Retailer roundup

Bensalem, Pa. Charming Shoppes Inc. agreed to purchase Lane Bryant Inc., a subsidiary of Columbus, Ohio-based The Limited Inc. for $335 million. The acquisition positions Charming Shoppes, best known for its Fashion Bug and Catharine's Plus Sizes stores, as a leader in the plus-size apparel market.

When the transaction is completed in 2nd quarter 2002, Charming Shoppes will have more than $2.5 billion in annual sales with approximately 70% of revenue derived from plus-sizes. The company plans to operate Lane Bryant as a stand-alone operation that does not compete with its existing brands. J.P. Morgan Securities Inc. acted as exclusive financial advisor to Charming Shoppes for the transaction.

Charlotte, N.C. Ruddick Corp. is selling 26 of its Harris Teeter grocery stores in Georgia and South Carolina. The locations to be sold brought in only 11.2% of Harris Teeter's total sales ($1.24 million) for the six months ended April 1, 2001. By dropping them, the chain says it will be able to concentrate on its core markets in North Carolina.

Cincinnati-based The Kroger Co. is purchasing 15 locations in Atlanta and Athens, Ga. These locations will join Kroger's 107-store strong Atlanta division. Buyers for the remaining 12 stores in South Carolina were unannounced as of press time, but rumor has it they will be scooped up by Victoria, Australia-based Coles Myer Ltd., owner of the Bi-Lo chain, and Lewisville, Tex.-based Fleming Cos. Inc., owner of the Piggly Wiggly chain.

Washington, D.C. In spite of the slowing U.S. economy, the retail industry as a whole posted a sizeable 7.1% gain in total sales over 1999 to reach $3.4 trillion, according to the National Retail Federation's Triversity Top 100 Retailers report. A few significant trends are highlighted in the report, including: Discount stores embracing the supercenter concept and adding more food items to their inventory; supermarkets adding non-foods and other services to confront emerging threats from drug stores; Mass merchandisers of all types installing gasoline pumps; and home improvement chains expanding their offerings in home furnishings and major appliances.

In the news

Washington, D.C. With REIT indexes setting new highs in recent weeks, some market watchers have suggested real estate stocks on average may now be overpriced or at least fairly priced. But are they? Maybe not in all cases, says Michael Grupe, senior vice president and director of research for NAREIT.

Real estate stock prices at the end of June were still about 40% on average below their peak levels at the end of 1997, Grupe says. While NAREIT's Equity REIT Total Return Index has exceeded its previous peak, it illustrates that share prices on average have not yet recovered to their December 1997 levels.

Broad-based equity indexes continue to languish with negative returns through mid-year, while value and income-oriented stocks posted double-digit returns. The rebalancing of investor sentiment and portfolio allocations, as well as renewed interest in diversification, that emerged early last year has continued, Grupe says.

If price multiples remain stable, income returns alone in the second half of the year would assure an average annual total return to real estate stocks this year in the mid-teens about what one would expect from real estate stocks.

Distribution of U.S. retail trade

The 1997 Census of Retail Trade, published in 2000, established some benchmarks for understanding how Americans spend their money. New York-based consulting firm Landauer estimates that $1.7 trillion was spent in stores, of the year 2000 personal income expenditures of about $6.8 trillion, excluding autos, gasoline and non-store retailing. Clothing and grocery sales are growing slowly, but drugstores and home furnishings and appliances are surging.
Source: U.S. Bureau of the Census.