Landrush underway for prime Alexander's sites - availability of vacant stores for other retailers

Discount Store News, July 20, 1992

NEW YORK - The race is on for Alexander's prime New York metro real estate, with chains as diverse as BJ's Wholesale Club, Kmart, Caldor and even Wal-Mart rumored to be interested in various sites.

Alexander's is just competing its going out of business sales, and the sites should be vacant by mid-August.

Kmart, which recently acquired the former Bloomingdale's site in the Fresh Meadows section of Queens, has made no secret of its interest in New York in general and Alexander's sites in particular.

"We're looking at some Alexander's sites, but we're looking at other sites as well in the metro area," a Kmart spokesperson said.

The company opened a two-level store in Southbury, Conn. (a renovated Jordan Marsh) this month and will debut another in Queens (a former Bloomingdale's) in the fall, so a prototype exists to take advantage of the multifloor Alexander's sites.

Wal-Mart, too is reported to be working on a two-level Sam's/Wal-Mart combo, so it could possibly be interested in some Alexander's sites.

While the prime location is the 59th Street site, Alexander's operates 10 other stores, nine in New York: one in lower Manhattan, three in the Bronx, one in Brooklyn, two in Queens, one on Long Islands, one in Yonkers, and one in Paramus, N.J. Each averages over 200,000 sq. ft.

Last year, Alexander's posted its second consecutive decline in sales, from $460 million to $430 million. The chain concentrated on soft lines with about 80% of its sales in apparel and soft home. Since Stephen Goldberger was named president and ceo in 1991, the chain has been attempting to boost its hard lines sales, particularly in core departments like toys and consumer electronics.

Alexander's has long been regarded as a relatively poor retailer but an excellent judge of real estate. Its flagship store at Lexington Avenue and 59th Street is one of the highest traffic zones in New York, and generated enormous revenues. Other sites in Brooklyn and the Bronx also benefit from high pedestrian traffic.

The chain's dissolution has left the urban New York market practically denuded of discount stores. Apart form two Kmarts, one not yet open and the other an extremely outdated, undersized unit on inaccessible Staten Island, and two Caldor stores, in Middle Village, Queens, and on Staten Island, there are no full-line discounters in the five boroughs. More important, there are very few sites available anywhere in the city of sufficient size to run a modern discount department store.

Further, discounters have pretty much sewed up the suburbs; most of U.S. suburbia is severely overstored. Virtually the only growth area of any significance remaining is the inner city. Discounters exited large cities en masse during the late 1970s, as real estate costs escalated beyond their means and security and insurance costs wiped out their thin margins. However, the New York market, with about 8 million residents, is a potential bonanza for the first chain to figure out how to market here.

The proposed Mall of the Americas, due in late 1993 or early 1994 in the Bronx, will almost certainly include at least one major discount store and perhaps a wholesale club as well, and it will reportedly include built-in security that will allow merchants to operate in relative peace. But the mall, to be built across from Yankee Stadium in the Bronx, will be accessible mainly to residents of the West Side of upper Manhattan and the Bronx, about two million people, and then mainly to that portion who own cars.

Opportunities for discounters who can find suitable real estate are enormous. New Yorkers have a high average income, well within discount parameters, and while they may have less disposable income than average, due to high rents, taxes and food costs, there is still plenty left to support a good discount operation.

Further, New Yorkers pay much more for standard discount wares than is the case nationwide. Despite a higher cost of doing business, a discounter could easily charge a bit more to maintain standard margins while still offering significant savings.