New retail chain enters after many others exit

  • Article by: DAVID PHELPS , Star Tribune
  • Updated: March 20, 2011 - 10:40 PM

Nebraska-based Gordmans is opening two stores in the Twin Cities April 1, entering its largest market to date.

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Avree Easton, 5, of Lincoln, Neb., helped her older sister Megan, 17, look for clothes at the Gordmans store in Lincoln earlier this month.

Photo: Brian Lehmann, Special to the Star Tribune

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Jeff Gordman is the fourth generation to run the department store chain that bears the family name, but he is the first to establish a beachhead in the Twin Cities, the Omaha-based company's biggest market to date.

On April 1, Gordmans will throw open its doors in Burnsville and Woodbury in a retail experiment to see whether promises of 60 percent discounts can draw shoppers in sufficient numbers to support the first new national retail chain in this market in the last 10 years.

"They have a pretty strong price appeal," said Dave Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas. "But they'll have plenty of competition."

Indeed, Gordmans, with 68 stores in 16 states largely located in the center of the country, is considered somewhere between Kohl's and Herberger's in the retail chain.

Stores are splashy, colorful and carry name-brand clothes and household goods at deep discounts. They have play areas for kids and lounging areas with big-screen TVs for shoppers who need a break or who would rather watch a football game while their spouse browses the racks and displays.

More than a third of its customers have household incomes in excess of $75,000 a year but "a significant number" earn less than $50,000 a year, Gordman said.

"They're going up against Kohl's to a certain extent, and Kohl's has been pretty successful in this market," said Brennan. "That could make it tough."

Dick Grones, a Twin Cities retail real estate broker and principal at Edina-based Cambridge Commercial Realty, described Gordmans' merchandise mix as "middle to down rather than middle to up." He said it is probably "a notch below" a Herberger's.

Gordmans is on a tear of sorts. The company went public over the summer and has pleasantly surprised Wall Street so far, beating expectations with strong sales and earnings growth. The stock, which closed Friday at $16.38 a share, is up nearly 50 percent from its August offering price.

It's used the IPO proceeds to pay down debt and to expand. Gordman said the company's public status also raised its visibility with vendors and commercial real estate brokers, which will help it going forward.

The Twin Cities presence will be Gordmans' largest market, but only for a few months as the 96-year-old retailer prepares to open shop in Chicago.

Until now, the chain has gone after smaller Midwest markets, such as Fargo. It opened in 2005 in Mankato, for instance -- its only Minnesota store.

"This is a step for them to come into a big market," Grones said.

It's opening six new stores this year, including the two Twin Cities versions, with a similar number expected next year.

Jeff Gordman won't rule out more stores in the Twin Cities if the opportunity arises, noting that he likes the local demographics. His customers skew younger -- women 25 to 49 with children at home, he said, noting that 35 percent of Minneapolis area residents have kids at home.

"This is a natural extension of our expansion," he said.

Room to grow

There are plenty of empty stores for them to fill, as many national chains have closed or scaled back underperforming stores during the recession.

Indeed, space for the Gordmans store at Burnsville Center is available because of failed retailer Mervyn's, which went out of business in 2008. The Woodbury store is in existing space in the Tamarack Village shopping center.

But Gordman is undeterred.

"We recognize this industry is highly competitive," he said. "We try and take advantage of potential voids in the market. We offer big savings, big selection and happy associates."

Grones said Gordmans' experience in the retail marketplace will work to their advantage.

"I expect them to survive," he said.

David Phelps • 612-673-7269

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