For example, Nautica Enterprises Inc. has traveled a rocky road with the 14,000-square-foot Rockefeller Center flagship it opened in April 2001. Unlucky timing has been one of the highest hurdles facing the store, which bowed just a year after the dot-com boom went bust and several months before the terrorist attacks of Sept. 11, 2001, severely wounded the New York retail scene.
In the third quarter ended Nov. 30, 2002, Nautica took an aftertax charge of $6.5 million to write down fixed assets at the store. President and chief executive Harvey Sanders, in the statement that first reported the write down, maintained, “The Rockefeller Plaza store serves as an effective testing ground for new products. In the current difficult retail environment, however, it has continued to perform below our expectations. We are in the process of evaluating a number of options regarding our longer-term strategy for the store.”
Wells Fargo Securities analyst Jennifer Black said the success of flagships varies. “For some companies it hasn’t worked out so well because they have too much square footage and their inventory turns haven’t been fast enough,” Black said.
Other firms view the cost of the often tony and unprofitable stores as a something akin to a marketing expense, said Black. That could be a notion that lost some luster as the go-go days of the boom faded, though.
“Companies today are going to have to take a closer look than they did a couple of years ago at a flagship,” she said. “Shareholders are putting more demands on these companies. They want to see a return on investment.”
Not surprisingly, companies looking to trim costs with smaller stores are turning to environments that are more personal and unique for consumers. “There is a movement toward more intimate rather than overtly commercial spaces,” said Michael Gabellini of Gabellini Associates, the architecture firm that designed the New York Jil Sander flagship on 57th Street. “I’ve seen a tendency with designers to personalize and make a space more accessible and casual for clients, along with more of a sense of discreetness and increased privacy.”