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Bloomingdale's Heads To Dubai as It Expands Globally

With American consumers frozen, Macy's is chasing shoppers overseas.

The nation's largest department store is making its first entrance into the international market by opening two upscale Bloomingdale's stores in Dubai. The question is whether the retailer can sell luxury in a time of frugality.

Shopper with Bloomingdales Bags
AP
Shopper with Bloomingdales Bags

Last night, Bloomingdale's Chief Executive Officer Michael Gould unveiled the plans for the new stores, which will be located inside the largest mall in the world, to a gathering of key vendors including Coach's CEO Lew Frankfort, Calvin Klein CEO Tom Murry and designer John Varvatos.

While the age of conspicuous consumption may seem long gone here in the U.S., Bloomingdale's and partner al Tayer Insignia believe that the luxury market will still thrive among the international jetset that travels through Dubai.

Both Gould and al Tayer Insignia CEO Shireen El Khatib said that the fall in oil prices and plunge in the global stock markets is slowing the explosive growth rate of the luxury market. Still, by the time Bloomingdale's opens in February 2010, they hope that the economic situation will improve.

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Macy's first announced its intention to open Bloomingdale's Dubai in September. Surprisingly, the retailer decided to stick with those plans despite a massive cutback in capital spending from $1 billion to a somewhere between $550 million and $600 million.

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Macy's CEO Terry Lundgren said he made the decision to go through with the opening in order to test the Bloomie's brand in new markets. This first—and currently only—international location is about marketing and "won't move move the needle on profits," Lundgren said. Competitors Saks and Neiman Marcus already have Dubai locations.

The new store will rival the flagship New York store and, thanks to its partnership with al Tayer, will feature some luxury brands not available in Bloomie's U.S. locations. Not all of the designers and vendors have yet been determined.

Tensions with vendors are high these days, with many revolting against the current heavy discounts that stores have been forced to take in order to raise cash.

Lundgren said no one likes the forced price cuts but it's the new reality in this economy. The rapidness of the current global slowdown is not something that Lundgren saw coming.

"No one saw that," he explained. "And people who say they do are just trying to be - they're lying to you."