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Nordstrom Adding 2 Off-Price Stores Next Year, But Consumers Need Deals Right Now

Nordstrom Inc. is planning to open a pair of off-price stores next year.

Bradley Fair in Wichita, Kan. will be home to a new 28,000 square-foot Nordstrom Rack store, growing the company’s presence in the area to two off-price store plus a mainline Nordstrom department store.

The 24,000 square-foot store coming to Chattanooga, Tenn. brings the area’s Rack count to three on top of a single full-price Nordstrom location in the state.

With apparel, accessories, home and shoes priced up to 70 percent below what shoppers would find in the full-price channel, Nordstrom Rack plays a key role in the company’s Closer to You strategy focused on customer convenience, flexibility and options.

Off-price seems to be offering growth opportunities for rival retailers as well.

Macy’s Inc. is preparing new off-price Backstage locations. Slated to open this fall, Backstage will open in Chicagoland in Evergreen, Ill. in its first-ever dual footprint that has a Market by Macy’s on the ground floor and Backstage on the second floor. The Market doors are smaller than the usual Macy’s department stores with a stronger local focus. They offer services similar to Macy’s full-line locations, including a service desk to pay bills, pick up orders and facilitate returns.

The greater focus on off-price is expected to be a good move for both retailers, given that inflation is driving consumers to get more bang for their buck.

And one reason why off-pricers are expected to do well has to do with inflation’s impact on consumer confidence.

Economists and analysts are concerned about the possibility of a looming recession. Not helping has been a consumer pullback on discretionary spending as they make ends meet.

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On Monday, Walmart sounded the alarm after slashing its earnings outlook for the fiscal year. The discounter is marking down apparel prices to get customers to buy, mostly because they’re spending more dollars on food, a category where inflation is up by double digits.

“We’re now anticipating more pressure on general merchandise in the back half,” Walmart Inc. president and CEO Doug McMillon said.

Just how bad it could get is anyone’s guess.

On Tuesday, The Conference Board said its Consumer Confidence Index fell in July, following a larger decline in June. The Index is now at 95.7, down 2.7 points from 98.4 last month. The Present Situation component fell to 141.3 from 147.2, while the Expectations portion slipped slightly to 65.3 from 65.8.

“Consumer confidence fell for a third consecutive month in July,” Lynn Franco, senior director of economic indicators at The Conference Board, said, adding that “concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers.”

Franco said that inflation and additional rate hikes are likely to pose “strong headwinds for consumer spending and economic growth over the next six months.”

The Federal Reserve meeting on Tuesday and Wednesday is expected to result in at least a 75-basis-point interest rate hike that could go as high as 100. This could have a significant impact on people who had planned to rely on loans to help pay for cars, homes and major appliances.

The job market also plays a role. Consumers’ assessment of the labor market was less optimistic in July, and they weren’t upbeat about job prospects six months out. Consumers were also more glum about their short-term financial prospects, with 14.7 percent expecting their incomes to rise, down from 16.1 percent last month. In addition, 15.7 percent expect their incomes will decrease, up from 15.3 percent in June.