Costco to enter unfamiliar territory: department store space

Costco Wholesale Corp. has struck a deal for department store space, a location where warehouse membership clubs have never been a familiar sight. One site is a vacant Dillard's in Westfield Sarasota Square mall that will be gutted and reopened as a bare-bones Costco in late 2011 or early 2012. Another Costco will fill an empty Hecht's in a Wheaton, Md., mall. The third will share anchor space in a redeveloped Westfield mall in Los Angeles with Neiman Marcus and Target, itself a rare combination in one shopping center. "We're bringing shoppers new choices in a mall setting," said Catherine Dickey, spokeswomen for Westfield Group, an Australian real estate investment trust that owns three malls in the Tampa Bay area. The shrinking department store industry caused landlords to rethink the mall formula, and the average Costco is a traffic generator with $100 million in annual sales. Westfield has been forced to buy back 24 vacant department stores in its malls in the past five years.