One local retailer's misfortune has turned out to be another's gain.

Woodward & Lothrop announced yesterday it will open a $3.5 million home furnishings specialty store in the 50,000-square-foot space in Fairfax's Fair Oaks Mall recently vacated by a troubled Garfinckel's.

The longtime Washington retailer will eliminate the home furnishings department at its 160,000-square-foot anchor store in the mall, substantially expand its women's and men's apparel departments there and offer a wider range of home products at the new store.

"We think the '90s will be an era of home and hearth," said Arnold H. Aronson, chairman and chief executive officer. "We were beginning to be crowded at our existing store and consider this an opportunistic situation for us to improve in an area we consider a major asset."

Aronson said the expansion will bolster Woodies's traditionally strong home furnishings niche in the face of incursions here by national department store chains -- such as Macy's and Nordstrom -- many of which do not focus on the product area.

Woodies had already announced similar plans to open a free-standing furniture store next year in Bethesda up Wisconsin Avenue from its full-line branch in Chevy Chase.

Garfinckel's left Fair Oaks in March after its sales performance there lagged and the Michigan-based Taubman Investment Co., the national mall developer that co-owns the 10-year-old, 210-store mall in Fairfax, indicated it wanted another tenant when Garfinckel's lease expired.

Woodward & Lothrop is controlled by Taubman, but Aronson said that made no difference in his store getting the space in the mall, which he said has been one of the chain's more successful locations.