US Retailers Slim Down For Bigger Sales; Bloomingdale's Is Latest

In the latest sign that retailers are taking smaller steps to reach customers, Macy's Inc. (M) is opening three more outlet stores for its high-end Bloomingdale's chain.

The Bloomingdale's outlet stores are part of a trend for high-end retailers such as Nordstrom Inc. (JWN) to open smaller sales outposts, while mainstream department stores such as Kohl's Corp. (KSS) make their own forays into smaller-format stores.

The moves by upper-end retailers are a way to reach a more-aspirational shopper who may not be able to afford the prices available at a true luxury store. And mainstream department stores are making their moves after finding that most large geographic areas have already been developed and that they can reach further into suburbia by building smaller-format stores.

"The common denominator here is retailers are being forced to rethink their parameters to reach new audiences," said Peter Brown, chairman at global management consultancy Kurt Salmon.

The new Bloomingdale's units will bring to seven the number of outlet stores that Macy's operates for its high-end chain.

Macy's spokesman Jim Sluzewski said the company sees smaller Macy's stores as a possibility, with the Bloomingdale's outlets taking precedence for now. "We are learning how the outlet store operates and how we can participate," Sluzewski said.

The Bloomingdale's outlet stores, which are set to open this autumn, will run about 24,000 square feet in size. A typical Bloomingdale's is five times that size. Like other high-end outlet stores, the Bloomingdale's store will carry a mix of clearance merchandise from larger Bloomingdale's stores and products made just for the outlets.

"Our first four outlet stores have helped us to learn this business and refine our merchandising and in-store presentation," Bloomingdale's Chief Executive Michael Gould said. "We continue to see opportunity for growth."

Other high-end retailers including Saks Inc. (SKS) and Nordstrom have been making major inroads into the outlet-store business over the past few years, with Saks now operating more outlet stores than full-line stores and Nordstrom having an ambitious roster of openings.

Mid-market department-store chain Kohl's is moving forward with more smaller-scale stores, in the 64,000-square-foot range. The retailer appears to be able to remain a "department" store despite a considerably smaller size. The retailer operates stores as large in size as 125,000 square feet.

A Kohl's spokeswoman wasn't available for comment.

Kohl's sees the smaller stores "as a growth vehicle," said Citigroup analyst Deborah Weinswig.

The smaller-format stores generate higher gross margins due to their product mix and have lower fixed costs and advertising expenses, Weinswig noted.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

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