Source: Anthropologie

Anthropologie's Plan to Supersize Its Stores While Others Shrink Is Working

Most retailers are shrinking their stores. Anthropologie's are getting bigger.

A dozen living rooms, dining rooms, and bedrooms, meticulously arranged to broadcast whimsy, beckon to shoppers in Anthropologie's sprawling Portland store—at 18,000 square feet, more than twice the size of its other quirky shops. A hulking wood sculpture looms over a dinner table strewn with plants and a centerpiece of colorful tangled rope. In a corner, a stately wooden display case brims with hundreds of beauty products, from fragrance rollerballs to body wash. Nearby, an in-house design center's stylist offers home-decorating help.

As many retailers shrink their store space in favor of e-commerce, Anthropologie is doing the opposite. So far, it's working: The large-format stores are performing better than their little counterparts.

"Those stores continue to exceed their sales plan, and importantly, for the quarter, both stores average higher sales per square foot than the average Anthropologie store," Richard Hayne, chief executive officer of parent company Urban Outfitters Inc., said on a call with analysts on Tuesday. "I think that's extraordinary."

A dining room at Anthropologie's expanded store in Portland.
A dining room at Anthropologie's expanded store in Portland.
Source: Anthropologie

Anthropologie's stores are unique in retail, each carefully crafted and unabashedly quaint. Stepping into one is a sensory explosion, designed to transport shoppers from a drab mall or city block to a quirky cottage where they can gaze upon playful goodies—funky doorknobs, animal figurines, shaggy pillows—as if through an Instagram filter.

Yet the brand has struggled of late. Comparative store sales at Anthropologie dipped 2.5 percent for the quarter, the company reported on Tuesday. The problem has been women's apparel, which is lagging behind everything else Anthropologie sells. Hayne pinned the clothing issues on a dull fashion cycle that's boring shoppers with its lack of newness. 

In recent years, Anthropologie has boosted efforts to sell more non-clothing items, dedicating more space to furnishings and beauty products. Great—but a $5,600 Belgian linen sectional sofa takes up a whole lot of room on the shopping floor.

Enter the super-sized stores, which despite their size share the smaller versions' artisanal aura. Anthropologie CEO David McCreight said on Tuesday's call that the rise of digital has made the in-store experience increasingly important, and more experimentation is underway.

The beach room at Anthropologie's large-format store in Newport Beach, Calif.
The beach room at Anthropologie's large-format store in Newport Beach, Calif.
Source: Anthropologie

Thus far, Anthropologie only has only two expanded shops—in Portland and in Newport Beach, Calif.—but plans to expand the concept. Executives hope to open three more by the end of this year, plus four or five in 2017. 

(Pizza may play a part, too. Urban Outfitters made the odd purchase of Vetri Family restaurant group, owners of Pizzeria Vetri, late last year, sending shares down as much as 10 percent that day. Urban Outfitters will soon open a Vetri cafe next to one of the large-format Anthropologie stores, executives said.)

Hayne said three months of results from the expanded stores aren't enough to confirm a trend but acknowledged that if the larger stores keep outperforming the mainline ones, "the long-term implications for the brand would be profound."

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