MASS RETAIL GIANTS, FROM SEARS TO KMART, POISED TO FILL N.Y. VOID
Byline: Mark Tosh
NEW YORK — The lure of the New York metropolitan area is reaching out to moderate-price department stores, discounters and off-pricers, all of whom hope to fill a niche that’s been vastly under-served.
Kmart is opening its second New York store on Monday, Bradlees just opened its first, Filene’s is a recent addition to the Manhattan landscape, and Sears, Roebuck and
J.C. Penney are reportedly hot to take over the Abraham & Straus unit at Herald Square.
Soon, even George Pataki might want to shop here.
Arthur C. Martinez, chairman and chief executive officer of Sears Merchandise Group, said Sears is “going to find some way” to put more stores in the region.
Sears and Penney are said to be the leading contenders to take over the Abraham & Straus store in A&S Plaza. Situated two blocks south of the Macy’s East flagship, it’s one of the six units Federated Department Stores officially has on the block as a result of its upcoming merger with R.H. Macy & Co.
Sears is also talking with Federated about the other five locations, and looking at other possibilities, but declined to comment on any specific sites.
Sears operates two stores in New York — one in the Flatbush section of Brooklyn and another in the Bronx — and will open a third next spring in a former Alexander’s location on Queens Boulevard in Queens.
The Flatbush store, which Sears remodeled and expanded this year, is expected to generate annual sales of more than $50 million and is one of the most profitable locations in the 800-store chain, the company said.
Of the Federated sites on the block, only the A&S store at Herald Square is of interest to Penney’s, according to one Penney’s source. The Texas-based chain has only two stores in the city — one in Queens, one on Staten Island — and nine on Long Island. Kmart, which will launch its second New York unit Monday in Co-op City in the Bronx, reportedly has agreed to open another store in Brooklyn.
“It’s a very active situation,” a spokeswoman said.
The chain also has a couple of deals pending in Manhattan and other boroughs, she said, but wouldn’t elaborate.
The Kmart in Fresh Meadows, Queens, on the site of a former Bloomingdale’s, is among the discounter’s top 10 in sales, and that’s encouraging it to pursue more locations.
Bradlees, which this month opened its first Manhattan unit, on 14th Street facing Union Square Park, and Caldor also are enviously eyeing the New York marketplace.
In addition, Filene’s Basement has signed a deal to open its third Manhattan store next spring. It will be on the site of a Wallachs store in the financial district.
And Syms Corp., an off-pricer that carries moderate to designer brands, is seeking a midtown location. Syms operates one store in Manhattan, at 42 Trinity Place in the Wall Street area.
“Real estate and retailing are going through an evolution,” said Marcy Syms, president of Syms Corp. “Real estate prices are more affordable and consumers are smarter.”
“New York has lost in excess of $1 billion in retailing in the budget to moderate area,” said Arnold Aronson, a partner in Levy, Kerson, Aronson & Associates, a retail search and consulting firm. “Gimbel’s, Alexander’s and Ohrbach’s went out of business over the years. They weren’t low-cost operators. That’s created a huge vacuum.”
Joseph Ronning, an analyst at Brown Bros. Harriman & Co., said he believes moderate-price stores and discounters have been “significantly underrepresented” in the New York marketplace, but said the tide is beginning to turn.
“Now as the market in their traditional areas has become somewhat more saturated, they are beginning to come into the metropolitan areas,” Ronning said. “They are saying, in effect, with the huge population densities in these areas, the volume you can do more than offsets the incremental costs.”
Historically, Ronning said, discounters have avoided major metropolitan areas because of the higher rents and delivery costs and shrinkage in urban areas.
Another factor contributing to the attraction of the New York region to discounters and off-pricers, he said, is the preponderance of sites available due to retail consolidation.
Steve Kernkraut, a managing director of Bear Stearns, said he believes the idea of a Manhattan store is not new to Penney.
“They were considering buying the B. Altman building [at Fifth Avenue and 34th Street] and decided the economics didn’t work,” he said. “Penney’s is very much interested in adding other stores in the metropolitan area or suburban New York.”
Bradlees officials said the six Federated sites are in desirable areas, but won’t confirm any discussions with Federated.
In 1995, Bradlees expects to open at least three more stores in the region — in the Bronx, Staten Island and Westbury, L.I. — as it moves to fill what it calls “a huge gap” in its marketing map.
“When we looked at our markets recently, we noticed that we’re serving primarily from Boston to Philadelphia and there’s a huge gap in there of about 8 million to 12 million people in Long Island and New York that we were not hitting,” a Bradlees spokesman said. The company has said it eventually may have as many as 10 stores on Long Island.
Former Bradlees management chose to expand in Philadelphia and New Jersey, but not the New York metro area and Long Island, the spokesman said. The company, with 136 stores, has now changed its thinking.
“Our research showed us a while ago that the New York [regional] and Long Island markets are definitely understored for the type of discounter that we are,” the spokesman said.
The battle over the Federated sites may simply boil down to who puts up more money.
“There’s the potential for a bidding contest,” said Arnold Aronson.
“Sears and Penney’s are both strong on expanding their markets,” said Edward F. Johnson, director of Johnson Redbook Service. “Sears has a little different product mix and might appeal to New York shoppers because they have more hard goods than Penney’s. But if there’s a race, it’s up to which one wants to spend more.”
Kernkraut said he believes the bidding for the other five locations Federated has on the block — including Stern’s in Flushing and Lake Grove, a Bloomingdale’s in Garden City, a Macy’s in White Plains, N.Y., and A&S in Massapequa, N.Y., is “more questionable.” “Some are not in prime enclosed malls,” he said. “I don’t think that’s going to excite a lot of retailers. It may well be Kmart or Bradlees or Caldor that takes them over.”