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Will Thalia heat up Kmart sales?
Retailer courts Hispanics with sexy Latin pop singer's exclusive clothing and home decor line.
August 4, 2003: 2:58 PM EDT
By Parija Bhatnagar, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Kmart is looking for some Latin spice in its fight to move back into prosperity, bringing on products tied to the sexy singer Thalia.

The Thalia Sodi brand of clothing, accessories and home decor, due this week, is Kmart's first product launch since the discount retailer emerged from bankruptcy earlier this year. And industry watchers say the chain needs this push to work in its struggle against Wal-Mart, Target and other discounters. In April, the Troy, Mich.-based company posted a first-quarter loss of $862 million, down from a whopping loss of $1.44 billion a year earlier.

It's been a year since Kmart introduced a new brand -- the Joe Boxer apparel line last August. Analysts say they're waiting until the third quarter for sales numbers before assessing whether it's been a success.

Retail consultant Howard Davidowitz said, "Just putting a famous name on a brand doesn't mean it will boost sales. Customers aren't stupid. Kmart stores are a wreck and they offer the least appetizing presentation, lighting, floorsets and customer service. Kmart needs to fix the basic fundamental problems first to keep customers coming."

"If Kmart decides apparel is critical, and it can make it a success, it needs to do what Target has done: Present great designs that are unique, well priced and well presented. Otherwise, this will fall flat on its face," Davidowitz added.

Trying Thalia

Named after the former Mexican soap opera actress and latest Latin sensation to hit the U.S. pop market, the exclusive Thalia collection will be launched in about 800 of Kmart's 1,500 stores across the United States.

Thalia wearing a dress from her upcoming Thalia Sodi collection for Kmart. (Courtesy: Kmart)  
Thalia wearing a dress from her upcoming Thalia Sodi collection for Kmart. (Courtesy: Kmart)

"We're very excited about the launch," Kmart (KMART: Research, Estimates) spokeswoman Abigail Jacobs said.

Jacobs wouldn't discuss the details of the contract, such as the duration of the licensing deal or how much money Kmart hopes to make from the brand. But she did say it's designed primarily to cater to the retailer's growing Hispanic customer base.

Smart move, industry analysts say, particularly since Hispanics are the nation's largest and fastest-growing minority group, with close to $600 billion in buying power, according to the Selig Center for Economic Growth.

"The basic fact is that there are a lot of Hispanics out there today, about 40 million in the United States. So whoever gains their loyalty first gets a big share of the market, " said Cesar Melgoza, president of Miami-based Geoscape International, a firm that specializes in providing multicultural market intelligence.

Wal-Mart (WMT: Research, Estimates) and Target (TGT: Research, Estimates), and even some department store chains such as Sears (S: Research, Estimates), are increasingly aware of the size of the urban-ethnic market, Melgoza said, and they're racing each other to see who comes out on top.

Already in town

But Kmart may have a distinct advantage over its rivals, according to Ulysses Yanas, analyst with New York-based Buckman Buckman & Reid.

"Kmart has about 60 percent of its stores in urban cities, much more than Wal-Mart and Target," Yanas said. "The company is already catering to the Hispanic community in a big way."

In fact, the Thalia launch is primarily being targeted to areas with a sizeable Hispanic community, given that Hispanic customers account for about 17 percent of Kmart's total sales.

If there's one bright spot for Kmart, it's reflected in the first-quarter gross margin number, which nearly doubled to $1.42 billion from $745 million in the year-earlier quarter.

The gross margin number was the best since 1999, Yanas said. "That means sales strength is coming from softline products with higher margins, like apparel and home products, including the Martha Stewart products line."

Now, with the addition of Thalia to its already billion-dollar Stewart brand and its Joe Boxer clothing and accessories collection, Yanas thinks Kmart is doing the right thing by bulking up its in-house brand names.

The Thalia line, which features an assortment of apparel, shoes, hosiery and lingerie for girls and women, comes a month after the release of her self-titled first English-language record.

The singer, married to former Sony chief (and Mariah Carey's ex-husband) Tommy Mottola, will work with Kmart's designers to develop the collection, according to her publicist Kim Jakwerth.

But whether or not Kmart customers say "Baby, I'm in love," after seeing her stuff is anyone's guess, even though some reports say Kmart will use the second single from her record in its upcoming ads.  Top of page

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