With the economy on the decline, 2008 promises to become a trying year for retail property owners, as the number of new store closings will climb to 5,770, according to a recently released ICSC report on “Retail Real Estate Business Conditions.” The figure would represent the highest level of store closings in four years, the most since retailers shut 6,303 stores in 2004.
By comparison, last year brought only 4,603 closings, a 3 percent decrease from 2006. But with many economists believing that we are already in a recession and with same-store sales recording growth of only 0.5 percent this January, compared to growth of 3.7 percent in January 2007, it seems unlikely retailers will be able to keep the number of closings down.
“I think that corporate real estate departments are much more proactive in managing their real estate portfolios than they were during previous slowdowns, so you'll see more store closings because of that,” says Alvin Williams, principal of Excess Space Retail Services, Inc., a Huntington Beach, Calif.-based real estate disposition and lease restructuring firm.
The ICSC based its projection model on several economic indicators, including the Consumer Price Index, U.S. jobless claims, yield on 10-year government notes and the U.S. treasury yield curve.
Among the sectors that got hit the hardest in 2007 were home furniture retailers and electronics stores, with 26.7 percent and 23.6 percent of all closures, respectively. The home furniture sector suffered in the aftermath of the housing meltdown, recording a same-store sales decline of 10.1 percent for the year, while electronics retailers faced the double threat of a slowing economy and intense competition within the sector.
This trend will likely continue this year, as in December, the most recent month for which numbers were available, the electronics sector posted a same-store sales decline of 1.6 percent. On Feb. 20, Sharper Image Corp., a San Francisco-based company that operates 184 stores, became the latest victim, filing for Chapter 11 bankruptcy. The retailer announced plans to shutter 90 stores while it deals with the reorganization.
Going forward, store closings will likely rise in the apparel sector, which saw 542 locations shuttered in 2007, accounting for 11.8 percent of total closings. The sector posted a same-store sales decline of 2 percent in 2007, and a same-store sales decline of 3.8 percent in January 2008.
So far this year, Ann Taylor announced that it will close 117 stores between now and 2010, and Charming Shoppes, Inc., which operates a number of plus-size women's apparel chains, revealed plans to close 150 stores, including 100 Fashion Bug and all of the Petite Sophisticate locations. Also, on Feb. 15, Wilsons the Leather Experts Inc. announced that it will close 160 out of its 260 mall stores as a result of declining sales.
In addition, department stores continued to struggle this January. After posting same-store sales growth of 0.2 percent in 2007, the sector registered a same-store sales decline of 5.7 percent in the first month of 2008. Already, Macy's has announced that it will shutter nine stores. In fact, a research report concluded during the 2007 Christmas season by America's Research Group, a Charleston, S.C.-based consumer behavior research firm, found that shopper traffic slowed in eight out of 10 retail categories surveyed compared to 2006. The worst hit categories included home accessories stores, music stores, department stores and specialty retailers.
“As the year progresses, it is just going to get a lot worse,” says Andy Graiser, co-CEO of DJM Realty, LLC, a New York-based diversified real estate consulting and advisory firm. “This is going to be across the board in retail categories.”
Segway Patrols Target
Target will employ Segway personal transporters as part of its security tools at Target and SuperTarget stores. Target guards will use the units to patrol parking lots and the surrounding environments of more than 150 of its U.S. stores. Users stand eight inches taller on a Segway, making it easier to see and be seen over parked cars and crowds. The discount retailer has developed a training program that security personnel must complete before rolling out the units. More than 600 police and security organizations use Segways to patrol business centers, airports, universities, parks and malls.
ICSC Taps Fiala
ICSC has nominated Mary Lou Fiala, president and COO of Jacksonville, Fla.-based Regency Centers, to serve as the association's chairman for the 2008-09 term. Fiala should assume that role during RECon (the conference formerly known as the ICSC Spring Convention). Fiala succeeds René Tremblay, president of Montréal-based Ivanhoe Cambridge. Fiala will be the association's 49th chairman. She will be the third woman to chair ICSC during its history. Fiala has been a member of ICSC for 11 years and has served on the board of trustees for the last five. Prior to Regency, Fiala was managing director of Security Capital Global Strategic Group Inc.
Tanger Awash in Dove
Tanger Factory Outlet Centers is lathering up its customers with Dove beauty products. The company signed a marketing agreement with Dove under which shoppers at Tanger's 31 shopping centers will be eligible for a gift when they make purchases worth more than $150 at select Tanger Outlets or more than $175 at others. Shoppers will receive a complimentary Dove Beauty Tote. The promotion will begin on March 22. The gift, valued at $40, contains Dove SkinVitalizer, along with a complement of Dove hair, skin and deodorant products. During the promotional period, online shoppers will also be able to access special Web promotions for stores located in Tanger's centers. Additionally, online shoppers will be able to receive downloadable coupons for Dove products.
Saluting Feldman
Larry Feldman, chairman of Feldman Mall Properties, owner of Northgate Mall, was named Businessman of the Year by the Colerain Township Business Association. Feldman was recognized for commandeering the turnaround of the 1.1-million-square-foot mall in suburban Cincinnati, which has been a boon to Colerain Township. The superregional mall, anchored by Macy's, Dillard's and Sears, recently signed new tenants, including Rave Digital Media/Rave Motion Pictures for a 14-screen all-digital multiplex at Northgate Mall. The more than 2,800-seat theater, seen as integral to the mall's redevelopment, is scheduled to open in the fall of 2008. Feldman says, “We believe that 2008 will bring even more exciting new tenants to Northgate as we continue to invigorate shopper interest and sales at the mall through targeted capital expenditures designed to increase mall traffic.”