Most Recent Articles In Fashion
Latest Fashion Articles
- Highlights From the 2016 Men’s Spring RTW Collections
- Colin Kaepernick, New Era Launch Capsule Collection
- Colin Kaepernick: Shoes, Tattoos and Victor Cruz
More Articles By
ATLANTA — Mervyns is liquidating. Foot Locker is closing 140 stores. Dawahares, which had 31 units, vanished this past summer. Goody’s Family Clothing, which just emerged from bankruptcy in October, has shut down 18 of its units. Eddie Bauer keeps shuttering more doors, and Saks Inc. is closing its Club Libby Lu tween specialty store business next spring. And that’s just the tip of the iceberg.
According to a developer at the International Council of Shopping Centers’ (ICSC) Southeast conference last month, the promotionally rampant holiday season won’t help matters, and more struggling retailers are expected to close their doors in 2009. Greg Greenfield, CEO, Gregory Greenfield & Associates, Atlanta, said January will be a particularly brutal month for retail bankruptcies, because of anticipated weak sales during the holiday season.
With so many retailers going out of business, closing stores or scaling back their expansion plans, coupled with the tight lending picture, retail developers are having to rethink their own projects as well. “Consumers are focusing on stretching their budgets,” observed Mary Lou Fiala, ICSC chair, and president and COO of Regency Centers. She continued, “Shopping center developers rely on retailers to create new and innovative concepts and products to drive consumers into their centers. There are clearly some positive developments in this area, with new and/or expanding retail concepts and formats, particularly in categories of fashion, upscale family restaurants and supermarkets.” Fiala also said there are some bright spots for shopping centers.
One is that the supply of new retail and shopping center space coming through the pipeline now is broadly in line with consumer and retailer demand. It’s not excessive, as has been the case in past decades, which means that the industry can absorb a slowdown in the rate of store growth. Two, the population is growing and becoming more diversified. Three, shopping centers are no longer as dependent on a limited range of mainstream anchors. Department stores are no longer the only anchor options at regional malls.
Ray Uttenhove, executive vice-president and managing principal, Southeast, of retail center developer Staubach, said of retailers, “Everyone’s looking very hard at what’s driving the consumer.” He added, “There’s more focus on convenience and on customers shopping closer to their needs.” He said there must also be a good shopping experience for consumers and named T.J. Maxx as an example. “It’s a treasure hunt,” he said, “and because the merchandise changes often, it brings people back.”
Bealls Outlet Stores is one example of a retailer that is still expanding and looking at new concepts. Ruth Coan, partner at The Shopping Center Group, said, “They’re upscaling themselves some in their presentation and are looking to do bigger stores in more upbeat locations.” Bealls Outlet has eight significant store projects planned for spring 2009, some of which are in new markets, including Myrtle Beach, S.C., and Houma, La., according to Conrad Szymanski, president.
The Bradenton, Fla.–based off-price retailer, a part of Bealls Inc., also has a new store prototype that increases store square footage from 15,000 to 25,000. “We can put more merchandise in these stores for all the categories we represent—apparel, home and footwear,” said Szymanski. “We feel we can give our customer a worthwhile shopping experience in 25,000 square feet.” Szymanski said Bealls Outlet continues to maintain a “quite healthy business. We do have a compelling price point, but also we have made a lot of changes in how we do things internally to match merchandise with the customer profile [in each market].”
Bealls Department Stores, also part of Bealls Inc., added 353,000 square feet of retail space in fi scal 2008 to its base of slightly over 5 million square feet, representing about 7 percent growth, said Jim Simpson, vice-president of store operations and real estate. Bealls plans to add 3 to 4 percent square footage in fiscal 2009, then 6 percent in fiscal 2010. The chain currently has 86 stores, all in Florida. Its new footprint for stores is typically 60,000 square feet in smaller markets and 80,000 square feet in larger markets. Bealls is increasing the size of older, smaller (35,000-square-foot) units at a rate of one to three a year, as well as opening new units.
Brian Letkoff, senior vice-president, Colliers Spectrum Cauble Realty Inc., Atlanta, whose firm represents Macy’s, Old Navy and Rack Room, said retailers now are being very careful and aggressive about negotiating rents. ”They’re getting leaner and meaner,” he said. He added that retailers are moving forward, but “it’s a much more cautious market.”
Macy’s Inc. announced in October that its need for cash had been reduced, because of a combination of initiatives, including reduced capital spending and disciplined management of inventories and expenses. The retailer has warned that same-store sales for the fall season could drop by 3 to 6 percent. Its October comps fell 6 percent. Macy’s has closed nine stores this year, or 1.5 million square feet, but also announced plans to open six.
Wal-Mart Stores Inc. is cutting back on its capital expenditures for the Wal-Mart division in the U.S. by as much as 43 percent—from $9.1 billion in fiscal 2008 to a projected $5.8 billion to $6.4 billion in fi scal 2009. The company said in October it plans to add about 23 million square feet in fi scal 2009 and 14 million square feet in fiscal 2010, down from 26 million in fi scal 2008, and will focus on supercenter growth, but in fewer numbers than in recent years. Wal-Mart said at its annual analyst and investor meeting in October that its strategic plan is to continue to focus on capital efficiency and improved return on investment.
Penney’s is scaling back on previous plans to open 50 new stores each year through 2011. It now plans to open 20 new or relocated stores in 2009. Planned renovations have been cut to 10 to 15 in 2009, compared to a previous goal of 65 a year through 2011. It’s reducing capital expenditures for 2009 to $650 million, down from an expected $1 billion for 2008 and $1.2 billion in 2007. Money is tight. “This is more of a credit crisis than a real estate [one],” said Kris Cooper, managing director, Jones Lang LaSalle, Atlanta.
The retail problems are bad, but “none compare to the sale of Bear Stearns to JPMorgan Chase, the sale of Merrill Lynch to Bank of America, and Wachovia to Wells Fargo. Retail real estate in the Southeast is fundamentally sound.” Vacancy rates in the Atlanta market are currently in the 10 to 12 percent range. However, “some development deals have come to a halt, because it’s difficult to get financing and because some developers can’t get the anchors they want.” He added, “Tenants are coming [to developers] and asking for rent relief.”
John Cutcliff, senior vice-president, Bank of America, said he sees a stable bottoming out in 2009, but believes a turnaround won’t come until 2010 because of a lack of liquidity in the market. “It will be tough the next few months,” he said. “There’s still financing, but you won’t see it as much as in the past. Fewer lenders have access to cash.” And, when competition returns to the financial lending market in three to five years, Cutcliff said, it will be relationship-driven.
The Real Estate Honorary Board at Georgia State University (GSU) recently completed the first part of an ongoing survey and, in it, members said they believed liquidity will return to the market in 12 to 18 months, primarily through private equity firms and foreign investors. Dr. Julian Diaz, professor and chair of GSU’s Department of Real Estate, said he also hears that lenders are focusing on relationships now and “keeping them strong. It’s an issue of trust.”
Cooper said he hopes a recovery will begin next year, but the market isn’t at the bottom yet. “Until you’re at the bottom, you can’t have investor interest again. It will be a slow coming back, because you’ve just taken out a huge chunk of the lenders,” he said. “Banks are still making loans, but they’re much more conservative. And it will take a while for properties to increase their values.”
Meanwhile, the retail market is struggling. Said Cooper, “There are retailers in trouble and there will be more in trouble over the Christmas holiday. Mom & pop stores are struggling, especially if they’re selling something the consumer can cut back on.” And that includes apparel.