NEW YORK — “Let’s stop by the food court and then go to Wal-Mart.”
Shoppers at the Sunrise Mall in Nassau County, N.Y., might be saying just that when Wal-Mart Stores Inc. cuts the ribbon on a two-level discount store on May 28.
The 131,000-square-foot store will house a McDonald’s and a pharmacy in addition to the 32 other general merchandise categories carried in Wal-Mart discount stores, including apparel.
“We’re always looking to expand in our markets and New York is an area that we are looking to expand to meet the customer need,” said a spokeswoman for the world’s largest company.
In urban areas, she noted, Wal-Mart’s expansion opportunity boils down to available space, since the demographics of that customer base are favorable.
Wal-Mart has about 15 similar stores around the country, at least some of which are adjacent to metropolitan areas. “We’ve been going to malls for about 10 years, and it has been a successful venture,” she said. “It will continue according to demographics and available property.”
Citing the Directory of Major Malls, Goldman Sachs analyst George Strachan said Sunrise was a solid ‘B’ mall with total retail sales of $271 million out of 1.26 million square feet. The Wal-Mart, he said, would replace a J.C. Penney store and join the more than 130 other stores at the mall, including Macy’s, Sears, H&M, Wet Seal, Old Navy and American Eagle.
Strachan estimated that 600 to 800 mall anchor slots could open over the next 10 years, 300 to 400 of them in densely populated urban/suburban areas, where real estate is hard to come by. As many as 200 to 300 of these slots could be filled by discounters.
Target Corp. already has more than 30 discount stores in malls, said the analyst.
“Both [Wal-Mart and Target] express a real estate preference for single-level freestanding stores with large parking lots, but as traditional growth opportunities diminish, mall positions may emerge as an increasingly attractive option,” noted Strachan in a research note.
Expansion in this direction, though, would be restrained by slow mall anchor turnover, he said, adding that a major rationalization of the department store industry could double or treble the possible expansion of discounters into malls.
“Wal-Mart management views metro-market expansion as a huge opportunity and recognizes that in such areas, ‘retail has to be where retail used to be,’” wrote Strachan. “Operating a mall store, a multilevel store or even an undersized store in such locations is better than operating no store at all.”