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Bloomingdale's Outlet-Store Openings a Late, but Good, Idea

Bloomingdale's will apparently get into the outlet-store business. A recent report in Women's Wear Daily (subscription required) said the Macy's (M)-owned luxury department-store chain is close to popping up off-price stores across the country.

The article, which cites an unnamed real estate executive, said Bloomingdale's is inking deals to put stores in several Simon Property Group (SPG) outlet malls across the country. The stores could fill vacant spaces in those centers ranging from 30,000 square feet to 40,000 square feet that were vacated by the many store closures of 2009. Bloomingdale's had no comment for WWD.

The move is likely a smart one, even though it's a little late, as some of Bloomingdale's main competitors are already aggressively pushing in that direction. Nordstom's (JWM) Rack concept grew by 13 stores this year and will add 12 in 2010, on top of its current 69 units. Saks Inc.'s (SKS) Off 5th expanded as well, with seven locations opening from the spring through November, bringing it to a current 54 locations, according to the company's third-quarter conference call.

Upscale department stores notice that in tough economic times, a consumer that would normally shop at full-price locations is looking for a deal. What better way to get a piece of that dollar than capitalize on off-price concepts?

Nordstrom's Rack outpaced its department stores during the third quarter, posting a same-store-sales gain of three percent, while the namesake locations dropped 4.2 percent year over year. Saks doesn't break out individual sales numbers for Off 5th, but while the retailer's overall revenues at stores open a year slid 10.1 percent in the third quarter, Off 5th's "comparable sales store sales performance continued to show relative strength."

None of this is any secret to Simon Property Group, the largest mall owner in the country. Management is aware of how well off-price and outlet concepts are doing in its centers because those tenants are performing better than regular-priced tenants, which are closing stores. In its third quarter, outlet-center occupancy came in at 97.5 percent, compared to 91.4 percent at the company's malls.

And Bloomingdale's isn't the only newcomer to this space. Apparently Lord & Taylor will open its first outlet store next month in New Jersey and is looking for more locations, according to WWD. With the recession not near any definite end and a struggling holiday season, it's probably not a bad move.