• by Sarah Mahoney  @mahoney_sarah, September 11, 2008

While Macy's still may have lingering problems at its flagship stores, it knows it's got a hit on its hands with its scaled-down Bloomingdale's, and now says it will roll out the small-store concept beyond New York. 

The company says it will open two new small Bloomingdale's, featuring the concept launched at the Bloomingdale's SoHo store in lower Manhattan back in 2004. The first store, at 105,000 square feet, will open in 2010 in Santa Monica, Calif., where it will replace an existing Macy's store, and the second, at 82,000 square feet, will open in the Georgetown area of Washington, D.C., in 2011.

The smaller format, opening in bastions of affluent urban hipsters, gives Bloomingdale's the chance to go head to head with smaller-and arguably chicer-stores, such as Barney's Co-Op and Neiman Marcus' Cusp.

And while some might question the wisdom of beefing up the luxury end of the brand portfolio at a time when consumers are cutting back on all but the basic purchases, others see it as a shrewd move.

Over the last few years, most of the media and investor scrutiny centered on Macy's 2005 acquisition of the May's chain, says Kelly Tackett, an analyst who follows Macy's for TNS Retail Forward. "That took pressure off Bloomingdale's, and the company has put a lot of work into making sure they know who their target market is, and now, they're refining that even further," she says. "I think we'll find these stores selling a finely edited selection that's more approachable than the competition."

Nor does Tackett think the soft economy, which has been hobbling sales at chains like Saks and Nordstrom, is much of a concern. "While we're not looking for a recovery from this slowdown any time soon, we do expect recovery to begin in 2009," she says. "And by 2010 and 2011, when these stores open, consumers will have a lot of pent-up demand for higher-end products, and hopefully, Bloomingdale's will be able to take advantage of that. Although they're building off a relatively small base with 40 stores, I expect we'll see Macy's putting a fair investment into the Bloomingdale's platform."

The company also says it will open a traditionally sized Bloomingdale's, 150,000 square feet, in San Jose, Calif., in 2011.