Observations & Conversations
It’s going to be an interesting year ahead of us.
The good news is that it’s
obvious we’ll have more space for lease on the market.
Oh man, the grumbling has officially started. Retailers are already talking about scaling back expansion plans for next year or, at the very least, they’re reconsidering testing new markets. So if you have a deal teetering, it might be better to close quick with some concessions than to roll the dice right now, although I did talk to an owner yesterday that said, “I’m not worried about leasing any of my space, sooner or later it will lease up and I can afford to let it sit vacant rather than take a subpar tenant or below market rent.” I also read an article about Wegman’s closing its 14-unit chain of Chase-Pitkin Home & Garden Centers in upstate NY. Plus, Levitz Furniture recently filed Chapter 11, CompUSA is closing all of its 46 Good Guys stores in CA and HI that it acquired just two years ago. Big Lots is closing 41 of its freestanding furniture stores and 85 closeout stores with a total of up to 170 store closings. Buehler Foods is closing six stores in KY and IN after buying 16 Winn-Dixies about a year ago. Farmer Jack, a supermarket chain in the Midwest and a division of A&P, which recently had its president resign and its the parent has been trying to sell the chain, may close stores if a buyer doesn’t step up to the plate soon. Earl May Nursery and Garden Centers is closing 14 of its stores. The 50-unit chain operates in IA, MI, NE and KS. After reviewing its September sales, Jo-Ann Stores decided to scale back expansion to 25 to 30 new stores, compared to 44 openings the prior year. Goody’s Family Clothing has been struggling with a 5.5% drop in September same store sales. The 368-unit chain operates in the south and midwest markets. It recently had an offer to sell a 51% stake for around $260 million from a private investment firm and is scaling back its openings for next year to nine from ten. TJX, parent of Bob’s, is disappointed with its recent sales and has scaled its growth to one opening next year, while scaling back expansion of A.J. Wright to 10 openings compared to 35 the previous year, and is opening only 15 HomeGoods, down from 40 new stores the prior year. The company also is shutting down its e-commerce presence after a $15 million loss and analysts are suggesting further restructuring of the company is in the works.
Combine all this news with the fact that in September consumer confidence posted its biggest decline in 15 years. Gas prices are still high and consumers are bracing for the winter’s heating bill. Last month, past due credit card accounts were at a record high. However, retail analysts are predicting four to seven percent increases in holiday spending this year. A few groups have gone on the record with their predictions, with The National Retail Federation expecting a five percent bump this year compared to its prediction of 6.7% last year and Ernst & Young anticipating a six to seven percent increase. I’ve seen predictions as low as four percent. One analyst said that they expect shoppers to cut back on entertainment and eating out before they cut back on buying gifts. It’s going to be an interesting year ahead of us. The good news is that it’s obvious we’ll have more space for lease on the market, but I think finding replacement tenants is going to get tougher in the next few months. I’ve been looking at who’s taking over some of these big boxes that have been sitting vacant for years. I came across a web site called www.bigboxreuse.com, hosted by Julia Christensen who’s been investigating “How Communities are Re-Using the Big Box.” For the past few years, she traveled the country visiting the sites and meeting the people who are transforming vacant Wal*Marts, Kmarts and Target stores. She is collecting photographs, interviews, stories, and documents relating to the renovations, and has been giving presentations in communities about how towns are dealing with this common situation. She is currently working on a book about her findings. If you’ve got a big box that’s been sitting vacant for a few years, you should check out her web site.
In the past few weeks, I came across a new retailer to the states. UNIQLO, a Japanese retailer whose moniker derives from “unique clothing” with 670 locations, opened its first U.S. store with about 8,000 sq.ft. at Menlo Park Mall in Edison, NJ. The company is opening two more NJ stores by the end of the year with locations at Rockaway Townsquare in Rockaway and Freehold Raceway Mall in Freehold. Each store will be between 8,000 and 10,000 sq.ft., and offers women's, men's and children's merchandise and will replicate the Japanese shopping experience, widely held to be the most service-oriented in the world. Its merchandise mix consists of casual apparel at moderate price points. Jeans are priced at $40 with free hemline alterations, cashmere turtlenecks at $70 and socks for four bucks. The concept resembles Old Navy. The company’s executive vice president and head of U.S. operations for UNIQLO stated that, “We want our stores to be your neighbor, where you go regularly for your everyday fashion basics. We plan to revolutionize the casual wear market in the U.S., just as we did in Japan.” Once the three pilot stores are stable and profitable, UNIQLO plans to rapidly expand throughout the United States. By 2010, UNIQLO hopes to achieve $1 billion in U.S. sales and will grow accordingly to reach this goal. UNIQLO is part of a retail conglomerate, Fast Retailing Co., Ltd., which owns about a 35% stake in Theory, a ladies apparel chain with U.S. stores in Boca Raton, FL, East Hampton and New York, NY and Greenwich, CT, as well as selling its clothing line at Barney's, Bergdorf Goodman, Saks Fifth Avenue, Neiman Marcus, Bloomingdale's, Macy's West, Belk's and Nordstrom; an 84% stake in National Standard Ltd, a line of ladies apparel; a 100% stake in Onezone Corporation, Japan's number four footwear retailer with 330 stores. The company also has a 31% stake in Nelson, the developer of the French casual brand for women, operating stores as "Comptoir Des Cotonniers" which was established in 1995 and now operates 22 stores in Paris. CDC promotes a "mother/daughter theme," offering fashionable clothes. Nelson operates about 200 stores predominantly in France but also in other parts of Europe. So this company knows its way around the parts of the world, but we’ll see if they become the next “GAP” by the year 2010.
While we’re on press with this issue, we’ll be at the ICSC Southeastern States Dealmaking in Atlanta and at the Midwestern States Convention in Chicago. We’ll also be in San Antonio for the ICSC’s Texas Dealmaking this week. So stop by and say hello. Again, I’m reminding you to send us your press releases and info to get coverage for the upcoming ICSC Eastern States Dealmaking during December in New York, NY. You can email me at ann@dealmakers.net or send a fax to 609-587-3511. The NY show is expected to break an all-time high record attendance.
Until next month,
Ann O’Neal, Publisher