By Kate King
ELMONT, N.Y. -- At Belmont Park Village, a new outdoor luxury outlet mall on Long Island, shoppers bundled up against the cold one recent evening to search for bargains on designer shoes and clothing.
At the Rene Caovilla store, open shoeboxes were spread across the floor. The Italian designer's footwear retails for $2,000 or more at full-price boutiques. But the outlet store sells merchandise at up to 65% off.
"The shoes are so cheap we had to come and get them," said Mikey Marino. He made the two-hour drive from New Haven, Conn., with his wife, Pebbles Marino, who snagged a pair of green chandelier high heels.
The global luxury sector is suffering a downcycle. After years of super-charged sales for designer goods, more customers are balking at the increasingly steep prices these retailers are asking.
But real-estate investors, retailers and landlords are betting that shoppers' increasing desire for the finer things remains strong -- as long as the prices are more reasonable. Even though foot traffic is still below prepandemic levels, retailers are leasing more space at outlet shopping centers, where designers sell heavily discounted surplus or lower-quality items.
There are more than 200 outlet shopping centers in the U.S., many of which offer "affordable luxury" brands such as Coach and Marc Jacobs. Outlet landlord Tanger, which owns 38 properties in the U.S. and Canada, was 97% occupied as of the third quarter, and its stock price has outperformed the S&P 500 since 2019.
A much smaller subset offer discounts on a deep roster of the most coveted European brands, including Gucci, Prada and Saint Laurent. Many luxury outlets depend on international tourism and therefore have recovered more slowly from the pandemic than other types of retail, said Vince Tibone, head of U.S. retail and industrial research at real-estate analytics firm Green Street.
But some luxury outlet owners are now expanding or opening new properties, confident that demand will remain strong long term. Belmont Park Village is the first U.S. shopping center in the Bicester Collection, a portfolio that includes discount-luxury shopping centers in Europe and China operated by London-based Value Retail.
LVMH-backed private-equity firm L Catterton this summer spent 600 million pounds, equivalent to $775 million, acquiring a 42% stake in Value Retail's European portfolio, which includes nine Bicester Collection locations.
Woodbury Common Premium Outlets -- already considered one of the top luxury outlets in the U.S. -- opened several new stores in 2024. That included ones from high-end fashion brands MCM and Reformation at its 150-acre New York location, about an hour's drive from Manhattan. The outlet has plans to add another 155,000-square-feet of retail stores and restaurants and a 200-room luxury hotel.
Woodbury Common generates more than $1.2 billion in annual sales, according to owner Simon Property Group.
While luxury sales overall have slipped recently, they are still above 2019 levels. High-end retailers are now attracting younger and more economically diverse shoppers than in the past.
"You have a much wider group of people that are buying luxury," said CBRE broker Joe Hudson.
Outlets historically have been a small part of luxury retail. Many brands believe that discounting hurts their products' exclusivity. Ultraluxe retailers such as Hermès and Chanel avoid them altogether.
High-end companies would often burn their unsold handbags and cashmere suits rather than slashing prices. European Union countries outlawed the practice last year, and it is now more common for luxury retailers to quietly sell surplus items to family and friends, said Joëlle Grünberg, who leads consulting firm McKinsey's apparel, fashion and luxury sector in North America.
Some retailers have also started selling excess inventory in limited quantities to discounters such as TJX, which owns T.J. Maxx and Marshalls. This may be helping spark interest in luxury outlets as more shoppers realize they can afford high-end items if they know where to look for them, Grünberg said.
And there are signs that more luxury retailers are warming to the idea of outlet locations, particularly European brands looking to gain market share among American shoppers.
The nearly 8-acre Belmont Park Village features brick facades and walkways dotted with trees, benches and high-end food and beverage carts. Several of the couple dozen stores that have opened or announced 2025 openings represent the designers' first U.S. outlet location, including women's footwear brand Aquazzura and retailer Vivienne Westwood.
Pebbles Marino, who bought the Rene Caovilla sandals, found out about the store's opening on TikTok. She recorded a vlog of her shopping trip, turning her new shoe slowly so the light bounced off the tiny crystals that dangled from the spiraling strap.
Belmont Park Village began its gradual opening process in mid-October. It will eventually have 155 boutiques and seven restaurants.
Value Retail thinks its location near New York City's airports will allow it to capture Bicester Collection's core customer, traveling luxury shoppers. In Europe, foot traffic at Bicester Collection's nine shopping villages have recovered to prepandemic levels.
Scott Malkin, chairman of Value Retail, is co-owner of the National Hockey League's Islanders team -- which plays at UBS Arena next to Belmont Park Village.
Write to Kate King at kate.king@wsj.com
(END) Dow Jones Newswires
December 16, 2024 05:30 ET (10:30 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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