In April, Hilo Hattie closed its second-largest store in the chain, a 23,000-square-foot mall anchor position in Tempe, Ariz., a year after eliminating a store in Nashville, Tenn.

The cuts leave Hilo Hattie with three Mainland locations, but the company said it better understands its demographic needs outside Hawai'i and remains interested in opening additional Mainland stores.

Hilo Hattie's Mainland expansion experience highlights the risks associated with a strategy embraced by several kama'aina retailers such as Crazy Shirts, ABC Stores, Honolua Surf Co., Cinnamon Girl, Endangered Species and others.

Paul deVille, Hilo Hattie president and chief executive officer, said the Mainland pullback was started after he and a new management team took over three years ago and entered lengthy negotiations with malls to terminate leases at the underperforming stores.

Various reasons, including cold-weather seasons and customer mix, contributed to lower-than-expected sales.

"The demographic was wrong," deVille said. "For us it was a must-fix (situation)."

Hilo Hattie's Mainland expansion started in Orange, Calif., where the company opened a 20,000-square-foot store at The Block at Orange mall in 1998. The store, which is two-thirds as big as the company's flagship Iwilei store, was a hit.

Starting in 2000, five more Mainland mall stores followed: Nashville, Tenn.; Tempe, Ariz.; Miami; Orlando, Fla.; and Las Vegas.

The strategy was part of a plan to help ensure strong sales during times of flat tourism in Hawai'i, where Hilo Hattie has nine stores.

Led by then-chief executive Chris Resich, the Mainland expansion helped Hilo Hattie more than double annual sales from roughly $30 million to $70 million in five years through 2000.

But deVille, who succeeded Resich in April 2001, said sales were disappointing at several Mainland stores.

Cold weather in Nashville at Opry Mills and in Tempe at Arizona Mills put a chill on sales of aloha shirts and other items. The two giant Mills Corp. malls, which mix entertainment and specialty retail with factory outlet stores, also provided an awkward fit, deVille said.

"We didn't see our customer there," he said. "We don't mark up to mark down, or discount the heck out of our merchandise. To be successful we have to have a visitor destination, warm climates year-round and lots of visitor traffic. When we have these ... we have successful operations."

In Miami at the Dolphin Mall, which is not a Mills center but is a value shopping/entertainment complex, Hilo Hattie ran into similar difficulties drawing the right customers, deVille said.

A fourth Mainland store, at Festival Bay center in Orlando, was reduced by deVille's team from a planned 25,000 square feet to 6,000 square feet before opening last year, and does fine at the smaller size.

DeVille said Hilo Hattie stores in California and in Las Vegas at the Aladdin hotel's Desert Passage shops do well because of high visitor traffic and resident shoppers embracing elements of a more tropical lifestyle.

The most popular Hilo Hattie items sold on the Mainland are aloha shirts, home furnishings and food items, which are also popular with large numbers of Hawai'i expatriates, deVille said.

DeVille said the company is putting a focus on looking for additional locations limited to Southern California and Las Vegas, as well as places in Hawai'i such as Waikiki, Waikoloa on the Big Island and Po'ipu on Kaua'i.

Local retail consultant Stephany Sofos said the refocusing closer to home by Hilo Hattie is a smart move, because capitalizing on the popularity of the aloha shirt and tropical lifestyle goods is often more difficult for a relatively small Hawai'i company facing bigger competitors such as Tommy Bahama, Macy's and others more recognized on the Mainland.

"It's a tough problem," she said. "In a big picture you have to go where your primary market is, and that's Hawai'i and the West Coast."