Thursday, June 16, 2016

Preview : 10-Year Retail Category Special Section

In earlier Special Sections of our KeyPoint Report for Eastern Massachusetts we’ve explored changes in the Grocery and Restaurant categories. This year we’ve analyzed 10 years of data on occupancy changes in all retail tenant categories. Here’s a preview:

It’s clear that social values, shopping habits, and lifestyle choices of shoppers in this region have changed the retail real estate landscape. For example, Eastern MA residents have no excuse for not getting enough exercise, based on growth in Health & Fitness Services during the past decade. Regional shoppers certainly love their pets, too.

The Health & Fitness Services category nearly doubled in total space since 2006, currently including approximately 7.6 million square feet. Pet Shops & Pet Supplies space gained about 55%, reaching a level of 1.4 million square feet. Variety Store inventory increased nearly 50%, with total inventory now at 2.8 million square feet. Dollar Stores, a rapidly-growing part of this category, are largely responsible.

The Medical & Dental Services category increased about 30% and is currently up to 1.7 million square feet. Although Sporting Goods shows a gain of approximately 13%, the Sports Authority liquidation, which will reduce inventory in the category by more than 400,000 square feet, was not factored into the change - inclusion would have placed Sporting Goods in negative territory. Book Stores and Electronics categories ended the decade with the largest declines in retail space, both shrinking by more than 40%. Space among Florists declined substantially, as did Furniture Stores and Office Supply Stores.

With respect to store count, growth in the cellular phone business drove Telephone Equipment to the top, with store count increasing by 34%. Expansion of fitness clubs throughout the region, as mentioned, has Health & Fitness Services as the second fastest growing category, increasing store count by 29%.  Grocery Stores showed very little change during the past 10 years, gaining in numbers by a nominal 1%. However, wholesale clubs, dollar stores, and discount superstores had much to do with constraining growth in this category.

The Great Recession and the rise of the internet, including the ability to shop for a house online, took a toll on housing development and related industries during the decade. Evidence of this shows up in the decline of the Real Estate category, which primarily includes residential real estate agencies. This category tied with Gift, Novelty, & Souvenir Shops for the largest decline in store count, down 34%. With the vast slowdown in home sales activity, Furniture Stores and Home Furnishings also felt the pain, reducing store counts by 31% and 27%, respectively.

The chart below tracks percentage changes in expansion/contraction by square footage of major retail tenant categories from 2006 through 2016.

Bob Sheehan, Vice President of Research
BSheehan@KeyPointPartners.com




See the complete Special Section: Retail Category Report in the 2016
KeyPoint Report for Eastern Massachusetts/Greater Boston.



KeyPoint Partners Company News

















National News

Retail sales rose 0.5% in May, more than expected, suggesting economic growth is gaining steam. Auto sales rose 0.5%. Receipts at service stations increased 2.1%, reflecting increases in gas prices. Sales at clothing stores increased 0.8%, the largest gain since November. Online retail sales shot up 1.3%. Receipts at sporting goods and hobby stores jumped 1.3%. Restaurants and bars sales climbed 0.8%. Sales at electronics and appliance outlets gained 0.3%. Sales at building materials and garden equipment stores fell 1.8%. Furniture store sales dipped 0.1%. Among retailers reporting monthly comp-store sales, L Brands was flat, Gap was down 6.0%, and Costco was up 1.0%. See our sales reports below.

Accelerating News

Davids Tea opened its 200th North American store this month at Chicago Premium Outlets in Aurora, IL...14 colleges and universities have selected Barnes & Noble College as their partner of choice to operate their campus bookstores. The 14 new contracts represent 23 new campus and virtual bookstores... A 60,000 s/f Crayola Experience has opened at Mall of America. The Crayola Experience is a family attraction that features hands-on activities inspired by Crayola products and technologies as well as a Crayola Store offering a selection of Crayola products and souvenirs. Crayola entered the attractions world in 2013, when the company re-imagined Crayola Experience’s hometown facility in Easton, PA, then opened a second location, in Orlando, FL...Tiffany expects to open 11 stores, relocate 10 stores and close 6 stores worldwide during fiscal 2016. ..Australian fast-fashion chain Cotton On has more than 1,400 stores in 18 countries, but only 121 stores in the US, about 40 of them in Southern California. That will soon change as the company gears up for an expansion to more than 2,000 stores around the world by mid-2019, nearly 10% of them in the US... FASTSIGNS, the sign, graphics and visual communications franchise, has signed 12 franchise agreements with new franchisees who will open centers across the country. FASTSIGNS International, Inc. currently has franchised locations in over 600 locations in 9 countries worldwide with plans to open 45 to 50 additional locations by year end...Five Below opened 21 new stores and ended the quarter with 458 stores in 28 states. During fiscal 2016, the company expects to open 85 new stores, including 28 in the second quarter...Personal care retailer Bluemercury expects to open 42 new stores in 2016... Johnny Rockets will open 14 additional mall locations this year. More than a third of its domestic and international restaurants are located in malls. Johnny Rockets recently announced a new restaurant design and logo...MinuteClinic, the retail medical clinic of CVS Health, has opened 8 new locations inside Target stores in Maryland, including 6 in the Baltimore metro area. The clinics have been rebranded and converted to MinuteClinic. There are now 43 MinuteClinic locations in Maryland, including clinics in select CVS stores. In December 2015, CVS Health acquired all Target pharmacies (1,672 locations across 47 states) and retail clinics (79 locations in 7 states)...Christopher & Banks intends to open 6 new outlet stores and 3 MPW stores in fiscal 2016...Francesca’s plans to open 50 to 60 new stores and close 5 to 10 unprofitable stores during the fiscal year, including 15-20 openings and 1-5 closures in the second quarter. The company count is 637 stores as of April 30, 2016...Harps Food Stores Inc. is acquiring 9 stores in Arkansas and Missouri that were shut down by Wal-Mart Stores Inc. earlier this year. In all, Wal-Mart shut down 11 stores in Arkansas. Wal-Mart announced it was closing 269 stores worldwide, including 154 in the US, as part of its ongoing efforts to streamline and reorganize...The third American Primark store opened this month in Danbury, CT.  The first American Primark opened in Downtown Crossing in Boston last fall, and the second last year at the King of Prussia Mall. Three more are set to open this year, and another three next year. Primark is filling space once occupied by Sears in seven of its  nine American mall locations. Globally, Primark has more than 300 stores in 10 countries... MidiCi: The Neapolitan Pizza Company has signed 100 franchisees to open 352 units across the US over the next five years. 15 restaurants are scheduled to open in 2016, followed by another 50 locations in 2017...Rejuvenation, retailer of reproductions of classic lighting products and house parts is set to open its first location, in Chicago. It will be the company’s 7th store, with existing locations in Atlanta, Seattle, Portland, Oregon, and three in California. The company was founded in 1977 as an architectural salvage store and acquired by Williams-Sonoma in 2011... Gourmet pizza franchise Paisano’s Pizza will open the first of 9 new locations in Washington, DC this month. 8  more locations are slated to open in the next 36 months. Since launching in 1998, Paisano’s Pizza has expanded to 30 locations throughout Northern Virginia and Maryland and abroad, with locations in Dubai...Macy’s will debut a store design at its remodeled location in Easton Town Center, Columbus, OH. The makeover transforms Macy’s conventional department store format with a model that spotlights “lifestyle” departments and leased businesses. The prototype also includes an increased emphasis on customer service... PGA Tour Superstore opened its 26th store to date, and first store in Minnesota, this month. Located in a former Sports Authority location, the 41,000 s/f store has 12 interactive simulators, practice hitting bays, a large putting green measuring more than 1,500 s/f, and an in-house club-making and repair facility to provide an interactive experience to golf enthusiasts of all levels. PGA Tour Superstore is operated by Golf & Tennis Pro Shop, a subsidiary of AMB Group...Tender Greens restaurant plans to expand to Manhattan beginning next year. They plan on 10 to 12 locations in New York City, and will expand over the next few years from D.C. to Boston.

Decelerating News

Mars Super Markets will close all stores in Maryland by the end of July. In conjunction with the closures, 5 stores are slated to be sold to Weis Markets. The company said it intends to complete the purchase in late July at which time Weis Markets will operate 9 stores in Baltimore County, essentially doubling its footprint in the region. Mars opened its first store in Essex in 1943... Ralph Lauren Corp. plans to close more than 50 stores, or about 10% of its total footprint.

New England News

Aldi will open an 18,000 s/f grocery store this month on South Willow Street in Manchester, NH at the site of the former Michael’s store, the chain’s fifth NH location... Namdar Realty Group of Great Neck, N.Y., has purchased the financially troubled Steeplegate Mall mall and its 51 acres in Concord, NH for $10.3 million in a sealed-bid auction. The mall opened in 1990, but over time, national retailers peeled away, putting the mall in distress. In March 2015, mall owner Rouse Properties turned the property over to its mortgage lender, which was owed nearly $46 million. Namdar owns more than 15 million square feet of commercial real estate in the US, including retail strip centers and medical office buildings...A new New Hampshire Liquor and Wine Outlet will open on Lafayette Road in Seabrook, according to the New Hampshire Liquor Commission. The new 15,000 s/f store at Southgate Plaza replaces an existing 6,000 s/f store in Seabrook, which is now closed. Since 2012, 23 New Hampshire Liquor and Wine Outlets have been relocated or renovated. The liquor commission operates 79 locations in New Hampshire.

MAY RETAIL SALES REPORT





























Notes: figures gathered from individual company websites, press releases, and Federal filings.  Not all companies report all figures; results not reported will be marked “n/r”. Quarterly results will be updated when available; quarterly figures are shown in italics. Figures from companies not calculated to one decimal point automatically received an ending digit of 0. 

COMMERCE DEPARTMENT MONTHLY SALES

The Commerce Department said retail sales increased 0.5% last month after surging by an unrevised 1.3% in April. It was the second straight month of gains and lifted sales 2.5% from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.4%.

Source: U.S. Department of Commerce - commerce.gov

TREASURY YIELDS


















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

CONSUMER CONFIDENCE INDEX

The Conference Board Consumer Confidence Index®, which had decreased in April, declined further in May. The Index now stands at 92.6 (1985=100), down from 94.7 in April. The Present Situation Index decreased from 117.1 to 112.9, while the Expectations Index declined from 79.7 to 79.0 in May.

Source: The Conference Board - www.conference-board.org

PURCHASING MANAGERS INDEX

Manufacturing expanded in May as the PMI® registered 51.3 percent, an increase of 0.5 percentage point from the April reading of 50.8 percent, indicating growth in manufacturing for the third consecutive month, following five consecutive months of contraction in manufacturing. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Source: Institute for Supply Management - Manufacturing Report on Business - www.ism.ws