By and  on February 17, 2005

NEW YORK — Brace yourselves Macy’s, Lord & Taylor and J.C. Penney: Wal-Mart could be headed to a mall near you.

Opposition to the growth of Wal-Mart Stores Inc., which today is expected to post a 15 percent earnings per share gain on an 11 percent sales increase for 2004, might be missing the mark.

In New Jersey, for example, the state legislature is examining a bill to halt the construction of all diversified big-box retailers within the state except for category killers such as Home Depot and Best Buy. In sales-tax-free Montana, lawmakers have proposed a bill dubbed the “Wal-Mart tax,” which would impose gross-receipts tax on the state’s largest retailers for their consumption of natural and labor resources. And in New York City, politicians are building careers — and grabbing media face time — by battling the world’s largest retailer over a proposed store in Rego Park.

But in these attempts to slow the development of massive Wal-Mart supercenters, politicians and advocacy groups are ignoring what might really be the retailer’s key expansion play: malls.

“Our preference is to be one-level and stand-alone because it’s much more cost-effective and easier to operate,” said Peter Kanelos, a Wal-Mart regional director of community affairs in California. “But if we can’t develop for lack of available land, then in order to meet the needs of consumers, we figure out how to adapt our stores.”

This is music to the ears of mall owners, who are thirsting for growth opportunities and looking for new anchor tenants as department store chains consolidate. So they are eager for Wal-Marts and Targets to move in (Target also reports its 2004 figures today).

“We have to keep [our malls] relevant,” said Peter Lowy, managing director of Westfield Group. “We have to keep up with retailers that are expanding, and they happen to be the Wal-Marts, Costcos and Best Buys of the world. We have to adapt our malls to fit them in.”

Last October, Wal-Mart opened its first multilevel store designed specifically for a mall in the Westfield Shoppingtown Parkway in El Cajon, Calif. The retailer has a few other mall locations, sites where it took over vacant department stores, such as a two-level, former Sterns store in the Sunrise Mall in Massapequa, N.Y.

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