Within a popular and competitive retail sector, Amarillo, Texas-based Hastings Entertainment has amassed a 120-unit superstore roster that spans 16 states. And over the next 16 months, the multimedia superstore expects to add another 54 stores, with six slated to open by year's end.
To speed the retailer to its goal, says Ritchy Brown, senior director of real estate, the company's sights are set in part on modifying existing big-box space (Hastings Entertainment's stores average 25,000 sq. ft.) in secondary markets. Earlier this year, the company opened stores in modified spaces in Clarkesville and Maryville, Tenn. The company also opened a superstore in Olathe, Kan., in place of a subdivided former Wal-Mart location.
According to John Marmaduke, Hastings Entertainment's president and CEO, the retailer's expansion has less to do with a set real estate agenda than it does with satisfying underserved markets. Further, he explains, the retailer's ability to draw customers from multiple markets is due to the positive sum of its parts.
"The excitement of our store is that it's more than a bookstore, music store or video store - it's an entertainment superstore," he says. "Customers walk in and let the products tell them what the most exiting thing is. Because of that, we get an enormous amount of cross-shopping between product categories."
The company's multi-format makeup marked its 30th year in June. That same month, Hastings Entertainment completed an Initial Public Offering (NASDAQ: HAST).
Marmaduke notes that operating the company with the backdrop of the stock market's well-publicized volatility has not affected the company's performance.
"Our comps have been strong and ahead of plan, and the recent (ups and downs) of the stock market have not been reflected at our cash registers," he says. "Certainly, markets have reacted to currency devaluation throughout the world. But as we've seen, every time the market takes a correction it sets a base for future growth. We've been consistently profitable for 30 years, and there are not many companies, public or private, that can claim that."
The company's profitability, Marmaduke says, has allowed Hastings Entertainment to invest capital, grow its store count and, subsequently, further enhance its economies of scale.
"That's the entire reason for the public offering," he explains. "We had invested approximately $13 million over the past four years developing the infrastructure to grow this business. Our large investment of funds - which we felt were strategically essential to our long-term viability - dictated our need to leverage with more stores. And we can envision a number of expense-leveraging opportunities going forward."
For the future, Marmaduke points to the growing generation-Y population as a key demographic.
"That group is completely aligned with our concept and our products," he notes, adding that the generation of baby boomers were the first to shop the store's entire product category pool.
"You wouldn't think anything of a generation-Y or teenager today surfing the Internet and listening to music with a magazine in their lap," he says. "That's just how they live. They're multi-taskers, and our store is designed specifically with them in mind."
Hastings Sets Expansion On Fast-Forward After replacing many of its outdated stores, The Sports Zone is now looking to open new stores in states surrounding its home base of Rockville, Md.
According to Michael Syag, The Sports Zone's president and CEO, the retailer considers itself actively seeking new opportunities that form a match with its criteria. "Right now, we are around the Baltimore/Washington, D.C., Beltway, and we are looking at (future sites in) Virginia, North Carolina and Philadelphia," he explains. "So we'll be going from a regional corporation to a multi-state retailer."
With an average size of 5,000 sq. ft. to 12,000 sq. ft., The Sports Zone's store footprint is adaptable to multiple retail real estate formats. The retailer's 13 stores are located in strip and enclosed shopping centers, as well as in urban, street retail settings. The store at Security Square Mall in Woodlawn, Md., marks The Sports Zone's first mall store opening in the greater Baltimore area.
"The only way we can compete is to do different business in a variety of formats," Syag says.
The Sports Zone's retail format differs from that of a traditional sports apparel and footwear retailer, Syag says, in that it gives its various product categories a department store-like feel. Design touches such as athletic benches and basketball hoops were rejected in favor of cherry wood walls and contemporary fixtures to create a cozy living room environment to connect customers intimately with their retail surroundings.
At its 5,700 sq. ft. Security Square location, for example, The Sports Zone management staff collaborated with Nike to retrofit a showcase area for the shoe manufacturer's own section of the store. The area was created by a team of designers and merchandisers from Nike who installed walls, lighting fixtures, product displays and rubberized flooring. The flooring allows customers to test the sneakers on surfaces they would normally find during sports activities.
"We turned over a portion of our store to Nike, and they created their own store within our store," explains Maz Zouhairi, vice president of operations for The Sports Zone. "Because we move so much merchandise, they asked us if we would like to be their representative for the area and design this unique section."
The Nike shop is in most existing stores and will be in all new locations. The Sports Zone is opening a store this month at PG Plaza Mall in Hyattsville, Md., and one in December at the Pennmar Shopping Center in Forrestville, Md.
"We always negotiate with landlords when we are interested in good locations and when the locations meet our requirements," Syag says, adding that the company should open three to six new stores per year. "We are in an expansion mode, but we don't have to open a certain amount of locations - only if they make good sense to us."