January 29, 2010, by Bill Hethcock, Dallas Business Journal

CHRISTMAS IN JANUARY: Christmas Tree Sops, a holiday-themed subsidiary of Bed Bath & Beyond, will open at the parent company’s superstore along the Dallas North Tollway this summer, say Steve Lieberman, left, CEO of The Retail Connection, and Peter Russell, vice president of Bed, Bath & Beyond.

Holiday-themed retailer Christmas Tree Shops is expanding into Texas, with its first store in the state taking root at a prime shopping spot in North Dallas.

Home furnishings retailer Bed Bath & Beyond, the parent company of Christmas Tree Shops, has reserved 40,000 square feet in its new Dallas North Tollway superstore for its holiday concept.

Christmas Tree will join children’s store Buy Buy Baby in the former Home Depot Expo Design Center store on the Dallas North Tollway, said Steve Lieberman, CEO of Dallas-based retail real estate firm The Retail Connection, which represents the three retailers throughout Texas and much of the Southwest.

In early 2009, Home Depot closed its Expo stores and put the 125,000-square-foot Dallas North Tollway site north of Alpha Road up for sale. Bed Bath & Beyond contracted to buy the building last year, and in June announced that Buy Buy Baby would occupy part of it as well. The sale of the property closed July 24, according to records from the Dallas Central Appraisal District, which placed a $13.65 million value on the property for tax purposes.

The addition of Christmas Tree Shops to the North Dallas location gives Bed Bath & Beyond full occupancy of the building, Lieberman said. More than a dozen retailers expressed interest in the site to Retail Connection before Bed Bath & Beyond decided to incorporate Christmas Tree into the building, he said.

“Bed Bath & Beyond was like, ‘Why are we going to let someone else come in and take this space?’” Lieberman said. “It was a natural evolution to roll Christmas Tree into the property.”

Bed Bath & Beyond has 23 of its namesake stores and two Buy Buy Baby stores in the Dallas-Fort Worth area, Lieberman said. Nationwide, the company has more than 950 Bed Bath & Beyond stores, 57 Christmas Tree Shops stores and 26 Buy Buy Baby stores.

New Jersey-based Bed Bath & Beyond Inc. acquired Christmas Tree Shops Inc. in 2003 for about $200 million. At the time, the company operated 23 stores in six northeastern sates.

Christmas Tree Shops offer more than Yule-related merchandise, said Peter Russell, vice president of real estate for the parent retailer.

The concept, which started as a small New England Christmas ornament shop, has grown into a bargain-hunter’s destination, with an ever-evolving selection of items, including household products, patio sets, candies, batteries and toys, he said.

“It’s more of a treasure hunt with opportunistic buys,” Russell said. “What might be in the store one day probably will not be in there next week. It’s a little bit of everything.”
Retailers expanding

Lieberman said Christmas Tree and Buy Buy Baby are looking for an undisclosed number of sites in Texas in 2010.

“To me, the real story is obviously Texas,” he said. “While other markets are contracting, we have retailers that are expanding.”

Russell allows that he expects Christmas Tree Shops to have locations in Houston, Austin and San Antonio by year-end, but he declined to discuss specifics about how many Texas stores might be added this year. He also declined to discuss store sales or employee numbers.

Christmas Tree Shops will open its North Dallas location this summer, Russell said. The 50,000-square-foot Bed Bath & Beyond and 32,000-square-foot Buy Buy Baby stores opened earlier this month.

“We think it’s one of the best sites in all of Texas,” Russell said, “and Texas is one of the best retail markets in the country.”

A Christmas Tree store or stores will likely succeed in Dallas, although the retailer will face stiffer competition in Texas than it does in the Northeast, where most of its stores are, said Charles Wetzel, president and chief operating officer of Buxton, a Fort Worth-based customer analytics firm.

Competitors include Wal-Mart, Target, Big Lots, Pier One, Kohl’s and Stein Mart, he said.

“I think the Dallas market is similar to other markets in that consumers are always looking for good deals, and offering those deals and having the synergy of Bed Bath & Beyond and Buy Buy Baby will bode well for Christmas Tree,” Wetzel said. “My anticipation is the store will do very well.”

‘Treasure-trove experience’

The economic downturn has provided opportunities for well-capitalized retailers to enter new markets. Real estate costs have dropped, and prime locations are available because other retailers have gone out of business, Wetzel said.

The analyst expects Christmas Tree’s sales in Dallas to start strong, taper as the novelty wears off, then settle into long-run profitability. Knowing its customer and differentiating itself from competitors will be crucial to Christmas Tree’s success, he said.

Christmas Tree relies heavily on marketing the “treasure trove experience” to attract and keep customers, Wetzel said.

“They really target the freshness and eclectiveness of their inventory,” he said. “If they target the right customer, the customer should respond kindly.”