Bloomie’s Mini-Store Strategy – Can It Win For Macy’s?

Yesterday, Bloomie’s opened in Seattle’s University Village lifestyle center. It is the third Bloomie’s to be opened – the first was in Fairfax, Va., and the second was in the Old Orchard Shopping Center in Chicago. They are small, superbly edited stores with beautiful, well selected brands. These expansion plans have been carefully managed. In contrast, Macy’s is on track to have 42 mini-Macy’s by 2025.

I do not think this is wise.

Macy’s has announced 30 new mini-Macy’s by 2025 which will open in underserved areas of the U.S. So far, so good. It will have an edited assortment of the best of Macy’s. That is good also. The stores will be an estimated 30,000 to 50.000 square feet in size; that is about one fifth of the size of a traditional Macy’s department store and will not fit most of the Macy’s assortment

In contrast to these store plans, consider what Walmart
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is doing. Recently, (November 1) I wrote an article that Walmart is renovating 1400 of its stores for $9 billion dollars. That is $6.4 million per store, a hefty investment. Plans by Walmart are very detailed. There will be more space for delivery of orders. There will also be more shopping carts and expanded pharmacies as well as a Mother’s Room for nursing and other needed enhancements Such improvements make the Walmart Supercenters more worthwhile shopping destinations for their customers. They are more likely to find what they are looking for.

While Walmart’s capital expenditure seems much bigger than Macy’s, there is a good reason for the high amount. The Walmart Superstores have not been updated since their inception and, traditionally, an update of stores occurs every seven years. However, with such updates, the Walmart stores have potential for growth and will add to Walmart’s sales.

I think the Macy’s mini stores are not likely to be as productive in the same way. Too many categories will have to be eliminated. The traditional Macy’s concept is to sell lots of goods to a lot of people to make a lot of money. At just one-fifth of the size of a traditional department store and, even with careful editing of the assortment, the mini Macy’s s stores are not likely to bring top results. These new units will not be what the Macy’s customers expect, so matching the productivity that Walmart can expect is not likely.

An investor said to me that Macy’s is dissipating corporate assets since Macy’s could buy back some stock, thus reducing dividend payments and then focus on full line stores.

POSTSCRIPT: Macy’s should redo their top stores, focus on best-selling classifications, and let Bloomingdale’s develop some mini stores at a gradual pace. Macy’s announcement of 42 mini’s, of which 11 were Macy’s Marketplace, states that one will be completed this year and thirty will be built in the 2024/25 time period. That will require significant investment and divert attention away from growing top stores. To copy Bloomingdale’s roll-out of its small store concept is fine; to copy it with a force like this will impact cash flow. Macy’s is a different store, with different customers, than Bloomingdale’s. I do not believe it is in the best interest of investors to pursue this expansion plan.