Warehouse retailer Costco (Nasdaq: COST ) may eventually show up in a most unlikely place: your local shopping mall.
According to The Wall Street Journal, Costco is accelerating plans to insert some of its stores into malls, following a long history of mostly plopping down its locations on massive stand-alone lots.
Needless to say, its stores' large sizes will require Costco to take up mall spaces previously reserved for major department stores. These "anchor stores" include Sears Holdings (Nasdaq: SHLD ) , Macy's (NYSE: M ) , and J.C. Penney (NYSE: JCP ) , which typically draw large amounts of customers who then venture out into the rest of the mall.
You've probably noticed that department stores such as the names above no longer hold the magical mystique they once did. Competition from savvy discounters such as Wal-Mart (NYSE: WMT ) , Target (NYSE: TGT ) , and yes, Costco has rapidly deteriorated their magnetic pull with shoppers. Recent earnings from Sears and ongoing malaise from Macy's reflect this fact.
Financial troubles for these once-mighty retailers stink for their shareholders. You can count BonTon and Dillard's among the department-store stocks facing major challenges these days.
But their tough times can become big opportunities for rivals, which may be the case with this Costco move. Ailing mall operators that are losing retail tenants may beg for a big, successful company like Costco to move into vacant spaces. In their desperation, they might even cut reasonable rates on leases. Malls could also give Costco an easy way to penetrate more urbanized areas than it usually targets for expansion. One of the new Costco locations will hunker down in a former Dillard's mall space in Sarasota, Fla., for example.
This is still a pretty new concept for Costco, so don't expect a store to move into your local mall tomorrow. However, such excursions could be a big success for the warehouse retailer, and help rejuvenate some of the ailing shopping malls it will occupy, not to mention other retailers residing in those malls. Costco at the mall seems like a winning proposition -- for everyone except the department stores.