Report says future dim for mid-level dept. stores

BY SANDRA GUY Business Reporter
Chicago Sun-Times

Is there a future for middle-America department stores?

No, two retail experts said in a report released Monday.

"The mid-market department store will disappear altogether," said Wendy Liebmann and Candace Corlett, principals in WSL Strategic Retail in New York.

Carson Pirie Scott & Co., as well as regional department stores such as Dillard's and Belk's, must either move upscale or become part of a mass-market national chain to survive, Liebmann and Corlett wrote in a report titled "Department Stores Are Transformed."

Department stores will split into two types -- big national chains such as Macy's, J.C. Penney and Sears, or upscale stores in niche markets, such as Nordstrom, Neiman Marcus and perhaps Saks Fifth Avenue.

They call it the "supersize or specialize" model of 21st century retail success.

Two long-time stalwarts of Chicago's retail scene are getting new owners, and separate developments Monday showed just how much the retail landscape is changing.

* Marshall Field's announced it is remodeling its downtown Minneapolis store much like the flagship store at 111 N. State in Chicago, including opening a Barbara's Bookstore and other exclusive boutiques.

The Field's in Minneapolis will feature a Louis Vuitton boutique four times the size of the existing one, and a shop dedicated to Signoria di Firenze hand-embroidered Italian luxury linens. The Minneapolis store already has introduced several boutiques that made their United States debut at the State Street store, such as Field's Culinary Studio, Levenger reading and writing accessories and British menswear shops Thomas Pink and Alexandre Savile Row.

A Field's spokeswoman said the company has yet to decide whether Field's employees will staff the boutiques or whether the suppliers will hire their own workers.

Field's is scheduled to be taken over by Macy's parent company, Federated Department Stores, by Nov. 1.

Federated CEO Terry Lundgren has yet to say what he will do with Field's boutiques, but he has increased the lines of exclusive merchandise sold at Macy's to set it apart from rivals.

Department stores are stepping up their efforts to be unique.

Nordstrom on Monday announced it had bought a majority stake in luxury designer stores Jeffrey New York and Jeffrey Atlanta, and hired owner Jeffrey Kalinsky as Nordstrom's director of designer merchandising for men and women.

*Bids reportedly were submitted Monday for Carson's and four other regional department stores owned by Saks Inc.

Bids also were submitted for the more upscale Saks Fifth Avenue and the department stores as one package.

A Saks spokeswoman was unavailable to comment further, but analysts have said the entire company could sell for anywhere from $22 a share to $30 a share.

The future of Saks Fifth Avenue's store at 700 N. Michigan and Carson's flagship at 1 S. State St. is uncertain.

A sale of Saks Fifth Avenue's stores in Chicago and New York could be part of the deal if all of Saks operations are sold, analysts have speculated.

Speculation also centers on changes at the Carson's store at 1 S. State, a Louis Sullivan design that has undergone a $17 million upgrade and could be transformed by new tenants.

As for mass merchants, Sears and Penney are building stand-alone stores away from malls, but their willingness to invest heavily in them isn't known. Sears will open 48 "Sears Essentials" stores by Oct. 29, but the Hoffman Estates-based retailer has yet to release a construction schedule for 2006.