Crate and Barrel's CB2 Chain Launches in Manhattan

While the U.S. housing slowdown is crimping sales at numerous home furnishings retailers, it isn't stopping Crate and Barrel from forging ahead with plans to expand its offshoot CB2 brand.

Crate and Barrel opens its first New York-based CB2 store Tuesday. It marks the third CB2 store, and is the retailer's first CB2 store outside of Chicago.

One reason Crate and Barrel can expand a new store concept while others are pulling back is because it is a private company that can take years to tweak a concept, said Crate and Barrel CEO Gordon Segal in an interview at the new CB2 store.

"We're not being pushed to grow too fast" by Wall Street analysts, he said. "We grow carefully. We grow deliberately. ... We're not rushing to build a quick success story."

Crate and Barrel opened its first CB2 store in 2000 in Chicago, and originally thought it would appeal to young shoppers looking to decorate their first apartments.

"We wanted to have a store for 22-year-olds who were getting married. Then we realized no one 22 is getting married. They're all 27 and 28," he said.

The first store also stocked too many smaller, "clever" home decor items, he added. "There wasn't enough sales volume generated from all these fun, small items."

The retailer retooled the concept, adding more furniture to appeal to shoppers in their 30s, 40s and 50s who were coming to the store in search of stylish, contemporary items at affordable prices.

CB2 now sells modern furniture, like sleek sofas and storage systems, designed for smaller spaces like apartments and lofts. It also offers an array of funky home decor goods
such as orange and brown striped rugs, paper and wire flowers, and decorative Buddha heads.

It also jump-started sales by launching a Web site in 2004 and a catalog in January of 2006, he said.

Now Segal said the retailer expects to open a CB2 in San Francisco early next year and is scouting locations for new CB2 stores Washington DC, Los Angeles, Boston and Miami.

Navigating the Housing Market Slowdown

Numerous home furnishing retailers have struggled this year as consumers have shied away from purchasing big-ticket items like furniture in the face of a deteriorating housing market
and ensuing credit crunch.

Segal, who founded Crate and Barrel with his wife in 1962, said he has managed the business through numerous downturns in the past 45 years.

At the start of this year, Segal said the retailer planned for modest growth in furniture sales, expecting a tough economy, but it expected "more aggressive" growth in its tabletop and housewares business.

Instead, it has been the opposite, he said, with furniture sales remaining strong and sales of cheaper items flagging.

He said it appears that consumers are still willing to spend, but they are feeling the squeeze from higher gasoline prices and are consolidating their shopping trips.

"I think they think twice before they travel now," he said. But he added, "When they do come, they're spending more."

Crate and Barrel, which operates roughly 160 stores across the United States, now has its sights on international expansion.

He said the retailer expects to open both Crate and Barrel and CB2 stores in Canada, starting next year.

© 2009 CNBC.com