The Beall's Curve

The Beall's Curve

Retail by Mark Gordon | Managing Editor

For Beall's, low profile doesn't mean low results. Despite its quiet approach, the company's made some bold calls, such as eliminating outlet advertising and doubling the size of its department stores.

The people behind Beall's aren't known for their flash or glitz. There aren't any nutty end-zone celebrations when they surpass quarterly sales goals. There isn't a large public relations staff blanketing the business community with each accomplishment. Its corporate headquarters is a bland '80s style building in Bradenton, a few miles from a cement plant and a multiplex movie theater.

It's enough for some to want to call Beall's boring.

But don't confuse Bealls' reserved, low-key approach with being timid or placid. In an industry with excruciatingly thin profit margins and increasingly steep competition, Beall's isn't afraid of a fight to keep its position among some of the best-regarded and most profitable retailers in the country. Among other tactics, the company is in the midst of doubling the size of each of its department stores, from 35,000 square feet to 70,000 square feet - an already profitable effort.

Just two weeks ago, J.C. Penny's and Kohl's, two of the chain's closest competitors in terms of merchandise, opened 85 stores nationwide, including a trio of Tampa-area Kohl's. And Kohl's plans to open more stores on the Gulf Coast, including some in the Sarasota market; what's more, it's experimenting with some new upscale features at its Brandon store, such as spacious try-on rooms and redesigned check-out areas.

If Beall's CEO Steve Knopik is worried, he hides it well. Knopik, promoted to the top management position in August and the first non-Beall to run the 91-year-old company, gives away little behind his poker face. "We've met the challenges pretty darn good before," he says, adding that the company's keen ability to differentiate itself - read: play up the Florida lifestyle - is its trump card.

The anti-braggart approach works to Beall's advantage in another key way: The company is so quiet about its resounding successes, some might forget it's there or how well it's performed over the last two decades.

But the numbers are difficult to forget. If Beall's didn't sell another men's polo shirt, woman's belt or Tervis Tumbler this year, it would still easily be the number one revenue generating company in the Sarasota-Bradenton area - second place Buchanan Automotive Group is hundreds of millions of dollars behind. Beall's revenues - drawn from its department stores, a much larger outlet chain and an online division - have grown about 15% per year the past five years. In 2005, it had revenues of $1.2 billion.

'Growing like mad'

In a weak moment of boasting, Knopik, 50, and executive chairman Robert Beall II, 63, point to some good decisions by top executives as one reason for the growth, such as the late '90s move to double the square-footage of each store, and another call to forgo any advertising for its outlet stores. The company also looked closely at market research and decided to shift away from being known as a store selling only senior citizen-centric wares. "We didn't want to abandon the senior citizen," Knopik says. "We just wanted to broaden our appeal."

The origination of the recent growth in the department store side of Beall's can be traced to a conversation eight years ago between cousins and grandsons of the company founder, Robert M. Beall, Sr. Beall II, then CEO, challenged Conrad Szymannski, then a 20-year veteran of various company management positions, to grow the department store's stagnant return rate. "The outlets were growing like mad in the mid '90s," Knopik says, "and the department stores had hit a plateau."

Szymanski's first move was to double the size of all 75 existing Beall's department stores. The move was made, Szymanski says, to stay competitive with other retail chains trying to score in Florida and by finding "a size range equal to what customers could find in a mall." Going bigger was the only way to sell merchandise for the new, younger customers the company coveted without sacrificing space for their bread-and-butter senior customers.

The move has been profitable almost from the beginning. Szymanski, 54, says stores that have been converted to the 70,000-square-foot model have shown anywhere from 50% to 80% in increased revenues.

The conversions have three versions. The most expensive is to build a brand new store, a process that can cost at least $4 million, not including land, parking and other costs. A second way is to renovate an existing store, which involves construction and demolition and could cost as much as $3 million per store, Szymanski says. A third, simpler and cheaper way, is to find a shuttered Wal-Mart, Kmart or Home Depot and have at it. That can keep costs to about $2 million; the initial Beall's conversion was a former Wal-Mart in Spring Hill.

The replacement options have sometimes caused Beall's to go bigger than it originally planned. For example, three years ago, the company bought five Kmarts from an auction run by the then-bankrupt company. The stores, in Englewood, Oldsmar, Boynton Beach, Ormond Beach and Pensacola, are 100,000 square feet.

But getting bigger is OK with Szymanski. When the plan first started in 1999, the challenge was filling up all the stores with merchandise. Now, he says, with 50 of 75 stores converted, the challenge is finding space for all the merchandise.

The conversion efforts will keep going until just about every store is double its original size. Szymanski has no timetable for when the project will be done, but he estimates that overall square-footage will rise about 10% a year. And whether building new or taking over another's big-box, the Beall's formula remains the same: Find underserved areas that are not oversaturated with retailers and have new home construction nearby.

Design time

Other factors have contributed to Beall's upward growth line. Its Web site has been a big boost. Executives declined to say what percentage of total revenue e-commerce represents, but Szymanski says the division has had annual triple digit growth on its own for almost a decade. A new in-house design studio has been key, too.

Just like the department stores, the outlet division has adapted to the wide-ranging competition. Stores in what's known as the off-price market include TJ Maxx and Ross. Beall's opened its first outlet store in 1987; it began opening outlet stores outside of Florida in 1992.

The most significant move to boost revenues for the outlets, Knopik says, was dropping advertising. Instead, the marketing of the 463 outlet stores across Florida, Georgia and Arizona would be done by word-of-mouth from customers.

Knopik says Beall's had spent 2% to 3% of sales on advertising, and the bottom line impact of cutting it out has been "phenomenal." He declined to say how much the company had spent on ads.

Two other sources of revenue have been recent additions. The design studio opened about three years ago and now has 12 employees working out of the Bradenton headquarters. The team works with buyers and other Beall's executives to come up with as much as 20 product lines, from T-shirts to teacups.

Beall's is one of two major retailers in Florida to have its own design studio, joining Fort Myers-based women's clothing chain Chico's FAS. Industry-wide, Beall's faces competition in this area, too. Menomonee Falls, Wisc.-based Kohl's recently announced plans to open a 23,000 square-foot design studio in New York City's garment district. The company plans to employ up to 30 designers for the studio.

The company's internet business also faces massive competition. It technically started ten years ago, Szymanski says, originally has an in-store effort to make sure each customer could conveniently order products they couldn't find in the stores. The goal was to eliminate the problem of customers leaving if they couldn't find their size. Since then, the e-commerce unit has grown to 20 employees, including call-center representatives.

From the beginning

Internet orders and outlet stores as far away as Arizona were not exactly what Robert M. Beall Sr. had in mind in 1915, when, at 22 years old, he opened a dry goods store in Bradenton. No item cost more than a buck, hence the store was called the Dollar Limit. The business - and prices - grew over the next 25 years.

Beall's son E.R. Beall began working for the business in 1940 and by 1946, the company was named Beall's Department Store. In 1970, Beall II joined the company and the three Bealls worked at the stores for the next nine years, until the eldest Beall died in 1979. When Beall II was named president in 1980, the company had $38 million in annual sales.

Knopik joined the company in 1984. A Sarasota native, Knopik came to Beall's with no experience in retail management, but instead a background in accounting. Working with KPMG in Tampa, Knopik had worked on several retail accounts, though. When Knopik joined Beall's as CFO in 1984, the company was approaching $100 million in annual revenues, but its corporate office was still a back room at the Manatee Avenue store in Bradenton.

Soon after Knopik arrived, the company moved into its current headquarters. It then began answering new challenges. For example, it opened stores in new locations, including ones in urban areas for the first time.

Other challenges remain. Crossing the billion-dollar revenue mark in July, 2005 and then the $1.2 billion mark this past July might be a major business accomplishment on paper, but Knopik sees problems in it, too. A company that big needs to make sure it has the technology, infrastructure and management controls to make sure costly errors are infrequent. "As you get bigger," Knopik says, "the impact of breakdowns is very significant."

Combating those breakdowns takes money. Recently, Beall's has invested in its design studio, Web site and a new software system for the entire company. Knopik says how and where to invest money is a constant struggle, not unlike what small businesses face. "In retail," he says, "people have a tendency to invest everything in the stores, because that's where the cash registers are."

In the next few years, Beall's executives say they expect the company to continue growing at about 15% a year. The move to double the department stores will continue, as will efforts to find new markets for the outlet stores. The company is also considering opening its first distribution center outside of Florida, Knopik says.

Finally, executives realize that for Beall's to continue its consistently stellar growth, it might have to look outside of Florida for new department store locations. And that means going past its slogan: Live the Florida Lifestyle.

It also puts Beall's, despite its billion dollar-plus size, in the category of hundreds of other small and medium-sized businesses trying to grow without losing its core identity. "At some point in time that becomes a tough decision," says Szymanski about how and when to grow the department stores outside of the Sunshine State, "but there's at least another five years of growth in Florida."

Beall's is consistently ranked first among Sarasota-Manatee companies in the Review's Gulf Coast 250 ranking of top companies. Here's how it looked for the 2005 issue:

($ in millions)

Company 2003 Revenue 2004 Revenue % change full-time employees year founded top executive

Beall's Inc. $851 $980 15% 9,300 1915 Steve Knopik, CEO

Vernon Buchanan, Buchanan Founder,

Automotive Group $591 $750 27% 1,300 1992 Chairman, CEO

Robert Geyer,

Sunset president and

Automotive Group* NA $630 NA 639 1979 co-owner

Erik Vonk, Chairman

Gevity HR $425.8 $585.4 37% 1,006 1984 and CEO

G.W. Jacobs,

FCCI Insurance Group $451 $490 9% 530 1959 president and CEO

*Estimate

Source: Companies.

Through the years

The original Beall's, top left, is pictured on the right hand side of Main Street in Downtown Bradenton, in the ground floor of what was the St. James Hotel. The store was called the Dollar Limit when it opened in 1915, as the founder, Robert M. Beall Sr., didn't sell items costing more than $1.

By 1966, the elder Beall's son, E.R. Beall, was working for company and it had three stores, including one in Venice, pictured here (middle).

By 2000, the company had 450 outlet stores and more than 70 department stores, including one in New Tampa (bottom left).

GLORY DAYS

Steve Knopik could brag about being the first person without Beall in his last name to be promoted to CEO of the Bradenton-based retailer.

Instead, he chooses to boast about high school football. He makes a point to mention to a recent visitor at Beall's corporate office that he was on the 1972 Cardinal Mooney (Sarasota) High School team that won the state championship. The Sarasota native played wide receiver and defensive back.

But Knopik, having recently turned 50, isn't just living out his glory days on the gridiron. His new role with Beall's is enough to keep him in the present. He oversees a $1.2 billion, 9,300-employee enterprise, making it the biggest company, in terms of sales and employees, in Manatee County.

Knopik graduated from the University of Florida and worked as an accountant in Tampa for seven years before joining Beall's in 1984. He worked on retail accounts, as well as with savings and loan enterprises.

Bob Beall II, who retired as CEO in August and now serves as executive chairman of the company, says promoting Knopik has to do with his accomplishments over the last 22 years. What's more, the succession planning was done over several years, following the Beall's MO of doing things deliberately and thoughtfully. "He succeeded at everything we asked him to do," says Beall. "He was our first choice."

Not that there weren't Bealls to choose from. Beall II's cousin and fellow grandson of the founder, Conrad Szymanski, is currently president of the department store division. Other Bealls currently working for the company include Beall II's sister, Beverly Beall-Reichmann and Beall II's son Matt Beall, 28, who currently works in a company training program.

-Mark Gordon

Hitting its target

Over the last 20 years, executives and managers at Beall's have spent considerable time trying to change their image and brand identity from one of selling for senior citizens (fire truck red golf pants, anyone?) to one that can sell to people of all ages and sizes. "The senior citizen was a vital part of our business, but we were weak in other areas," is how past CEO and current executive chairman Bob Beall II puts it.

It turns out Beall's isn't the only major retailer that needed to redefine its main identity. Minneapolis-based Target Corp. also has put a lot of money and effort in attempting to redefine how people think of the mass retailer. Vice president John Remington explained the company's brand strategy recently at the Sarasota Design Summit, hosted by the Ringling School of Art and Design.

A new brand image was essential, Target executives realized a decade or so ago, because the company was falling far behind rival Wal-Mart in efforts to attract customers looking for all sorts of low-cost items, from Cheerios to clock radios. The answer, Remington says, was in pushing two things: The company's commitment to product design and its red bull's eye.

Remington says the company's research showed the red bull's eye was the third most recognized company logo, behind Nike's swoosh and Apple's apple. "Our brand shows such strength, we don't even have to put products in our ads for people to know it's Target," says Remington.

The design plug was a more extensive process. In 1998, the company began partnering with Michael Graves, an architect and product designer who sells $300 teapots and $200 cheese trays. Graves thought there was a way to bring his quirky yet practical designs to the masses in an economical way. Target executives agreed, beginning its commitment to design and a way to separate itself from Wal-Mart. (Wal-Mart still dwarfs Target in annual revenues).

Since Graves, several other trendy designers have joined up with Target, including Isaac Mizrahi for clothing, Philippe Starck for home, office and kitchen gadgets and most recently, Thomas O'Brien for furniture. All the designers take the Graves approach of making high-quality design affordable.

Remington and Target take both the lofty and practical approach, too, when it comes to design and the company's brand. "We believe deeply that design has the power to transform minds," he says. "And our business."

-Mark Gordon