Bealls Profile by Bob Andelman

Bealls Department Stores, a staple of rural communities across Florida since 1915, is beating the recession blues with a line extension concept, Bealls Outlet Stores. The no-frills outlets, featuring everyday low prices, came to life in 1990 with 26 locations, joined by 19 more in '91. Another nineteen opened in the first half of 1992 with three more under construction and three more planned this year but lacking firm site plans. Incredibly, in just three years, there are already more Bealls Outlets 64 than Bealls Department Stores 51.

But growth is nothing new to Bealls.

"You can go back in four-year increments and approximately every four years, the numbers double," says Bob Beall, the soft-spoken, amiable chief executive officer of the company.

Gross revenues for the privately held company are estimated at $260 million this year. That is, as Beall suggests, nearly double the 1988 sales of $142 million. Previous leap year sales grosses are $71 million (1984), $34 million (1980), $17 million (1976) and $9 million (1972).

"I think they're a great example of a privately-held, well-run company," says shopping center developer Craig Sher, president of the Sembler Company in St. Petersburg. "They pay a lot of attention to detail. They don't try to be anything but who they are."

Retail consultant Carleton Bob Meyers agrees. "That company has their finger on the pulse of the Florida consumer. They've done a very good job of fulfilling their niche," says the president of Fairfax-Burke, Va.-based Factory Outlet Consultants and Shopping Center Consultants.

Beall believes there's no time like the present for developing new retail niches like his outlets.

"In the department store side of the business, we've always been reliant on new shopping centers and there aren't any new shopping centers getting built. It's really stifled our growth," he laments. "So we feel, for the department store company, one way we can continue to grow is exploding some categories into formats that can go into existing space, that don't have to waste time waiting for new centers.

"We've saturated the areas of Florida we're already in, so we're looking at outlet malls, testing with Sawgrass and the Bay Area Outlet Mall (in Clearwater). Urban areas are another possibility for us," says Beall, although he is leery of Miami and concedes that Palm Beach and Fort Lauderdale "are areas we've struggled with."
Ambitious growth plans carried Bealls out of state and clear across the country for the first time in 1991. "Arizona is a place we're really pinning our hopes on," admits Beall. "The jury is out; the results are mixed. But if we make Arizona work, we can get into California and Texas." Optimistic plans call for reaching a critical mass of 15 to 20 outlet stores in Arizona as soon as possible. (Beall hopes to move into Georgia with department stores shortly.)

Historically, Bealls has been in small to medium Florida markets, appealing to a more mature customer. But Beall and his team are tinkering with their department store formula. In Jacksonville, Orlando and Tampa they discovered that the traditional mature mix was not appropriate.

"We don't want to alienate our mature market but our effort has been on the younger customers," says Beall. "We're moving out of domestics linens, towels and bedsheets. We need that room to focus on apparel and fashion gifts." Domestics has always been the least profitable element in the department stores, but a necessary category in small towns. More recently, as specialists have located in secondary and tertiary Florida markets, Bealls is withdrawing its domestics line.

"By getting the domestics out, you could come in our stores and see as wide an assortment as you could in a mall department store," says Beall. "And you can get in and out of our stores without the time commitment of the mall."

The secret at Bealls is plowing profits back into the company so that the chain grows with internally generated cash. Bealls never goes outside for financing when it wants to add new stores. "We've codified in our mission statement that we're looking for a 16 percent to 18 percent growth rate and a 16 percent to 18 percent after-tax rate of return," says Beall. "It's an aggressive goal but it also limits our efforts to do anything stupid."

And with the outlet stores, Bealls is tapping into a cash effective way of stretching its brand recognition with far less capital outlay. Whereas the company's department stores rely on new shopping center development to grow, the outlets are engineered to recycle older, existing space in less attractive neighborhood centers. A Bealls Outlet Store can expand or contract to fit available space and the most attractive lease terms.

Bealls prefers to locate new department stores, which average 35,000 square feet, in centers that feature a Wal-mart, K mart, Target or a large supermarket. "While there is some overlap (with the discounters) and we lose some business to them, the synergy is good," according to Beall. "We like to be in power centers." The average apparel item in a Bealls Department Store is $16, higher than Wal-mart and therefore more compatible and less competitive. "The department store," says Beall, "is for the person who is willing to spend more to get better merchandise."

Still, Beall says he wouldn't hesitate to locate one of his outlet stores which range in size from 9,000 to 25,000 square feet and carry an average price of $8 in the same center as a Wal-mart. "They just generate an awful lot of traffic and we get our share of it. We're pretty flexible. We look at existing sites. We want to be near a high-volume retailer PharMor, a supermarket or T.J. Maxx. Bealls does not generate the traffic that a supermarket or discount store does. We're in the middle range. That's why we like to be in an active center. We like to be six to seven miles from a mall and we don't want to be right next to a movie theater because of parking.

"In the outlets, we look for the strongest centers, but we've also gone into fairly dead malls where the market is right and the rent is right," adds Beall.

Conrad Szymanski, vice president of store development for Bealls, expects that sooner or later, other chains will follow Bealls in developing concepts that effectively recycle older spaces.
"Most markets have an adequate amount of retail space," says Szymanski. "Some centers have to die but others are well-located in quality communities. One or two anchors may leave, but the centers are still viable. It's been a great opportunity for us and sooner or later other people will have to make themselves adaptable."

The first Bealls Department Store in a mall turned up recently in Sebring, alongside JC Penney and Belk-Lindsey. "We aren't exclusively strip centers; if somebody is going to do a small, enclosed center, we'd probably be interested," says Beall. He is not interested in free-standing sites.

Actual growth for next year is up in the air. "We're still undecided between 15 and 25 additional outlet stores for fiscal year '93," says Beall. "That depends on some tests we're doing."

The "tests" include two new offshoot stores, Outlooks, a 7,000-square-foot junior young men's store, and an as-yet-unnamed, 4,000-square-foot, free-standing gift store. The first Outlooks opened in rural Spring Hill, Fl. adjoining an existing Bealls Department Store. "We think we minimize the risk by looking at new formats in existing markets," according to Beall. "We're going to try our new formats in existing markets because we know these markets. That lowers our risk. And we want to try existing formats in new markets because we've saturated existing markets."

While the Bealls Outlets pioneer new territory in Arizona and Georgia, Outlooks will negotiate familiar territory in Florida. Beall sees savings in distribution, marketing, management and supervision in the early stages of the new formats by making them either in adjoining locations or, at most, in the same strips and shopping centers.

Whether future Outlooks stores three are already slated for Deland, Cape Coral and Bradenton will carry the Bealls name is still undecided.

"That's under debate right now," says Beall. "The first one, in Spring Hill, says 'Outlooks' But there's an opening between the two stores inside so I think it's clear it's the same operation.

That's such a fledgling that for the next 12 months we'll want to locate it with Bealls. If that's successful, we'll look to locate them in places there are no Bealls."

end

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