<SPECIAL FEATURE>
June 23, 1999

Crate & Barrel
725 Landwehr Rd.
Northbrook, IL 60062
Phone: 847-272-2888
www.crateandbarrel.com

by Chris Rugaber (TMF RFK)

Ownership: Otto Versand, Gordon and Carole Segal
Competition: Williams-Sonoma, Pottery Barn, Pier 1 Imports
A Future IPO? Company says no
Where can you fashionably furnish your home for a remarkably reasonable price? Crate and Barrel is the first stop for many housewares and home furnishings shoppers around the country. The trendsetting retailer, incorporated as Euromarket Designs, Inc., sells "upmarket" housewares and home furnishings and is a popular store for gift registration. Crate & Barrel shares this market with Williams-Sonoma (NYSE: WSM), Pottery Barn, and Pier 1 Imports (NYSE: PIR).

Crate & Barrel pioneered what it calls the "vignette" display, where a variety of its products are grouped together to create a unified look. Widely copied today, this means that instead of putting all the coffee cups in one area, all the plates in another, and all the wine glasses or tableware in a third, different combinations of these products are displayed together. This increases sales by encouraging customers to consider all these different products as part of a set. As a result, if you just need a few coffee cups, you can't simply go to Crate & Barrel's "coffee cups" section, buy a few, and then leave. You'll need to look at many different displays, with a variety of products, before you can buy what you need -- and, of course, you may end up getting a few things you don't need. At least, that's the idea.

Given the company's compound annual revenue growth of 18% over the past 10 years, the approach does seem to be working. Crate & Barrel broke the $100 million sales mark in 1989, and the company estimates 1999 sales will be $530 million.

Crate & Barrel was founded in Chicago in 1962 by Gordon and Carole Segal, who targeted their first store to "couples like us with good taste and no money," according to Hoover's. Gordon Segal is now CEO of the company, and while Carole left in 1965, their son, Chris Segal, is currently the director of electronic commerce, overseeing the company's new website, among other things.

The company is not solely a family affair. In the spring of 1998, the world's largest privately held mail-order firm, Otto Versand, bought a majority stake in Crate & Barrel. Gordon Segal still has operating control. According to the Wall Street Journal, Segal considered Otto Versand's deep pockets -- its 1998 sales were estimated at about $16 billion -- necessary to help speed up Crate & Barrel's expansion. The company currently operates 80 stores in about 16 markets, and wants to double the number of new stores it adds each year from 4 to 5 to around 10.

This faster expansion should certainly maintain, if not increase, Crate & Barrel's revenue growth. Thanks to the company's methodical progress, it still has plenty of room to grow. The Boston area has 11 Crate & Barrel stores, while Chicago supports 12, and the Washington, DC area has 6. Meanwhile, plenty of large cities, such as Los Angeles, have only one store, and many have none. There's little reason that most cities couldn't support the number of Crate & Barrel outlets that Boston or Chicago do. Click here for store listings.

Given Crate & Barrel's skills in store design and merchandising, its consistent long-term growth, and its rapid expansion, it would be great to see the company go public. Unfortunately, there seem to be no plans for that. According to Fortune Investor, Gordon Segal has said, "I've talked to too many people who are public who say that if you don't have to do it -- don't!" Given the company's alliance with Otto Versand, it probably doesn't have to. According to the company's headquarters, Crate & Barrel is "definitely privately held, and will stay that way." As a result, it's unlikely that stock certificates with the distinctive Crate & Barrel logo will appear anytime soon.

Next -- Domino's Pizza

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