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Bloomingdale's Launches Small-Store Concept: Good for Investors?

Mar 01, 2021 by Maurie Backman
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2020 was a terrible year for retailers, with dozens of well-known names filing for bankruptcy and making plans to close stores. At this point, news of any type of store launch could be considered positive for mall and shopping center operators. But a new concept from Bloomingdale's, which is owned by Macy's (NYSE: M), could end up being somewhat of a mixed bag.

Smaller stores to drive expansion

Bloomingdale's is looking to expand its footprint -- but not via the typical department store model customers already know and love. Rather, the retailer is launching a small-store concept known as Bloomie's -- the name fans of the store already commonly refer to it by.

The first Bloomie's is under construction and expected to open in fall 2021 outside of Washington, D.C. The store will comprise about 22,000 square feet.

Bloomingdale's hopes to present a more edited-down version of its department store model. Bloomie's will focus more on specially curated products and spot-on service. If the concept proves successful, additional Bloomie's stores could start popping up all over cities and suburbs that already support full-line Bloomingdale's stores. These smaller stores could also give customers more options when it comes to making returns or picking up purchases ordered online.

Interestingly, Bloomie's won't be the first pared-down Bloomingdale's format. There's already a Bloomingdale's SoHo in Manhattan, as well as a Bloomingdale's in the Glendale Galleria in Los Angeles, which are both smaller versions of the well-known department store.

Good for malls?

But while the Bloomie's line could be a boon to shopping center operators who, at this point, may be looking at vacancies as more retailers shutter, if it proves too successful, Bloomingdale's may look to expand its off-mall presence and close underperforming full-line stores. And the latter could prove to be very bad news for mall operators, given that many already count on the retailer to serve as an anchor tenant.

Macy's is already increasingly going off-mall, and it plans to shutter at least 125 stores in the near term. Those plans are not pandemic-driven -- Macy's had announced its intent to close those 125 locations before the coronavirus outbreak began. But seeing as how the pandemic has taken such a drastic toll on retailers, the last thing malls want to worry about is losing department stores in the near term.

The Millionacres bottom line

Of course, it'll be interesting to see how many customers visit pared-down Bloomie's locations versus the full-line store once its first locations open to the public. It may end up being that Bloomie's locations are used more so as a hub for the pickup and return of online purchases than those made in stores -- known as BOPIS (buy online, pick up in store).

Ultimately, only time will tell, but the takeaway is that while a small-store concept could drive Bloomingdale's in an off-mall direction going forward, that won't necessarily be the case. So mall real estate investment trust (REIT) investors certainly don't need to panic just yet.

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Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.