Thursday, December 20, 2018

The Year in KeyPoints: An Annual Review

The end of another KeyPoints publishing year approaches. We’ve explored events and trends in retail real estate, and shared our unique research. Below is a recap of topics on which we’ve commented in 2018. Stay with us in 2019 to see where these stories go from here:

January: Reason to Smile
VP of Research Bob Sheehan wrote about a positive trend in brick-and-mortar retail holiday sales: “By most accounts, the industry just experienced its best Christmas since the end of the Great Recession in 2010. The National Retail Federation (NRF) reported that November/December sales were 5.5% higher than holiday 2016…If any of you thinks this could be a “one and done” holiday shopping season, it’s likely you’re mistaken. North American retailers expect a 6.2% increase in sales in 2018”.
Update: Most recent forecasts peg Christmas 2018 coming in at 4.3% to 4.8% (NRF) and 4.8% (CBRE), slightly below 2017. However, online sales are running 18.6% (Adobe Analytics) higher, an all-time record.

February: Mall owners Fill Up on Entertainment
Bob commented on the rise of entertainment tenants in malls: “The tenant category that is arguably playing the largest role in the re-thinking of mall tenancy is the category we broadly refer to as Entertainment… a variety of non-traditional entertainment concepts of many different types are absorbing large chunks of unoccupied mall square footage.”
Update: Entertainment growth doesn’t stop at the mall. Outside the mall, movie theaters, upscale bowling facilities, and trampoline parks continue to add space to the region.

March: Another Category Killer Gets Killed
Bob wrote about the demise of Toys R Us: “The two questions that always come up when bankruptcies are announced are, “Who will absorb the sales?”  and “Who will fill the vacancies?”  We can expect to see a significant impact on vacancy rates in all regions which may take some time to fully mitigate - and that’s only until the next category killer bites the dust.”
Update: Not a category killer per se, but a Sears and Kmart liquidation would add over 2.5 million square feet of vacancy to the three New England regions tracked by KeyPoint Partners.

April: Internet Sales tax: A Game Changer?
Bob commented on possible changes to the laws covering sales tax on online retail: “A change in the sales tax rule should be deliberated very carefully. If small retailers with both a physical presence as well as an online platform are required to collect sales tax for online purchases, will they have the wherewithal to get it done? It could be that burden, and the expense, are too big to bear. Consequently, a change in the online sales tax rule may be just the thing that drives some of these smaller retail firms out of business.”
Update: So far it appears that the sales tax change hasn’t had much effect on internet sales, which is setting all-time highs this holiday season.

Our May through August issues focused on our KeyPoint Reports on retail real estate in key New England markets, based on our GRIID™. All reports are available at KeyPointPartners.com.

September: Is It the 900 lb. Gorilla?
Bob Sheehan shared some thoughts on whether market share from closing Sears stores was being taken up by Amazon: “Although Sears hasn’t filed yet, its ongoing initiative to eliminate stores has freed up substantial sales dollars. Sears…saw its US revenue drop from $21.0 billion to $11.1 billion during that time frame, a decline of nearly $10 billion…When $10 billion gets tossed back into the expenditure pot, someone must be benefitting. Where have those revenue dollars gone?”
Update: Not much new to report here…yet!

October: Then and Now: Decade of Change?
Bob Sheehan explored whether the list of Top 25 Retailers in Eastern MA had changed in 10 years: “If were to ask you how much a list of the Top 25 Retailers by Store Count in a given region of the country had changed in the last ten years, what would you say - a great deal, somewhat, or not very much, really? We decided to use our GRIIDTM database to see how much change this region experienced during the past 10 years. To do so, we listed the top 25 retailers by store count in 2008 and in 2018.”

November: Just How Apocalyptic Is It?
Last month Bob questioned the concept of “retail apocalypse” by analyzing vacancy at 270 shopping centers: “While the fallout is far from over, there are signs the worst may be behind us…The point that needs to be stressed here is that 199 of the 270 shopping centers analyzed here - 74% - are only 4% vacant. In most circles that’s considered fully occupied.  Put another way: most centers are doing fine.”

All of which brings us to the close of another action-packed retail year! Thanks for your readership and support. Happy Holidays and a peaceful, prosperous New Year!
                                                                                                                                                                   









Mark Becker          Bob Sheehan         Chris Cardoni
Partner/CFO         VP of Research       Marketing Mgr.

KeyPoint Partners Company News

New Leasing Assignment: VPs of Leasing Don Mace and Michael Branton will handle leasing for 375 South Willow Street, Manchester, New Hampshire.


National Retail News

US retail sales increased a slight 0.2% in November, as strong holiday shopping sales were offset by lower gas prices. Excluding gas, however, the Commerce Department said last month’s retail sales rose a healthy 0.5% in a positive sign for economic growth. Retail sales have climbed a solid 5.3% so far this year. In November, non-store retail sales - a category that includes Internet brands such as Amazon - jumped 2.3%. Furniture, electronics, and health stores also enjoyed a solid bump as the holiday shopping season went into full swing. Besides non-store retailers, the gains were fueled by a 1.2% increase at furniture stores and a 1.4% growth in electronics and appliance stores. Core sales, which exclude autos, gas, and building materials, have increased over the past two months at the fastest pace in two years, a reassuring sign coming to the end of 2018. Among retailers still reporting monthly sales, L Brands was up 9.0% and Costco was up 9.2%. See sales reports below...Baskin-Robbins unveiled its next generation store format in a Fresno, CA location, adding handheld ice cream novelties and upgrading decor with modern fixtures and artwork that reflect local communities. The store will act as a model for new and remodeled shops in 2019, and will be among 6 - 10 new or remodeled stores to adopt the design in 2019. Baskin-Robbins has more than 2,500 US stores.

Accelerating Retail News

Burlington Stores expects to open 46 net new stores next year...Ikea will open around 30 urban store concepts over the next two years. These stores will differ from the company’s big-box warehouses, with a more experiential concept and a greater focus on e-commerce and service offerings…Leichtman Capital Partners closed on its sale of GFG Holding Inc. to two private-equity partners: Lion Capital LLP and Serruya Private Equity Inc. Terms of the deal were not disclosed. Global Franchise Group owns the brands Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery/MaggieMoo’s, Pretzelmaker and Round Table Pizza...At Home is building  its store portfolio, with a potential to grow to at least 600 locations. The retailer currently operates 178 stores…Giant Food opened 3 new stores in  VA last month, and will remodel 24 locations to feature new amenities such as improved perishable, produce, beer, wine and spirits offerings; florists; bigger natural and organic departments; hot food bars; juice bars; better checkout zones; and full-service pharmacies. Giant operates 164 supermarkets in Virginia, Maryland, Delaware and DC…Dollar General plans to open 975 new stores, remodel 1,000 stores and relocate 100 stores. The company expects to add produce to about 200 of these remodeled stores. Currently, Dollar General has about 425 stores that carry produce. The company sees an opportunity to add 12,000 to 13,000 US store..Swedish socks brand Happy Socks opened its 100th global store, in Manhattan’s Times Square, its third NYC location. Happy Socks hopes to open about 30 - 40 stores in the next couple of years…5 new Popeyes franchises will open on Long Island. Popeyes has about 2,500 US restaurants, and approximately 175 new locations opened in 2018... Dave & Buster’s Entertainment Inc. is on track to open 15 new locations in its fiscal 2018, which ends in February. Dave & Buster’s owns and operates 120 venues in 39 states, Puerto Rico and Canada…Amazon opened a 450 s/f Amazon Go store - about a quarter the size of existing Go stores - on the sixth floor of the Macy’s building in downtown Seattle…Starbucks opened its newest New York Roastery in a new nine-story office building Manhattan’s meatpacking district….Whole Foods Market opened its first Whole Foods Market 365 store in Atlanta, expanding the 365 banner to 12 stores....Grocery Outlet, which operates in Pennsylvania and the western states of Oregon, Washington, Idaho, Nevada and California, opened 30 new stores so far this year and plans 40 more. The retailer is focused on Southern California, and now operates more than 70 stores in the region. In June, Grocery Outlet opened its 300th store in Inglewood, California. The grocer plans to expand nationally…Alimentation Couche-Tard Inc. and CrossAmerica Partners LP reached an agreement that will see 265 sites change hands in a series of transactions. Couche-Tard will sell 192 US company-operated Circle K convenience/fuel stores with an aggregate value of approximately $184.5 million to CrossAmerica. CrossAmerica has agreed to sell to Couche-Tard assets with an aggregate value of approximately $184.5 million. The CrossAmerica assets include the real estate property for 56 US company-operated convenience/fuel retail stores currently leased and operated by Couche-Tard, and 17 company-operated convenience/fuel retail stores currently owned and operated by CrossAmerica in the Midwest.

Decelerating Retail News

Christopher & Banks plans to close 30 to 40 stores over the next two years with closings to begin in late 2019 as leases expire…Sears Hometown and Outlet Stores plans to close 80 to 100 stores during the fourth quarter. The company opened 2 new Outlet locations during the quarter along with 2 new Buddy’s Home Furnishings rent-to-own stores...L Brands signed a definitive agreement to sell its lingerie brand La Senza to an affiliate of private equity firm Regent LP. The deal includes La Senza’s home office organization, North American stores and e-commerce and international partnerships. There are currently 126 La Senza company-owned stores in the US and Canada. The financial terms of the agreement were not disclosed…Scotty’s Holdings LLC has filed for Chapter 11 bankruptcy protection and plans to close 4 of its Scotty’s Brewhouse locations by the end of the year...Shopko is closing 39 stores. The retailer has 363 stores in 24 states.

New England News

Target plans to open its first small-format store in CT, located in West Hartford at the Bishops Corner Shopping Center. The store is expected to open in 2019 and will be Target’s 7th store in the Hartford area and 21st in Connecticut...Asana Partners bought Jamestown’s 130K SF, 28-building Back Bay portfolio - mostly situated on Newbury Street - for $297.9M. The cluster includes 64 retail storefronts, 30 office suites and 51 residential units…Comcast opened 7 interactive Xfinity Stores in New England in 2018, bringing its regional total to 29... Alternative Therapies Group opened a retail marijuana dispensary in Salem, MA, the state’s third. Verilife and I.N.S.A. will become the fourth and fifth when they open soon in Easthampton and Wareham.

Mall News

Crazy 8s, the children’s clothing chain operated by Gymboree, is closing. All Crazy 8 locations will be closed and the number of Gymboree stores will be reduced in 2019, according to Gymboree Group. There are more than 295 US Crazy 8 locations, most in malls...GNC is on track to close about 200 company stores in the current year, and an additional 700-900 company stores over the next three years...Genesco Inc. has entered into a definitive agreement to sell its Lids Sports Group for $100 million in cash to FanzzLids Holdings. Genesco is also the owner of Journeys, Johnston & Murphy, and Schuh.

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

U.S. retail sales increased 0.2% in November, the Commerce Department said. Excluding gas, last month’s retail sales rose 0.5%

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® declined in November, following an improvement in October. The Index now stands at 135.7 (1985=100), down from 137.9 in October. 

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in November, as the PMI® registered 59.3 percent, an increase of 1.6 percentage points from the October reading of 57.7 percent. 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