.99 from $180. Prices are discounted more steeply than at other off-pricers, as about 75 percent of Value City’s goods are closeouts, said retail analysts. Apparel accounted for about 72 percent of its sales of $954 million in fiscal 1996.
Roughly 500,000 people live within two to three miles of the Bergen Mall shopping center on Route 4, observed Thomas Filandro, analyst at Gerard Klauer Mattison, speaking of the trading area’s heavy traffic. He was one of the retail analysts who participated in a company-led tour of the store Nov. 6 on the eve of the grand opening. Within five miles of the store, the population balloons to 2.6 million with average annual household incomes of $40,000, according to Value City officials.
This unit – 139,400 square feet, more than four times the size of the off-price sector’s average 32,000-square-foot box — followed the firm’s first foray into Memphis, in August. The average Value City unit is 90,000 square feet.
“Where opportunity knocks with a good location, we are ready to answer,” offered a buoyant Schottenstein, who revealed some of the chain’s upcoming moves into metropolitan areas in an interview after the tour.
The Bergen Mall door is expected to prove one of Value City’s biggest winners. Officials estimated it will produce sales of $25 million annually — not far off the $30 million a year generated by its top unit, the Columbus flagship. The average Value City has annual sales of $13.5 million.
Retail observers said Value City could easily drum up that level of business — equivalent to sales of $285 per square foot — given the area’s upscale demographics. Some Value City doors generate sales as high as $365 per square foot, Filandro noted.
On Tuesday, Schottenstein reported that the store, 20 miles from the Lincoln Tunnel, is “performing to plan.”
Apparel claims half the selling space of the Paramus store, spanning the entire first level. Women’s gets 22 percent of the overall selling floor, men’s 20 percent. Hard lines ranging from sporting goods to housewares, along with health and beauty aids and gourmet food, are on the second floor.
There are many more men’s designer labels than women’s at the Bergen Mall store. That’s a sign of better closeouts — and weaker business — in the full-price men’s area currently, analysts said.
Citing the chain’s array of value-priced brands and improved merchandise presentation, on Oct. 28 NatWest Securities analyst Robert Buchanan upped his first-quarter earnings estimate to 18 cents a share from 16 cents against year-ago earnings of 8 cents a share. He noted sharp execution by the chain’s merchants, led by George Iacono, president and general merchandise manager. He also highlighted the role of executive vice president Don Andrus, a 23-year May Co. veteran, in improving apparel presentations since his arrival in September 1995.
In the year ended Aug. 3, the chain’s profits leaped 57.2 percent to $21.7 million, or 68 cents a share, as sales grew 9.5 percent to $954.3 million. For 1997, Buchanan estimated Value City would net 95 cents a share; Filandro sees $1 a share on sales of $1.1 billion.
“The key to this store is the value appeal,” said Gilbert Harrison, chairman of Financo Inc., a New York investment banker, who was among those on the opening tour. “It offers lower prices than competitors like Marshalls but will draw a more upscale customer than Kmart and other discounters.”

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