After 42 years of selling shoes in Hawaii, Nordstrom is putting the finishing touches on its first full-line specialty clothing store in the state's largest shopping mall.
Blake Nordstrom deflected talk about “the R-word” when asked recently about the dreary economic forecast for 2008, a year in which he plans to open eight full-line clothing stores nationwide.
The upbeat retail-company president then changed the subject from a possible recession to something considerably more sunny: Hawaii.
Nordstrom plans to open a bigger-than-usual department store next month at Hawaii’s largest shopping mall, Ala Moana Center in Honolulu. Perhaps the most ballyhooed of all Nordstrom openings this year, it carries the distinction of being the upscale clothier’s first department store outside the U.S. mainland — and its most awaited.
“We just think that Hawaii is so unique and special,” Blake Nordstrom said during a rare sit-down interview at his downtown Seattle office. “We’re excited about this store, and we’re optimistic about its future.”
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In 1966, Nordstrom began doing business in Hawaii as the exclusive operator of shoe departments for a Honolulu-based chain, Liberty House. Thirty years later, in 1996, Nordstrom announced plans for its own department store at Ala Moana.
But Liberty House, which also had a store at Ala Moana, sued the mall’s owner, Chicago-based General Growth Properties, citing concerns about where the new store would go. General Growth contended that Liberty House was merely trying to prevent potential competition with Nordstrom.
The lawsuit was dismissed in late 2000, and six months later Macy’s parent company, Federated Department Stores, bought Liberty House. Nordstrom went on to open a discount Rack store at the nearby Ward Centre in Honolulu, then a 17,000-square-foot shoe store.
Eventually, Nordstrom revived its plans for going into Ala Moana and began construction on Feb. 10, 2006.
“There are people in Hawaii who actually had to see the girders going up to believe it, because there have been so many announcements,” Blake Nordstrom said. “So maybe we get a gold star for patience — or our customers do.”
Nordstrom’s eight openings this year represent its largest department-store expansion since 2002. The timing is far from ideal: Nationwide, consumer confidence is down amid concerns about a housing-market slump, the high costs of food and gas, and the possibility of a recession.
Earlier this month, Nordstrom said sales at stores open at least a year — a key measure for retailers — slid 6.6 percent in January from the same month in 2007. California, where Nordstrom has nearly a third of its stores, is especially hard-hit by the housing-market slowdown and subsequent credit crunch.
“Your crystal ball — how do you look and see?” Blake Nordstrom said. “In our business, it’s difficult to, in the short-run, have perfect timing. So I think you need to look at it” from a longer perspective.
Even so, Hawaii appears to be holding up under the economic uncertainty. In January, Oahu’s median single-family home price of $623,536 — meaning half sold for more, half for less — was above July’s median, according to the Bank of Hawaii.
The bank asserts that Hawaii’s mortgage-delinquency and loan-default rates are the lowest in the U.S.
“The fundamentals aren’t running amok in Hawaii,” said Paul Brewbaker, chief economist at the Bank of Hawaii. “But we live in the same information space, and the news from Phoenix and Las Vegas weighs just as heavily on someone in Hawaii as somewhere else.”
Spending in Hawaii
Brewbaker finds hope in an otherwise troublesome economic trend: The U.S. dollar’s decline against the euro and other foreign currencies gives international visitors more buying power — and additional motivation to spend while on vacation in Hawaii.
“I had four kids between the ages of 18 and 21 from Sweden at my house over the holidays. I took them down to Ala Moana, and they went nuts, because for them everything was so cheap,” Brewbaker said. “We’re seeing the same thing from Canadian and Korean visitors.”
Roughly one in four visitors to Hawaii comes from outside the U.S. During the third quarter, international arrivals rose 3 percent from a year ago to 491,700, while U.S. arrivals held steady at 1.36 million, according to the Bank of Hawaii.
Ala Moana’s diverse customer base, including a growing number of Chinese travelers, presents Nordstrom with a “fun challenge,” Blake Nordstrom said. The company has no stores outside the U.S. — and no plans to change that anytime soon.
But Patricia Edwards, a money manager at Wentworth, Hauser & Violich in Seattle, whose firm manages more than $13.4 billion in assets, including nearly 700,000 Nordstrom shares, said the store at Ala Moana allows Nordstrom to dip its “toes in the international waters.”
“With Hawaii, you have an opportunity to test out things with Asian travelers and see how they fly,” she said.
The new Nordstrom joins Neiman Marcus, Macy’s and Sears at Ala Moana Center, now close to completing its fifth expansion since it opened in 1959.
The three-level, 210,000-square-foot Nordstrom is 50 percent bigger than the typical 140,000-square-foot format.
Blake Nordstrom said he prefers “giving it our best shot with one large store versus trying to have multiple stores on the islands.”
The Ala Moana store will carry a few only-in-Hawaii distinctions, such the largest companywide sunglass shop and its first gelato bar. “It gets pretty hot here, so you need something cool to drink,” said Brian Tatsumura, the store’s Hawaii-born-and-raised manager. “It can’t all be coffee.”
With more than $1 billion in sales annually, Ala Moana touts itself as one of the most lucrative shopping malls in the U.S.
Its latest expansion paves the way for 30 new retailers, including Hawaii’s first stores from J.Crew, Vera Bradley and True Religion Jeans. Other tenants include Burberry, Gucci, Jimmy Choo and Prada.
“The mall is probably one of the top 10 malls in the country, if not one of the top five,” said Doug Wood, chief operating officer at Seattle’s Tommy Bahama, which has a store in Ala Moana. “It’s huge. Everybody’s there. And it’s very upscale.”
Shopping is a surprisingly popular tourist activity, given Hawaii’s abundance of beautiful weather and beaches. Ala Moana’s management estimates that tourists annually make up about 45 percent of foot traffic, edged out only slightly by local residents.
“Tourists usually shop four to five days in the week that they’re here. They go to the beach and then they shop,” said Honolulu resident Stephany Sofos, a real-estate consultant focused on the retail sector.
Sofos said Nordstrom fills a gap between Macy’s and Neiman Marcus. Macy’s targets middle-income consumers, while the core Nordstrom household enjoys an annual income above $100,000. Neiman Marcus targets families making at least $200,000 a year.
Margo Bourland, a Honolulu resident who describes her personal finances as comfortable enough to allow her occasional excursions to Macy’s and Neiman Marcus, said she’s “ready to take on” Nordstrom.
“We basically have a lot of boutiques here. The only department stores we have are Macy’s and Neiman — and Sears if you want to consider that,” Bourland said. “We have always felt we could use another department store.”
The feeling is mutual. Blake Nordstrom, who counts 24,000 Hawaii residents with Nordstrom credit cards, spoke of Ala Moana as a place where the company needs to be.
“It is one of the premier shopping centers in the world,” he said.
“If we’re going to be a successful retailer and reach the goals we’d like to achieve, we need to be a part of it.”
Staff researcher David Turim contributed to this story.
Amy Martinez: 206-464-2923 or firstname.lastname@example.org