NEW YORK — Lord & Taylor has a future on Fifth Avenue after all.
It’s looking more and more likely that the L&T flagship is staying put and that the retailer’s new owners are well into formulating a vision for downsizing and renovating the huge site.
“We are working hard at analyzing all different alternatives. It’s quite likely it gets reduced in size and quite likely office tenants are very viable in the building above Lord & Taylor,” said Richard Baker, the chain’s new chairman.
Baker is also vice chairman of National Realty and Development Corp. and president of NRDC Equity Partners LLC, which purchased L&T from Federated Department Stores earlier this year for $1.1 billion. Baker’s thumbs-up on L&T came during a panel discussion at the International Council of Shopping Centers conference Monday at the Hilton here.
While he stopped short of absolutely guaranteeing L&T’s survival on Fifth Avenue and said he continues to examine options, he reiterated to WWD his positive message on the flagship’s future, saying, “It’s very likely we will downsize the L&T store on Fifth Avenue.”
And Baker has a good idea of just how big the reinvented flagship should be: 250,000 to 300,000 square feet, he said. That would give the reconfigured store five or six selling levels, considering each floor plate is 50,000 square feet. The flagship currently has 650,000 square feet and 11 floors, including executive offices, and is considered very overspaced for the amount of volume it generates — roughly $140 million a year. The site is worth an estimated $300 million to $400 million.
According to retail experts, 250,000 to 300,000 square feet would be enough space to include all categories currently sold at the store, and the flagship would not sacrifice that much in sales, considering a lot of its volume is generated through the main and second floors.
Another department store retailer said maintaining a flagship presence in New York for L&T is important for building relations with vendors and bringing in new resources that could be distributed to other of the retailer’s locations.
According to sources, NRDC is interested in pursuing an acquisition of Saks Fifth Avenue, which is not up for sale, but could be later next year. If NRDC ultimately bought Saks, it would be better for NRDC to hang onto the L&T flagship, which is not considered a direct competitor to Saks, rather than give it up to another, pricier retailer that would be competitive. Nordstrom, for example, is said to have checked out the L&T flagship and is eager to enter Manhattan.
This story first appeared in the December 5, 2006 issue of WWD. Subscribe Today.
For decades, not much money was spent to update L&T stores, but Baker said he’s working on a capital budget, envisioning $250 million for improvements at the chain, with $100 million specifically for the flagship. Baker said the Boston and Northbrook, Ill., stores would share in the capital budget; other units in Manhasset, N.Y.; Stamford, Conn., and Chevy Chase, Md., would be high on the list for capital improvements. The budget would cover several years.
Lord & Taylor has been performing better at its suburban locations than at the flagship.
One of the keys to ultimately deciding on the flagship is how business progresses. Baker said he is seeing improvements at branch locations, with some experiencing 20 to 30 percent increases due to the fallout from Federated Department Stores’ conversion of former units of May Department Stores, which Federated bought early this year. Federated sold L&T to NRDC after the May acquisition.
“There’s been a tremendous opportunity to pick up customers who are unhappy” with Filene’s or Marshall Field’s becoming Macy’s, Baker noted, citing these as examples of where L&T can grab former May store shoppers.
“Lord & Taylor is having a good moment in time,” Baker said. He said the chain has a “clear home,” offering a certain quality of merchandise at a competitive price, above Macy’s and beneath Saks and Nordstrom.
The 180-year-old company operates 48 stores and generated $1.4 billion in sales last year, though as recently as 2003, it operated 86 stores until an aggressive store-closing strategy, mostly through the Sunbelt, was unleashed.
Previously, Baker spoke of the possibility of opening additional stores in lifestyle centers in the Eastern corridor, in Connecticut, Long Island, New York, New Jersey and Pennsylvania. He also has singled out Westchester and Fairfield counties and believes L&T has a particular appeal to the “New England type of shopper, primarily in the suburbs,” who seeks a price-range alternative to Saks and Neiman Marcus on the high side and Kohl’s and J.C. Penney on the low side.
For the past four years, L&T chief executive Jane Elfers has led efforts to refocus the business on better, bridge and contemporary apparel and accessories for women, shedding moderate goods and reducing some of the retailer’s past focus on price promotions.