While most mall-focused department store chains are retreating in the United States, Nordstrom (NYSE:JWN) isn't quite done building new full-line stores. Most notably, the main portion of the upscale retailer's Manhattan flagship store is set to open in late October, building on the spring 2018 opening of a (much smaller) men's store across the street.
Nordstrom first announced its plan to open a flagship store in New York City way back in 2012, and management has declared that the Manhattan location could become the company's best store. Thus, it's understandable (and appropriate) that the pending flagship opening has garnered lots of investor attention. However, Nordstrom will also open a second new store this October -- in Norwalk, Connecticut -- allowing the retailer to tap into another big opportunity.
The Norwalk store has an opening date
In 2015, Nordstrom announced that it would open a full-line store in Norwalk as part of a new upscale mall that was being developed there. More than four years later, Brookfield Property is finally close to completing that mall, now known as the SoNo Collection.
Earlier this week, Nordstrom revealed that the new store will open on Friday, Oct. 11, along with most of the other mall tenants. It will be the company's second full-line location in Connecticut, joining a store in the Hartford suburbs. The store will have 140,000 square feet of space and will feature Nordstrom's newest design concepts.
Filling an important gap
Nordstrom's new store is located in southern Fairfield County, near the heart of Connecticut's wealthy "Gold Coast" region. Indeed, Fairfield County routinely ranks as one of the wealthiest counties in the country. That makes it all the more surprising that the county doesn't have any true high-end malls.
Today, Hudson's Bay (NASDAQOTH:HBAYF) is the only upscale department store operator with full-line stores in Fairfield County. Hudson's Bay's Saks Fifth Avenue luxury chain has three small-format stores in downtown Greenwich. Put together, they are just a quarter of the size of Nordstrom's new Norwalk store. Meanwhile, Lord & Taylor -- a struggling upper-midrange chain that Hudson's Bay recently put on the auction block -- has two full-size stores in the county.
Other than Hudson's Bay's offerings, the nearest upscale department stores for Fairfield County residents -- including the nearest Nordstrom -- are in White Plains, New York, about 25 miles from Norwalk.
As a result, there is probably a lot of pent-up demand for Nordstrom (and retailers like it) in Fairfield County. That alone should make the Norwalk store successful. Moreover, Nordstrom executives have repeatedly noted that digital sales in a region tend to rise when a full-line store opens nearby. The store's presence makes returns easy; enables in-store pickup, alterations, and other services; and raises local residents' engagement with the Nordstrom brand. That means the Norwalk store is also likely to boost Nordstrom's digital sales in Fairfield County.
Nordstrom still needs to optimize its store count
In the greater New York metro area, Nordstrom has clearly needed a bigger store footprint. Even after opening the Manhattan flagship store and the Norwalk store this fall, the retailer will have just eight full-line stores to serve the region's nearly 24 million residents.
By contrast, Nordstrom has far more full-line stores per capita in many other markets, especially on the West Coast. Some of those locations are in malls that are losing their luster and no longer produce adequate sales or profit to justify continued reinvestment.
Like its peers in the department store space, Nordstrom will need to trim its store count over time to address these issues. Nevertheless, Nordstrom's decision to open a new full-line store in Norwalk as well as its Manhattan flagship location this fall will likely pay off, contributing to solid sales and earnings growth over the next couple of years.