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UBS Projects 10% Reduction in Specialty Stores

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New research from UBS Securities LLC predicts a 10 percent contraction in space devoted to specialty stores over the next several years, just as weaker malls face either extinction or an accelerated evolution.

“While some specialty retailers could pick up market share as others shutter stores, we expect the majority of the sales to never resurface given the poor quality of those lost sales and given a smaller consumer appetite,” wrote UBS equity analysts Roxanne Meyer, Brian Nagel and Neil Currie in a research report.

The UBS team predicted the reduction in specialty store square footage would be driven by the elimination of newer concepts, such as Abercrombie & Fitch Co.'s Ruehl and American Eagle Outfitters Inc.'s Martin + Osa; the shuttering of underperforming doors; cutbacks in average store size, and the closure of shopping centers. Executives at Abercrombie & Fitch and American Eagle continue to stand behind their respective Ruehl and Martin + Osa nameplates.

UBS worked up a list of the “bottom 300” shopping centers with more than 500,000 square feet and found the companies with the greatest exposure to those centers were Christopher & Banks Corp., 24 percent of its store base; Aéropostale Inc, 16 percent; Pacific Sunwear of California Inc., 15 percent, and American Eagle Outfitters, 15 percent.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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