PRICE/COSTCO OPENS NEW YORK CITY UNIT

LISA A. TIBBITTS

KIRKLAND, Wash. -- Price/Costco here has unveiled its first New York City store and has set plans for other metro-area units here.

Analysts called this move to the inner city a bold one for a club operator. Warehouse clubs traditionally have gravitated toward rural or suburban areas. Even in the suburbs, clubs are usually situated in industrial sections of town rather than commercial sections.

The company opened a club this month in the New York City borough of Staten Island. Price/Costco also has secured store sites in Manhattan and Brooklyn. The company said the Manhattan location will be

in midtown while the site of the Brooklyn store is reportedly in Red Hook.

These will be Price/Costco's first units in New York's five boroughs, but the company does operate stores in the New York and New Jersey suburbs.

The 116,000-square-foot store on Staten Island is situated on a commercial strip that is also home to Toys 'R' Us and the Staten Island Mall, as well as a supermarket operated by Pathmark Stores, Woodbridge, N.J.

The store in Manhattan will be located on 34th Street between Eighth and Ninth avenues, analysts said. It is scheduled to open in about 18 months, according to reports. At 150,000 square feet, the unit is larger than Price/Costco's typical units, analysts said.

"The new store will be on three to four levels, which is relatively new for us," said Jeff Brotman, chairman of Price/Costco, regarding the planned Manhattan unit. "There will be a pickup and drop-off area on the first floor and selling space on the upper levels."

Analysts agreed that Price/Costco should do well in New York, particularly because of the high concentration of small businesses in the area. And although selling to nonbusiness shoppers may be a challenge because of such difficulties as shrinkage and lack of parking, at least one analyst said the clubs would be successful because of the poor quality of other food retailers in New York.

Analysts noted Price/Costco successfully operates a store in a somewhat industrial section of San Francisco.

"They know how to handle a metro market," said Bonni Zwickel, a retail analyst with CS First Boston in New York. "They're going to continue expanding the club base and adjusting the merchandising as they go along."

Mark Husson, vice president of J.P. Morgan Securities, New York, called Price/Costco's move into the New York area "one of those great retail challenges." Manhattan, in particular, is clearly "a major opportunity," he added.

Another warehouse store operator, BJ's Wholesale Club, Natick, Mass., reportedly is considering opening a store on Staten Island. Julie Somers, the company's manager of communications, would not comment directly on the report, but noted, "We're always looking to expand."

Meanwhile, Fairway, a supermarket that operates a single unit on Manhattan's Upper West Side, opened a second unit in Harlem last week. At 35,000 square feet, the Harlem supermarket is about eight times larger than its West Side unit, said David Sneddon, one of the company's owners.