Nordstrom to Enter, Shake Up NYC Retail Market
In one way, the wait for a Nordstrom to enter the New York City market is over. In another, the anticipation and what it means for the company and other high-end department stores in the area has just begun.
Although the widely awaited store will not be ready for business until 2018, the retail world is already abuzz.
The company has tiptoed into the Manhattan market with the opening of a Nordstrom Rack outlet store in Union Square two years ago and last year’s launch of Treasure & Bond, a concept store that it used to test the market that donates its profits to charity.
"This has been a long time coming for us, as Nordstrom has sought a NYC location for many years," said Erik Nordstrom, the company’s president of stores. "We look forward to opening our doors, and we view this as our chance to have our best Nordstrom store in the best retail city in the world."
The store will be located in Midtown Manhattan, an area popular with tourists from abroad, many of whom flock to the city for its reputation as a shopping mecca. According to the U.S. Travel Association, the average visitor spends about $4,000 while visiting the U.S. while the average Chinese tourist shells out around $6,000.
When the store opens, the company’s presence could grab some market share away from the city’s existing high-end department stores, including competitors Bloomingdale’s, Saks, Macy’s, Barney’s, Bergdorf Goodman and Henri Bendel. Saks generates about 20 percent of its annual sales from its Fifth Avenue store.
The announcement also comes amid concern for some high-end retailers, shown by slides in the stocks of Tiffany and Lululemon . It also follows a downgrade of its stock by Citi analysts on Wednesday, along with the shares of Macy’s and Saks, to “Neutral” from “Buy,” citing concern about high-income consumer spending.
In the report, analysts said they expect consumer spending to slow, driven by a soft U.S. macro environment, weakness in Europe that has led to a drag in tourism in the U.S and declining consumer confidence.
“We believe that the slowdown is being led by high-income consumers, who account for approximately 50 percent of spending, own approximately 90 percent of U.S. equities, and are most impacted by stock market volatility,” Citi analysts said.
Analysts added that same-store sales growth for high-end department stores in its coverage universe softened in April and in May compared to stronger sales growth in the first three months of the year.