Why Selena Gomez May Not Be Kmart's Next Cash Cow

Last Updated Apr 1, 2010 10:45 AM EDT

Selena Gomez strikes a poseShe can sing, she can act, and she's got irresistible appeal, but can Disney Channel star Selena Gomez -- she's on the Wizards of Waverly Place comedy series -- become the next teenage design sensation? Kmart's betting she can. The discount retailer, a wholly-owned subsidiary of Sears Holdings (SHLD), is projecting Gomez apparel and accessories will ring in $100 million in sales the first year. I'm skeptical.

Certainly there are reasons to think a Gomez collection for juniors is a sure thing.

One, she's following in the footsteps of that other Disney sensation Miley Cyrus. Like the current Miley Cyrus Max Azria line for Walmart (WMT), Gomez (partnering with her master licensee Adjmi Cynosure Holdings) will be the face on the label Dream Out Loud, a trendy assortment of leggings, minis, sweaters, t-shirts, and other accessories. The items are budget-friendly -- all priced south of $25. And the timing is optimum: the launch will hit stores in time for back-to-school shopping.

Two, Kmart's typically done well with celebrity endorsements, most notably with the (seemingly) ageless actress Jaclyn Smith whose angelic smile encouraged customers to purchase everything from skirts to sheets for 25 years.

Three, Gomez's Mexican heritage coupled with her hometown roots in Texas should appeal to Kmart's historically sizeable Hispanic customer base.

That's all fine, but I still think Kmart needs to be wary of putting all its eggs in Gomez's basket.

One, its plan is awfully ambitious. Rather than experiment with a small capsule collection among existing proprietary offerings, John Goodman, executive vice president of home and apparel for Sears Holdings, told WWD that the entire juniors department would get a makeover. This move will kill the Piper & Blue line and reposition Route 66 in the women's section, placing Dream Out Loud squarely in center stage.

Two, copying Walmart may not be such a good idea. A recent trip to a local outlet revealed racks stuffed with Miley merchandise at deep discounts. One style of skinny jeans marked down to $3 still filled a chunk of the rounder, indicating the items are not as hot as the retailer thought. Indeed, a recent survey of teenagers' shopping preferences by the consulting firm Kurt Salmon Associates found that Walmart trailed behind Target (TGT) and specialty shops such as American Eagle (AE) and Forever 21.

Three, though Kmart was largely responsible for boosting Sears' profits to their highest level in three years, analysts say a "more aggressive Walmart in 2010 could ultimately derail Kmart's trends." Walmart's already getting pushy. The company's added 34 million net square feet of selling space this year, with international contributing more than half of that growth. And it's also snagged an exclusive deal with DreamWorks Animation SKG (DWA) for toys based on the 3-D kid flick How to Train Your Dragon.

Finally, it's uncertain how much of an impact Gomez's turn in the upcoming film Ramona and Beezus will have on sales (she plays big sister Beezus). After all, Gomez doesn't even get top billing for the movie which bears the tagline, "A Little Sister Goes a Long Way."

Image by Flickr user Ammy.Lou CC 2.0