Crain’s New York Business
By Adrianne Pasquarelli
Bloomingdale’s is finally catching up to many of its upscale competitors and entering the outlet store arena. Parent company Macy’s Inc. announced Thursday that the upscale retailer will launch an outlet division this year, with four stores opening in the summer and fall. More are expected for 2011.
“Bloomingdale’s Outlet stores are an opportunity to expand our presence in new and existing markets, as well as to remove clearance from full-line Bloomingdale’s stores in a timely manner,” said Michael Gould, Bloomingdale’s chief executive, in a statement.
The first Bloomingdale’s outlets, which will each take up about 25,000 square feet, will be housed in the Bergen Town Center of Paramus, N.J., Miami’s Dolphin Mall, Potomac Mills in Woodbridge, Va., and Sawgrass Mills in Sunrise, Fla. The retailer has hired Arnold Orlick, who was chief executive of Fortunoff and a former executive at Macy’s Inc.’s predecessor Federated Department Stores Inc., to run the outlet business.
Bloomingdale’s is one of the last upscale department stores to explore the outlet business. This spring, Nordstrom will open one of its off-price Nordstrom Rack stores in Union Square, and the chain is rumored to be negotiating for a second location on Fifth Avenue. The Rack division has been far outpacing its full-line parent, with same-store sales rising 3% for the quarter ended Oct. 31, compared with the same period of 2008. The Nordstrom chain reported a 4.2% decline for the same stretch. Another competitor, Saks Inc., is also planning to expand its outlet division, Off 5th. Chief Executive Stephen Sadove said he expects to add about five additional outlet stores per year.
“That’s where you’ll see growth,” Mr. Sadove said.
According to real estate experts, a store in an outlet mall costs about 30% less to rent than a full-priced space. The construction and build-out at such centers is usually sparse and inexpensive.
“Today’s consumers are flocking to outlets,” said Steven Greenberg, president of real estate advisory firm The Greenberg Group, Inc., noting that his company is working with several leading brands about developing an outlet strategy.”
The race to outfit more upscale outlets stems from shoppers’ tight-fisted reaction to the recession. Many department stores spent 2009 drastically reducing their inventory, some by as much as 20% in order to avoid deep markdowns. But shoppers are still flocking toward value, so experts say having an off-price division is a good way for retailers to unload excess.
After 11 months of same-store sales declines, Macy’s Inc., which includes Bloomingdale’s, posted a 1% same-store sales increase for the month of December.