Slow-going for Urban Outfitters’ Garden Center Brand

I recently had the opportunity to visit Terrain at Styers, the up-scale garden center plus operated by mall retailer Urban Outfitter, Inc.  It wasn’t a planned visit, but when I drove by the site, I had to stop.

Terrain at Styers is a very engaging place.  It offers a nice range of nursery products, outdoor furniture and  decorative accessories in addition to offering landscape design and installation services.   It has a delightful café and bar (with a dirt floor!). They also have a “farm stand” featuring local veggies, fruit and baked goods. Their own landscaping includes a variety of native plants that some people might mistake for weeds.

It is a great place – the kind of place I could turn into a habit if I lived in Philly.

However …  I just can’t get my arms around the idea of it being the launch of a chain of up-scale garden centers.

Urban Outfitters touts that all of their stores are designed independently.  That would really have to be the case for Terrain since a garden center has to have a local focus.

A year and a half has passed since this deal was announced.  There is still just one Terrain store.  Of course, the gloomy economy of the past year has delayed many companies’  expansion plans.   I took a peek at the investor relations material from Urban Outfitters.  Earlier, they had indicated they planned to open one additional Terrain unit in fiscal 2010.  They now predict that there will be just one Terrain store in fiscal 2010, although their most recent 10-Q filed with the Securities and Exchange Commission includes the statements “We plan to open additional [Terrain] stores over the next several years.” and “During fiscal 2010, we may enter into one or more acquisitions related to the expansion of the Terrain brand.”  They still indicate a total potential of 50 stores.  It has never been completely clear as to whether they envisioned acquiring upscale garden centers (similar to Styers in Philadelphia) or building them from the ground up.

Terrain reported revenues of $5.7 million for the year ended January 31, 2009 and $1.3 million for the quarter ended April 30.  For the second quarter ended July 31, they reported sales of $2.3 million, down from $2.6 million in 2009.  Given the economic environment and Terrain’s state of development, the revenue drop of 11% is hardly surprising.  Nearly $6 million in sales from one garden center  location in its first year is not bad at all.  Terrain, however, continues  to represent  well under one percent of Urban Outfitters’ sales.

It is possible Urban Outfitters may make a move and jumpstart the Terrain brand; however, I would expect them to be quite cautious.  As a result, it is hard to envision them building Terrain into a significant business unit anytime soon.  Given the high short-term expectations of investors, it would be a lot easier to see them abandoning the effort, but who knows?

I recently read a blog post that asked the question “Did Terrain Kill Smith & Hawken?”   I hardly think so.  However, The Scotts Miracle-Gro Company’s poor results with Smith & Hawken have to give Urban Outfitters something to think about as they consider the expansion of the Terrain brand and give them plenty of reason to be cautious.

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