Wednesday, November 20, 2019

The Replacements: Avoid the Big Gorilla

This past decade has been a revolving door of retail tenants closing stores, followed by the ensuing scramble to fill the empty spaces left behind. We all recall the days of large format retailers such as Linens ‘N Things, Circuit City, Borders, Filene’s Basement, Office Max and, more recently, Sports Authority and Toys R Us. There are many more we could add to this list.

And then we have Sears, JCPenney, and Macy’s: the major department store companies that were blind-sided by the impact of ecommerce and the attitude reversal of shoppers that had grown up on regional malls. More closings resulted. Exacerbating the problem was that these were all large format vacancies that needed to be filled. A certain degree of panic set in among landlords who had to find viable replacements in a retail world that was in a state of disarray. Who would they find?

In many cases they called on low rent payers, retail “bottom feeders” if you will, that once would never have been considered viable candidates for the better power and community centers which traditionally catered to the type of tenants noted above. But then things changed again: the more attractive target tenants now included familiar names such as Burlington, Ocean State Job Lot, Tractor Supply, and Big Lots. When things improved a bit, other more desirable candidates came to the forefront, such as Target, Hobby Lobby, Whole Foods, Dick’s Sporting Goods, and the TJX divisions. Also, there were newcomers to the market that helped eat up vacant space, including At Home, Floor & Décor, and PGA Superstore. However, even the recent proliferation of viable retail replacements hasn’t been enough to fill all the vacancy built up over the past 10 years.

So landlords reached beyond general merchandise and grocery prospects and actively pursued entertainment venues - not only more traditional movie theaters, but also trampoline parks, bowling venues, adventure parks, and escape rooms – as well as medical uses and fitness centers. These tenant types have one common advantage over traditional retail tenants: what they provide to fulfill customer needs and desires cannot be purchased online; they’re “gorilla proof” (as in the 900 lb. variety whose name begins with an A).

Growth in these retail tenant categories is clearly evident when we review the annual results within our proprietary GRIIDTM retail database. The Health & Fitness category has been the most consistent winner for more than a decade with respect to square footage gains in Eastern Massachusetts/Greater Boston. Going back as far as 2007, this category has been consistently ranked in the top five. In fact, in the past ten years it’s made it into the top three in all but one year.

The Amusement & Recreation category, better recognized today simply as Entertainment, has also come to the forefront in recent years. While movie theaters and bowling alleys have always been a big part of the Entertainment industry, we are now seeing significant upgrades to these venues compared to years past. Theater offerings now include reclining seats, bar service, dessert menus, and reserved seating. Bowling facilities are incorporating luxury bowling with live music, larger-than-life sports viewing, billiard tables, and retro-video gaming. In more recent years, the entertainment category has broadened to include trampoline and adventure parks and escape rooms. These newer venues have helped push Entertainment space in the region to the top position in our annual rankings in three of the past six years and to the top ten nine times since 2009. The other strong growth category worth mentioning is Medical & Dental Services. In the past 15 years, this category never ranked in the top 10 until 2014. Since then it has ranked among the top six every year, including two first place finishes. Urgent care centers, dental offices, doctors’ offices, and other medical uses have been the main drivers as landlords hunt for non-retail uses to fill unoccupied space.

In reviewing the vacant spaces over 10,000 square feet that exist across all three KeyPoint Partners GRIIDTM regions, which includes just under 400 units, we identified 29 spaces that have commitments from tenants. While these new tenants come from a variety of categories, seven come from the Entertainment category, including four trampoline parks of various brands. Also included are a movie theater and a Dave & Busters. There also will be five Health & Fitness tenants added later this year and early next year, including three Fit Factory locations. While there are no spaces larger than 10,000 square feet with medical use commitments thus far, there are 10 commitments for smaller units, including urgent care, physical therapy, dental clinics, and other doctors’ offices. The remaining larger format boxes are earmarked mainly for grocery, pharmacy, and restaurant uses, although there are commitments for a number of these spaces from Target, Marshalls, and Ulta Beauty, all dominant retailers within their respective merchandise lines.

The telling point in all of this is that there are opportunities out there for landlords to fill vacant retail space, but it’s best to find the kind of tenant that is Amazon-proof…in other words, avoid the big gorilla!
Bob Sheehan, Vice President of Research
BSheehan@KeyPointPartners.com

KeyPoint Partners Company News

Team News: Tina Chenosky, PM in the Maryland office, has earned the ICSC Certified Retail Real Estate Professional (CRRP) credential. This certification is earned through a demonstration of knowledge of the core principles essential to the retail real estate industry…Investment Sales: VP of Investment Sales Jonathan Aron represented the seller and procured the buyer in the sale of Hooksett Village Shops, Hooksett, NH; a retail property fully-tenanted by Sherwin Williams in Falmouth, MA; and Center Plaza in West Bridgewater, MA. Jonathan also represented the buyer in the sale of a newly-constructed Aldi in No. Lauderdale, FL...New Leasing Assignments: VP of Leasing Don Mace has added Christmas Tree Shops and Cumberland Plaza, North Attleboro, MA; Hale Road Plaza, Manchester, CT; North Dartmouth Towne Center and Towne Center West, North Dartmouth, MA.


National Retail News

US retail sales rebounded in October, but shoppers cut back on big-ticket household items and clothing, which could alter expectations for strong holiday sales. The Commerce Department said retail sales increased 0.3% last month, lifted by motor vehicle purchases and higher gasoline prices.. See sales reports below.

Accelerating Retail News

At Home added 5 new stores last month. The retailer now operates 213 locations in 39 states with an eventual goal of having more than 600 stores…Lidl US will roll out a 2nd wave of stores across New York’s Long Island; by next summer, the grocer will have 8 stores in the area. Lidl operates 10,800 stores in 32 countries…Major League Baseball will open a retail destination in midtown Manhattan in summer 2020, the league’s first permanent retail location in the US…Five Below and Nerd Street Gamers will build 3,000 s/f Localhost spaces in Five Below stores, and host in-person gaming events using professional-level equipment. The test will begin with a multi-store pilot in 2020 and could scale to 70 or more locations...Chipotle’s has over 80 restaurants currently under construction, about half of which will feature mobile pickup lanes, dubbed Chipotlanes, resulting in about 60 Chipotlanes by the end of the year. In 2020, the company expects to open 150 to 165 restaurants, and more than half will include Chipotlanes…Take 5 Oil Change opened its 500th store…UK-based EG Group has completed its acquisition of Cumberland Farms, which operates 567 c-stores in 7 Northeast states and Florida. The deal brings EG Group’s US network to 1,680 c-stores and gas stations across 31 states…CVS announced that its BeautyIRL concept will be expanding to nearly 50 stores by the end of the year...Duluth Trading Co. debuted a new concept,  “The Museum of Man Area and Underwear Shop,” at Mall of America. The store is dedicated to Duluth’s underwear styles for men, with sections dedicated to its four main product lines. Duluth Trading operates 55 stores…Bob’s Discount Furniture will open its first 2 Cincinnati-market stores and enter 2 other new markets early next year. The company is leasing a 31,000 s/f former Hhgregg on Mall Road in Florence, KY., and a former 39,000 s/f Toys R Us in Colerain, OH. With the latest expansion, Bob’s store count will reach 126. The company said additional openings are slated for later in the year and include more new markets...Allbirds will add 20 stores next year. The company currently has 15 stores…Ashley HomeStore opened its 1,000th store last month, a 22,000 s/f  showroom in Millsboro, DE…The Coffee Bean & Tea Leaf will open 3 new locations over the next several months, starting with East Pasadena, CA.  The company currently has more than 1,200 retail locations across the globe...Primark signed a lease to open a 34,200 s/f store in Fashion District Philadelphia, the new retail and entertainment center. The retailer opened its first US store in 2015 in Boston. It now has 9 locations in the Northeast...Happy Socks opened its 4th NYC store in Herald Square, a continuation of Happy Socks’ US expansion plans. The new store opening comes on the heels of 2 store openings earlier this year. Later this year, Happy Socks will open a 5th New York location...HomeGoods is opening 9 new stores across 8 states this month and reopening 1 updated unit…Edible Brands Inc., parent company of Edible Arrangements, is rolling out Incredible Edibles, a line of hemp C.B.D. products set to launch in traditional Edible Arrangement stores and newly branded Gifts & Treats Edible stores later this year. Edible Brands also has plans to introduce its first Incredible Edibles store, which will focus on natural health and wellness, next year...Restaurant chain Slim Chickens expects to open its 100th restaurant in December and is on track to open more than 30 stores in 2020... Burlington Stores will add 50 stores to its portfolio in fiscal 2019 as the 736-unit chain approaches its eventual goal of 1,000 stores...Grocery Outlet envisions quadrupling its current store base through expansion to contiguous markets, eventually reaching 4,800 US stores. Grocery Outlet currently operates 337 stores, all but 20 on the West Coast... REI opened 4 stores in a single day this month as it entered two new markets. REI has 158 stores in 37 states and DC

Decelerating Retail News

Hamilton Beach Brands Holding Co. is closing all 160 of its Kitchen Collection retail stores by the end of this year. Kitchen Collection has stores in 39 states, mainly in outlet malls...Destination Maternity filed for bankruptcy with the US Bankruptcy Court in Delaware and is considering options including a sale. Destination Maternity said it intends to use the process to optimize operations, including right-sizing its brick-and-mortar store footprint. As of August, Destination Maternity operated 446 stores in the US, Canada and Puerto Rico under the banners Motherhood Maternity, A Pea in the Pod and Destination Maternity, along with 491 leased departments in department stores and baby specialty stores. It also operates international stores via franchising…Hudson’s Bay Company has agreed to be taken private by a group of its shareholders headed by Richard Baker, executive chairman of the company. The shareholders include Rhone Capital LLC, WeWork Property Advisors, Hanover Investments and Abrams Capital Management. Hudson’s Bay has been struggling to adjust to the evolving retail marketplace, closing underperforming locations and shedding assets. In August, the company announced that it was selling its Lord & Taylor division to clothing rental subscription company Le Tote. Founded in 1670, Hudson’s is the oldest company in North America. It operates more than 300 stores around the world, under the banners Saks Fifth Avenue, Hudson’s Bay, Lord & Taylor, and Saks Off 5th... Fresh Thyme Farmers Market will close 3 stores in mid-November. These closures follow two others that took place over the summer...Parent company Ascena Retail Group started store-closing sales at all of Dressbarn’s remaining 544 locations. All stores are expected to go dark no later than December 26…Olympia Sports is closing 76 stores across the country. 50 of those stores are in New England, 22 in MA...Forever 21 Inc. will keep open more than 60 US stores previously set to close as part of the company’s bankruptcy restructuring, after the retailer secured rent concessions from several landlords. The company had no reorganization plan when it filed, and had said it would close at least 178 US stores. Its beauty offshoot, Riley Rose, will also be closing all 100 stores…A bankruptcy court judge in Poughkeepsie, NY approved the sale of Barneys New York to Authentic Brands Group, which plans to close most Barneys stores...Transformco, parent company of Sears and Kmart, will close another 96 Sears and Kmart stores, leaving the Sears/Kmart chain with a total of 182 locations…CVS Health Corp. will close 22 “underperforming” drug stores early next year, in addition to the 46 stores CVS closed earlier this year….BBB Group, parent company of Bailey Banks & Biddle, filed for Chapter 11 bankruptcy. Bailey Banks & Biddle began 2019 with 5 stores. However, by the summer, it had closed 4.

New England Retail News

Bridesmaid gown showroom Brideside Bridesmaid opened a 2,000 s/f location on Boston’s Newbury St. A second location for bridal gowns, named Brideside Bride, is scheduled to open nearby in January...Shake Shack opened its 3,015 s/f downtown Boston location last month. Shake Shack has 330 US locations, including 5 in Greater Boston.

Mall News

After 17 years, a small part of the 3 million s/f American Dream retail and entertainment complex at the Meadowlands in East Rutherford, NJ opened last month. Developer Triple Five obtained a temporary certificate of occupancy from the State of New Jersey and was able to open what it calls “Chapter One” of the center which includes a massive indoor Nickelodeon Universe amusement park and The Rink, an NHL-sized ice skating and hockey facility. The TCO will last for 90 days and can be renewed. “Chapter Two” begins this month when the gates open at Dreamworks Water Park. The opening of Big Snow indoor ski slope is the third chapter and is slated for December. The retail and shopping districts of the center, when open, will include 450 retailers and restaurants...J.C. Penney opened a revamped location at North East Mall in Hurst, TX that features a totally reimagined format and a truncated name: Penney’s.  The store includes Penney’s first ever fitness studio with instructor-led fitness, stretching, and yoga classes, lifestyle workshops, cooking gadget demos, a kid’s clubhouse, 11 lounges, a café, and a Shutterfly Picture Pop Selfie Studio.

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 0.3% last month, lifted by motor vehicle purchases and higher gasoline prices, reversing September’s unrevised 0.3% drop, which was the first decline in seven months.

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® decreased marginally in October, following a decline in September. The Index now stands at 125.9 (1985=100), down from 126.3 in September.

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

PURCHASING MANAGERS INDEX

Manufacturing contracted in October, as the PMI® registered 48.3 percent, an increase of 0.5 percentage point from the September reading of 47.8 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

Wednesday, October 23, 2019

The Halloween Issue

“Brick-and-mortar remains the top destination when it comes to Halloween shopping”.
Marianne Wilson, Chain Store Age

Well, there you go, a bit of a bright spot in the midst of continuing upheaval in the retail world (and, you know, the regular world): even though they’re searching for ideas online, Halloween shoppers still plan to visit actual stores for their costumes, candy, and party purchases, at least according to the National Retail Federation’s Halloween Data Center.

Which actual stores? According to the NRF, to buy Halloween merchandise, 42 percent of shoppers will go to a discount store, 36 percent to a specialty Halloween or costume store, 25 percent to a grocery store, and 23 percent will visit a department store. 25 percent will purchase online.
Although average individual Halloween shopper spending won’t quite reach last year’s record level, it will still add up to a healthy $8.8 billion in total Halloween spending. According to the NRF (based on a survey of 7,419 consumers was conducted in early September):

Total Halloween spending will reach $8.8 billion, down slightly from $9 billion last year and  the third-highest in the survey’s history, after the record $9.1 billion set in 2017.
Shoppers will spend an average $86.27 each, down just slightly from last year’s record $86.79.
172 million people plan to celebrate Halloween, 68 percent of those surveyed, down from 175 million last year.
Online search remains the top source of Halloween ideas, cited by 35 percent of consumers surveyed, followed by browsing in stores at 28 percent, and ideas from friends/family at 20 percent. Shoppers will spend $3.2 billion on costumes (purchased by 67 percent of Halloween shoppers), $2.6 billion on candy (95 percent), $2.7 billion on decorations (72 percent) and $390 million on greeting cards (34 percent).

Among those celebrating, 69 percent plan to hand out candy, 49 percent plan to decorate their home or yard, 47 percent will dress in costume, 44 percent will carve a pumpkin, 32 percent will throw or attend a party, 29 percent will take their children trick-or-treating, 22 percent will visit a haunted house and 17 percent will dress their pets in costume.


Speaking of costumes, a warning for those of you who suffer from Coulrophobia (look it up): the most-searched costume this year, and therefore likely to be the most-worn, according to Google: Pennywise, the frightening clown from It.

And on the subject of fear, the NRF notes that “the ongoing trade war with China is causing uncertainty among American consumers, and 14 percent of those surveyed said their concerns about the economy would impact their Halloween plans. However, most Halloween merchandise was in the country before 15 percent tariffs on consumer goods took effect September 1.

There you have it – a reasonably positive Halloween forecast for retailers. Not only that, but looking ahead, the NRF forecasts that 2019 holiday sales will grow between 3.8 and 4.2 percent. Here’s hoping.

By the way, 2019, according to the National Garden Bureau, is the Year of the Pumpkin, of which American farmers produce between 1 and 2 billion pounds annually. Happy Halloween!

Chris Cardoni, Marketing Manager
CCardoni@KeyPointPartners.com
Source: NRF.com/Halloween Data Center

KEYPOINT PARTNERS COMPANY NEWS

Team News: Eva Marlier has joined the Boston office as an Assistant Property Manager. Karen Kelley joined the Burlington, MA office as an Accounts Payable Data Entry Clerk…Investment Sales: VP of Investment Sales Jonathan Aron represented the seller in the sale of Longhorn Steakhouse and Bertucci’s, Walkers Brook Drive, Reading, MA, and represented the seller and procured the buyer for the sale of the Newton Highlands Portfolio, a four-building mixed-use property in Newton, MA.



NATIONAL RETAIL NEWS

US retail sales fell for the first time in 7 months in September, the Commerce Department said. Sales dropped 0.3% last month as households slashed spending on building materials, online purchases, and automobiles. The decline was the first since February. Compared to September last year, retail sales increased by 4.1%. See sales reports on Page 4...Simon Property Group has announced an agreement with online shopping site Rue Gilt Groupe to create a multi-platform venture dedicated to online shopping from its outlets. Simon operates 89 outlet centers.

ACCELERATING NEWS

purchase of Del Frisco’s Restaurant Group and has an agreement to sell Del Frisco’s Double Eagle Steakhouse and Del Frisco’s Grille to Landry’s for an undisclosed sum. The company operates high-end steak chains such as Morton’s, Mastro’s, Vic & Anthony’s, Strip House and Brenner’s…Multi-concept owner Inspire Brands has entered into an agreement to acquire Jimmy John’s Sandwiches. The financial terms of the transaction were not disclosed. Inspire owns the Arby’s, Buffalo Wild Wings, Sonic Drive-In and Rusty Taco brands which total about 8,300 locations worldwide. Jimmy John’s has more than 2,800 locations across 43 states...Wegmans opened its 100th store this month, a 104,000 s/f store in Raleigh, NC…Wawa plans to open 40 convenience stores in Northern VA during the next 15 years, the first in April 2020. Wawa is on track to open 63 stores this year. The company currently operates more than 870 US stores…Designer handbag reseller Rebag opened its 8th brick-and-mortar location, at Roosevelt Field mall, Garden City, NY. Rebag plans 30 locations in the medium term…Dollar General opened its 16,000th store this month with a location in Panama City, Florida.  The Company plans to expand its presence to 46 states by adding locations in Wyoming and Washington in 2020... Amazon reportedly has signed leases for and will open more than 12 brick-and-mortar grocery stores in greater Los Angeles. The stores will operate separately from Whole Foods, and measure about 35,000 s/f. Amazon plans additional grocery stores in other US markets...Dick’s Sporting Goods opened 5 Dick’s stores and 2 Golf Galaxy stores this month. The company has a total of 732 Dick’s Sporting Goods stores and 95 Golf Galaxy stores in 47 states. Dick’s has also entered into an agreement with Sportsman’s Warehouse Holdings Inc., which will acquire 8 of Dick’s Field & Stream locations, to be rebranded under the Sportsman’s Warehouse banner. Three are located in Pennsylvania, two in New York, two in North Carolina, and one in Michigan.   Dick’s has been evaluating its hunting business, including its 35-store Field & Stream division…RH opened a three-level, 60,000 s/f store at The Gallery in Edina, a suburb of Minneapolis. RH is set to open 2 additional locations this year, in Columbus, OH, and Corte Madera, CA…VSP Global has completed the acquisition of Visionworks, which operates more than 700 stores in nearly 40 states. Visionworks will continue to operate independently...The Cheesecake Factory has completed its  acquisition of Fox Restaurant Concepts (FRC). They will essentially operate as two companies, each with its own headquarters. FRC grew its North Italia concept to 21 locations in 10 states. Now the brand becomes part of Cheesecake, which has disclosed plans to open 4-5 North Italias in 2020, roughly the same as the number of Cheesecake-brand restaurants expects to open. Other FRC brands to be transferred to Cheesecake’s portfolio include Flower Child; Doughbird; Culinary Dropout; The Arrogant Butcher; and Wildflower...Von Maur department store will open an 85,000 s/f store at West Towne Mall in Madison, WI, Von Maur’s second location in that state, part of a targeted national growth strategy. Von Maur operates 35 stores in 15 states…Whole Foods Market will open a new Mid-Atlantic flagship store in Tysons Corner, VA this month, its 10th store in Virginia. Whole Foods is also opening stores in Seattle, Beverly, MA, and Long Beach, CA this month. In November, the grocer plans to open new stores in Tempe, AZ., and Parsippany, NJ…Costco Wholesale Corp. will open about 15 new US stores in the new fiscal year, and about 25 new stores worldwide. The company opened 10 new US units and relocated 2 stores in the recently completed fourth quarter. Costco now operates 544 US locations...Giant Food Stores plans to open 3 rebranded stores next month in Pennsylvania’s Lancaster and Lebanon counties from its acquisition of Musser’s Market. Giant also plans to open a 65,000 s/f flagship store in the River Walk mixed-use development in Philadelphia. This is Giant’s first two-story store and its second full supermarket in the city. Part of Ahold Delhaize USA, Giant currently operates 181 stores under the Giant, Martin’s Food Markets and Giant Heirloom Market banners in Pennsylvania, Maryland, Virginia and West Virginia…McAlister’s Deli signed its largest development deal in company history. As part of the deal, McAlister’s Deli will develop 47 restaurants over the next 7 years. McAlister’s Franchisor SPV LLC currently has more than 450 restaurants in 27 states and is part of the Focus Brands family, including Auntie Anne’s, Carvel, Cinnabon, Jamba, Moe’s Southwest Grill, and Schlotzsky’s Austin Eatery…INDOCHINO opened its 50th US showroom, in Washington, DC…JackRabbit, a retailer of athletic footwear, apparel, and accessories owned by affiliates of CriticalPoint Capital announced the acquisition of the Olympia Sports brand from retail sporting goods company Olympia Sports. Olympia currently operates stores in the Northeast US...Ross Stores Inc. opened 30 new Ross Dress for Less and 12 dd’s Discounts stores across 19 different states in September and October, completing the company’s plans for 98 new stores in fiscal 2019. Together, Ross Dress for Less and dd’s Discounts operate 1,811 stores.

DECELERATING NEWS

Forever 21 has filed for Chapter 11 bankruptcy protection. The privately held company will close up to 178 US stores. As of the bankruptcy filing, the company operated about 800 stores globally, including more than 500 stores in the US...Bed Bath & Beyond Inc., which also operates buybuy Baby, Harmon Face Values and World Market, says it will close 60 stores in the fiscal year across the company, up from the April estimate of 40 stores. Most closings are expected after the holidays in early 2020. 40 of the stores closing will be Bed Bath & Beyond stores and 20 will be in the company’s other concepts... Walmart is reportedly laying off staffers from its Bonobos menswear brand. It is not clear whether affected roles are in Bonobos’ corporate offices, 60-plus stores, or both... Another 100 stores Sears and Kmart locations are set to close by the end of 2019. Parent entity TransformCo, hasn’t said which stores will be closing.

NEW ENGLAND NEWS

Whole Foods Market opened a 34,500 s/f store in Beverly, MA this month. Whole Foods has 32 additional stores in MA... Target plans to open an 11,000 s/f store near Boston’s City Hall. The opening date was not been announced.

MALL NEWS

Consulting firm McKinsey & Co. opened its first retail store, the Modern Retail Collective, at the Mall of America in Minneapolis. The 3,000 s/f living retail lab will feature a regular rotation of different brands using an array of new retail tech. It will accept cryptocurrency as payment. McKinsey, plans to operate the store for at least a year and rotate brands and tech providers every few months...Amazon 4-Star will open a location in the Natick (MA) Mall this month, the 1st store of its kind in the Boston area and the 5th nationwide. The stores carry a variety of products from popular categories that are top sellers, new and trending, or rated four stars and above on Amazon.com... Gymboree is being revived by former rival The Children’s Place, which plans to relaunch the brand in 2020 with an enhanced website and shop-in-shop locations in more than 200 Children’s Place stores in the US and Canada. Gymboree filed for bankruptcy in January 2019, saying it would close all stores. In March, The Children’s Place acquired the rights to the Gymboree and Crazy 8 brands.

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

According to the Commerce Department, September saw a 0.3% drop in sales to $525.6 billion, following an upwardly revised 0.6% boost from the initial reading of 0.4% in August.

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® decreased in September, following a slight decline in August. The Index now stands at 125.1 (1985=100), down from 134.2 in August.

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

PURCHASING MANAGERS INDEX

Manufacturing contracted in September, as the PMI® registered 47.8 percent, a decrease of 1.3 percentage points from the August reading of 49.1 percent. This is the lowest reading since June 2009, the last month of the Great Recession, when the index registered 46.3 percent.

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

Tuesday, September 24, 2019

JC Penney: What Now?


For the better part of the past decade, JC Penney has been on a downward trend, experiencing a continuous erosion of market share to the likes of Target, Walmart, and Amazon, among others. It has gone through four chief executives, most notably Ron Johnson, who came over from Apple after transforming Apple retail outlets from boring computer stores to electronic gadget playgrounds. Unfortunately Johnson couldn’t successfully reboot Penney’s, and he proceeded to run the ship into the ground…well not quite, thanks to a returning Mike Ullman in 2013, who had held the position from 2004 until the hiring of Johnson in 2011.

Ullman’s stay was only temporary; he stabilized the company and then in 2015 another replacement was found in Marvin Ellison, a well-regarded Home Depot executive. With home improvement in his blood, he proceeded to introduce major appliances into the Penney mix - but he didn’t stick around long enough to find out if it was the right decision. He made a quick exit to Lowe’s in 2018. Perhaps he saw the writing on the wall, although he likely wanted everyone to believe he was heading back to his roots. So the search was on again, and in October 2018 the company hired a new CEO, Jill Soltau, for what could be a one last attempt to right the JC Penney ship.

After nearly a year of revamping the C-wing, Soltau now seems to have a team in place in which she has confidence. But in a pretty poor environment for department stores in general, she certainly has her work cut out for her. Penney has reduced inventory levels by 12.5% this past quarter, which has improved margins and led to lower permanent markdowns. Major appliances and in-store furniture categories have been removed from the merchandise mix, and an ongoing effort to strengthen the omnichannel strategy in order promote growth in e-commerce is also part of her plan.

The company has conducted extensive consumer research to reconnect with the customer, identify major issues facing the company, and rebuild a brand that can generate traffic growth, transform the customer experience, and improve customer retention. In-store there have been improvements to fitting rooms and upgrades to displays, particularly in women’s categories such as jewelry, handbags, shoes, and Sephora beauty. Stores have even added stylists to provide customers with personalized one-on-one service. To be quite honest, however, none of this seems like cutting-edge innovation.

Apparently stockholders don’t think so either. JCPenney’s stock price is down about 13% year-to-date, while the S&P is up about 20%. Currently, Penney’s stock price is below $1.00 a share and is at risk of being delisted from the New York Stock Exchange. Just last week Fitch downgraded JCPenney’s credit rating based on, as analysts said in an emailed report, “continued market share losses and declining EBITDA, with lack of visibility for a material turnaround although there are no near-term liquidity concerns.”

A headline from Footwear News this month read JCPenney Reportedly Headed Toward Debt Talks as Holiday Shopping Season Looms. The article went on to say that “the move would give lienholders and unsecured bondholders access to confidential company information as they continue to urge JCPenney to consider a swap or extension on its debt — valued at roughly $4 billion, according to filings with the U.S. Securities and Exchange Commission. It also buys the department store chain more time to get its business in order ahead of the crucial holiday shopping season.”

So what now for Penney’s? Many questions regarding the company’s fate remain unanswered. It seems that Q4 will be a critical period for Soltau’s efforts to take full effect and make believers out of investors again. But considering the vulnerability of department stores as a category, and the struggle of regional malls just to survive, Soltau’s future at JCPenney may not be any brighter than her recent predecessors.

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

Photo courtesy of JC Penney

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KEYPOINT PARTNERS COMPANY NEWS

Team News: Mary Russo has been promoted to an Assistant Property Manager at the Burlington, MA office.

NATIONAL RETAIL NEWS

The Commerce Department reported that retail sales increased 0.4% last month, down from a strong 0.8% in July. Spending at automobile and parts dealers climbed 1.8% from the previous month, the most since March, after increasing 0.1% in July. Home and garden centers reported a 1.4% gain. Sales at restaurants and bars fell 1.2%, the steepest drop in nearly a year. General merchandise stores reported a 0.3% drop. Online sales continued to soar, rising 1.6%. See sales reports below...Stage Stores Inc. plans to convert its stores to off-price, starting in February of 2020, and expects to be operating approximately 700 Gordmans off-price stores by the third quarter of fiscal 2020. The company plans to close approximately 40 stores; a limited number may continue to operate under the existing department store nameplates until closure. As of this month, Stage Store operates 625 Bealls, Goody’s, Palais Royal, Peebles, and Stage specialty department stores and 158 Gordmans off-price stores in 42 states.

ACCELERATING NEWS

BJ’s Wholesale Club will open two new stores, including BJ’s Gas, in early 2020, in FL and MI. BJ’s Club currently operates 217 clubs and 141 BJ’s Gas locations in 16 states, primarily on the East Coast…Krispy Kreme opened a new prototype store in North Carolina, Krispy Kreme’s most comprehensive redesign in more than a decade. 45 new locations with the updated design will open by the end of 2020…Target Corp. opened its 100th small-format store, and also surpassed its 500th store remodel. Target is on track to remodel 1,000 stores by the end of 2020. After opening 30 small-format locations in 2019, Target said it plans to open nearly 30 more each year for the foreseeable future... Liberty Tax, Inc. parent company of Liberty Tax Service and Buddy’s Home Furnishings, has entered into a definitive purchase agreement whereby Liberty Tax will acquire Sears Hometown’s Outlet business as well as its Buddy’s Home Furnishings Stores in an all cash transaction valued at up to approximately $132.9 million…Five Below is on plan to open 150 stores in fiscal 2019. The retailer opened 44 new stores and ended the quarter with 833 stores in 36 states...Burlington Stores will have remodeled over 60% of its store fleet by the end of this year. The chain, which currently has 691units, has a long-term plan to reach US 1,000 stores...Lego will open more than 160 new stores this year, an increase of almost 40%...Tropical Smoothie Café opened its 800th location this month….Puma opened its first-ever North American flagship, a two-level 18,000 s/f store in New York City…Ulta Beauty plans to open approximately 80 new stores, execute approximately 20 remodel or relocation projects and complete approximately 270 store refreshes by the end of fiscal 2019... The largest Starbucks Reserve Roastery yet will open in Chicago Nov. 15, in a 43,000 s/f space formerly occupied by Crate and Barrel...Tractor Supply Company opened its 1,800th store this month, in Sunbury, Ohio. Tractor Supply has stores in 49 states. The company opened 80 new stores in 2018 and plans 80 new store openings in 2019...Self Esteem Brands, parent company of Anytime Fitness, has purchased The Bar Method, a low-impact fitness franchise with 123 studios across 30 states and Canada. Self Esteem Brands’ portfolio of franchises also includes Basecamp Fitness and Waxing the City... Old Navy plans to open 800 new stores. Parent company Gap announced earlier this year that it would spin off the lower-priced brand. Old Navy had 1,140 stores at the end of its fiscal year in February and plans to open around 75 stores a year, focusing away from malls, with a goal of 2,000 stores in North America. Gap will also begin franchising its Athleta and Janie & Jack brands internationally, starting with online and in shop-in-shop formats and will eventually open brick-and-mortar stores with proven partners. In the last three years, Gap Inc. has opened 100 franchise locations. Currently, there are more than 500 franchise-operated Gap, Banana Republic and Old Navy stores around the world...Neighborhood Goods will open its 3rd location, a 10,000 s/f store in a new mixed-use development in Austin, TX, in 2020...Under Armour plans to have 2,500 stores by 2023. By the end of  last year, it operated around 1,100 locations...Stop & Shop plans to invest $133 million in store remodels in 21 of its Suffolk County, Long Island locations. This series of remodels is part of a multi-year initiative to refresh the brand’s 400+ stores across the Northeast...At Home is opening four new stores this month, growing its national footprint to 209 locations across 39 states by the end of September...Digital hair color brand Madison Reed plans to open some 600 brick-and-mortar stores during the next four years, which includes 500 franchised locations and 100 company-owned locations...Hollister will open a location at 130 W 34th St., in NYC, one of 40 new stores the company will open in fiscal 2019... Apple has reopened its flagship on 5th Avenue in NYC after a long renovation. At 32,000 s/f the store is nearly double the size of the original.

DECELERATING NEWS

Flywheel Sports, the spin chain, is closing 11 of its 42 locations. Flywheel had been taken over by a lender amid financial struggles and was working with an advisor to explore a possible sale... Regis Corp. plans to sell more than 3,100 salons in its transition to a full franchise business model. In its last fiscal year, the Edina-based company has sold 767 salons to franchisees, making more than half its 7,145 salons franchises, and said it will sell almost all of the rest of the corporate-owned stores. Regis will also cut the total number of salon brands from more than 50 to just five core brands: Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters and Roosters... Nearly 100 additional Kmart and Sears stores could close in December or sooner. The news comes just weeks after retailers announced 26 Sears and Kmart locations would close in October. Liquidation sales are expected to start in mid-September. About 400 stores are expected to stay open under a new entity Transform Holdco... At least 9 Ruby Tuesday restaurants have closed this month. Most are located along the East Coast from Massachusetts to Delaware. 5 are in New York. The chain has closed more than 120 domestic locations since 2016, about 76 of them in the past 20 months. The chain’s current count stands at 460 units...Fred’s has filed for bankruptcy. The company has begun liquidation sales at its stores, which are expected to close in the next 60 days.. This year, the company’s store footprint shrunk from roughly 500 to less than 100 since April when it began its first round of closures.

NEW ENGLAND NEWS

Designer footwear retailer The Tannery appears to have closed its final Boylston St. location. The Tannery once operated three locations across Boston and Cambridge...Well-known Nantucket restaurant The Nautilus will open a larger, 2nd location in the Boston Seaport in spring 2020, called the Nautilus Pier 4... Harvard Square’s Out of Town News newsstand, a fixture for over 60 years, will close by October 31 to make way for a new visitor information booth... Floor & Decor will make its New Hampshire debut in the former Bob’s and Staples stores on Amherst Street, Nashua. The new store will combine the Bob’s and Staples spaces and some additional square footage...A 70,000 s/f Market Basket Supermarket will anchor the 306,000 s/f Maynard Crossing mixed-use development currently under construction in Maynard, MA.

MALL NEWS

GameStop, which has more than 5,700 stores worldwide, is on track to close from 180 to 200 under-performing stores globally by the end of the year. More store closures are planned for the coming 12-24 months...Hudson’s Bay Co. is selling its Lord and Taylor banner to clothing rental subscription service Le Tote for $99.5 million in cash and a secured promissory note for $33.4 million payable in cash after two years. HBC will also receive a 25-per cent equity stake in Le Tote, two seats on the company’s board of directors and certain rights as a minority shareholder...7-Eleven opened a location inside the Westfield Brandon mall in Brandon, FL, the first of 7 locations it plans to open in malls this year. 7-Eleven operates, franchises, or licenses more than 69,000 stores in 17 countries.

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 0.4% last month, down from a strong 0.8% in July.

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 marginally in August, following July’s rebound. The Index now stands at 135.1 (1985=100), down from 135.8 in July.

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

PURCHASING MANAGERS INDEX

Manufacturing contracted in August, as the PMI® registered 49.1 percent, a decrease of 2.1 percentage points from the July reading of 51.2 percent. This is the lowest reading since January 2016, when the index registered 48 percent. The PMI® contracted for the first time since August 2016 (when it registered 49.6 percent) and ended a 35-month expansion period in which the composite index averaged 56.5 percent. The August contraction ended four straight months of expansion softening.

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

Wednesday, August 28, 2019

Greater Hartford, CT Report Preview

With the releases of the KeyPoint Reports on Eastern Massachusetts/Greater Boston and Southern New Hampshire behind us, it’s time to move on to the report for Greater Hartford, Connecticut, based on our proprietary GRIID™ retail database. As with the other reports, our modus operandi is to share some of the regional highlights while the complete version is still “baking.” In Greater Hartford, the 2019 retail market was a relatively stable one.

Retail Inventory and Vacancy: Total retail space in Greater Hartford currently stands at 37.6 million square feet, an increase of 166,300 square feet from last year. The modest change is primarily attributed to a low level of new development offset by a number of conversions to non-retail space. However, the region still could not escape a slight uptick in the vacancy rate from 10.6% to 10.8%.  At the same time, the region was able to avoid any large format chain liquidations or multi-store closings such as it had experienced in years past. As a result, Greater Hartford experienced its third consecutive year of positive absorption, netting an incremental 50,700 square feet of occupied retail space.

Size Classifications: During 2019 changes in vacancy rates among size classifications were generally mixed. Size ranges under 25,000 square feet, which represent nearly two-thirds of the total number of tenants in the region, all experienced increases in vacancy rates. The most significant impacts were in size classifications of 2,500-4,999 square feet, which increased from 13.1% to 14.8%, and 5,000- 9,999 square feet, increasing from 12.7% to13.7%. The overall vacancy rate for tenants under 2,500 square feet rose 70 basis points while those in the 10,000-24,999 square foot bracket only experienced a 40 basis point swing. Vacancy rates of size classifications above 25,000 square feet either declined or reflected full occupancy. The 50,000-99,999 square foot segment showed the most improvement, lowering its vacancy rate from 8.1% to 6.4% on the backs of Target filling the vacant Walmart Neighborhood Market in West Hartford and Urban Air Adventure Park, which is planning a fall 2019 opening in the former Bob’s Stores unit in Manchester. Also the vacant Showcase Cinema in East Hartford, which has remained an eyesore for the community for a number of years, was purchased by the town with plans to redevelop the site as a residential or mixed-use project. The vacancy rate in the 25,000-49,999 square foot segment also improved by 100 basis points, a result of backfilling several vacant units. Segments larger than 100,000 square feet remained fully occupied.

Town Rankings: The ten largest retail markets among Greater Hartford communities, based on square feet of retail space supply, have remained unchanged for the past three years. It should be no surprise that the top three towns are Manchester, West Hartford, and Enfield, all regional retail hubs serving Greater Hartford. Manchester dominates the region with 5.4 million square feet of retail space; West Hartford comes in a distant second with 3.0 million square feet. However, it should be noted that the 1.2 million square foot Westfarms regional mall, which straddles the West Hartford/Farmington line, has a Farmington address but is very much rooted in the West Hartford retail hub. Consequently, West Hartford is effectively a 4.0 million square foot market. Regarding vacancy, the lowest rate was found in Rocky Hill, coming in at 4.5%. Glastonbury, which last year held the number one spot, finished 2019 in the runner-up position at 5.4%. Farmington, finishing the year at 6.1%, rounds out the top three. Among towns with the highest vacancy rates, Enfield again finished the year at 20.9%, impacted largely by vacant Macy’s and Sears stores at Enfield Mall. East Windsor followed at 19.4%, followed by South Windsor at 15.9%. Only one of the top ten towns managed to hold its vacancy rate below 10.0%.

Retailer Activity: Planet Fitness led all retailers in square footage gain this year, a result of its acquisition of five Cardio Express locations in the region. Target opened a smaller prototype in the vacant Walmart Neighborhood Market in West Hartford, ranking the discounter in second place. Raymour & Flanigan opened its fourth store in the region, in Avon, to finish in third. The Cardio Express exit from the market represented the largest space contraction among retailers in the region. The 84,200 square foot Kmart closing in Vernon ranked second. It was the largest single store closing in the region. Fallas closed its Wethersfield store, coming in third place.

People’s United Bank added the most locations in the region through its acquisition of Farmington Bank, picking up 12 branches. The Planet Fitness acquisition of five Cardio Express fitness centers was good enough for the runner-up spot. A number of retailers added two stores, including Cost Plus World Market, O’Reilly Auto Parts, and Chick-fil-A among others. Farmington Bank declined by 19 locations, the most in the region. Payless ShoeSource liquidated its seven stores and Subway closed six units, finishing in second and third, respectively.

The full report will be released soon. Stay tuned!
Bob Sheehan, Vice President of Research
BSheehan@KeyPointPartners.com

The KeyPoint Report examines the retail real estate marketplace for Greater Hartford, Connecticut, with a focus on changes between August 2018 and August 2019. This report provides an analysis of changes in the region’s retail activity and examines supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories. The Greater Hartford market includes 26 cities and towns and represents more than 835 square miles. The complete report contains much more detailed information on these categories and more, and will be available soon at KeyPointpartners.com.

KeyPoint Partners’ GRIID™ database maintains detailed information on virtually all retail properties in three key regions: Eastern Massachusetts, Southern New Hampshire and Greater Hartford, Connecticut. These markets encompass approximately 44% of all retail space in New England. GRIID™ has information on nearly 262 million square feet of retail space and nearly 60,000 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.

The 2019 KeyPoint Reports for Eastern MA/Greater Boston
& Southern NH are available now at
KeyPointPartners.com/Retail-Reports. 
The Report for Greater Hartford, CT will follow soon.

KeyPoint Partners Company News

New retail leasing assignments: Minuteman Landing, a new 24,000 s/f retail center to be built near Minuteman Office Park in Andover, MA, and NH 9/106, a 10.6 acre parcel of land for sale/lease off Route 393 in Concord, NH. Both will be handled by VP of Leasing Don Mace....Team News: Rich Couillard has been promoted to Property Manager in the Burlington, MA office. Rich has been an Assistant Property Manager in the Brookline, MA office. Chris Domos, Assistant Property Manager, will be joining the Brookline office. Rachel DiGiorgio joined the Burlington, MA office as Accounts Payable Data Entry Clerk.

National Retail News

U.S. consumers spent more at retail stores and restaurants in July, the Commerce Department said.  Retail sales rose 0.7% last month, after a 0.3% gain in June. Online retailers, grocery stores, clothing retailers and electronics and appliance stores all reported strong gains.... See sales reports below.

Accelerating Retail News

At Home opened its 200th store, with a goal of operating more than 600 stores…Capriotti’s Sandwich Shop has signed 48 franchise development deals within the first 6 months of the year. Capriotti’s currently has 100 operating locations, and more than 130 new shops in progress…The Cheesecake Factory has a deal to buy Fox Restaurant Concepts. Fox’s concepts include Culinary Dropout, The Henry, and Blanco. It currently operates 45 restaurants across 7 states and was the creator of True Food Kitchen and Zinburger. Cheesecake operates 219 restaurants in the US, most under The Cheesecake Factory name. Its other ventures include Grand Lux Cafe, RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen…5.11 Tactical opened its 50th company-owned store in Fort Bliss, TX. To date, 5.11 owns retail stores in 24 states…Orangetheory Fitness announced expansion into its 50th state, Wyoming. Orangetheory now has more than 1,200 studios in 50 states and 22 countries…Birkenstock Americas opened its 2nd US location, in Venice Beach, CA. It comes after the successful opening of the brand’s first US store in Manhattan’s SoHo neighborhood in 2018…Old Chicago Pizza & Taproom has opened 10 new restaurants in the last year, with 4 more locations set to open in the coming months. By year-end 2019, Old Chicago will have a presence in 25 states…The Container Store has opened a new store concept called The Container Store Custom Closets at its redesigned location in Los Angeles. A second Custom Closets location will open by the end of the year in Dallas…Ross Stores Inc. opened 22 Ross Dress for Less and 6 dd’s Discounts stores across 10 different states in June and July, part of the company’s plans to add approximately 100 stores in 2019, with 75 Ross and 25 dd’s Discounts locations. As part of this wave of openings, Ross entered Ohio and now operates in 39 states...Michaels Jewelers, the 10-store CT chain based in Waterbury, has been purchased by Camile Hannoush, one of the owners of Hannoush Jewelers. Hannoush doesn’t plan to change anything about Michaels, though he will open a new store in the National Harbor Casino in Oxon Hill, MD., the chain’s first store outside CT in decades…Marathon Petroleum Corp. will rebrand 700 stores it acquired from Andeavor to its Speedway convenience store banner by the end of 2019. MPC’s Speedway LLC subsidiary has already rebranded more than 400 stores...Sprouts Farmers Market will expand into new markets, with 6 stores in 2 new states during the second quarter...Noodles & Co., which has 395 company-owned units and 62 franchised units, is planning for 5% unit growth system-wide, with the potential to grow to 7% unit growth in subsequent years…Liberty Tax will acquire The Vitamin Shoppe, which operates 750 stores, in an all-cash transaction valued at approximately $208 million. Liberty Tax, the parent company of Liberty Tax Service, recently acquired retailer Buddy’s Home Furnishings. The Vitamin Shoppe deal is expected to be completed in the fourth quarter.

Decelerating Retail News

Yum! Brands said Pizza Hut will likely decrease domestic locations by nearly 500 stores over the next two years as the brand closes underperforming dine-in restaurants and swaps them out for modern express stores. Pizza Hut closed 2018 with 7,482 US restaurants...The iPic Entertainment movie theater-restaurant chain has filed for Chapter 11 bankruptcy protection. The 16-location operation will remain open while financial problems are resolved…Walgreens Boots Alliance plans to close about 200 US stores. Earlier this summer, the company announced it was reviewing its portfolio in the US, where it operates approximately 10,000 stores…Steak n Shake burger chain has closed 106 restaurant locations since the beginning of 2019 with 67 of these closures occurring in the second quarter. The decision to close was made as Steak n Shake faces reduced customer traffic at its locations. Total locations fell to 307 at the end of the quarter…Perkins & Marie Callender’s Inc. filed for bankruptcy protection and closed 29 Perkins Restaurant & Bakery and Marie Callender’s restaurants. Perkins has 342 locations; Marie Callender’s has 7 company and 21 franchised restaurants…Barneys New York filed for bankruptcy protection as it looks to find a buyer. The 96-year-old luxury retailer will shutter its stores in Chicago, Seattle and Las Vegas and Seattle, along with 5 smaller format stores and 7 Barneys Warehouse locations. The closings will leave Barneys with 5 flagships, including its outpost on Manhattan’s Madison Avenue...TransformCo. announced that 21 Sears stores and 5 Kmart stores will close in late October.  TransformCo. said it could not rule out additional store closings in the near-term as it works  to return the company to profitability. Liquidation sales at the 26 locations are expected to begin around August 15...Women’s fashion retailer A’Gaci filed under Chapter 11 in the United States Bankruptcy Court, with the intention to close all 54 of its retail stores.

New England Retail News

G Group, UK-based parent company of EG America, entered into an agreement to acquire Westborough, MA-based Cumberland Farms, which operates approximately 600 convenience stores in seven Northeast states and Florida. The acquisition will take the EG Group’s US network to nearly 1,700 stores in 30 states…Trader Joe’s is coming to Boston’s Seaport District, with a 15,000-20,000 s/f store in the same structure as Trillium Brewing Co. in Fort Point...Freedom Wind Tunnel Indoor Skydiving plans to open at Patriot Place in fall of 2020…Shake Shack is coming to Boston’s Downtown Crossing this fall, the third Boston location for the hamburger chain... Nantucket’s first cannabis shop, the Green Lady Dispensary, opened this month on an appointment-only basis after receiving approval to operate from the state’s Cannabis Control Commission.

Mall News

GNC plans to shutter approximately 900 stores, mostly in malls. As of June 30, GNC had approximately 8,000 locations, of which approximately 5,900 are in the US, including some 2,000 in-store shops at Rite Aid locations. There are currently GNC stores in over 800 malls…Toys “R” Us is returning with two 6,500 s/f locations at Simon’s The Galleria in Houston and at Westfield Garden State Plaza in Paramus, NJ, with additional locations in prime US retail markets expected to open in 2020. The stores are a joint venture between Tru Kids and technology retailer B8ta. Tru Kids bought the intellectual property of Toys “R” Us, including the brand names of Toys “R” Us, Babies “R” Us, and Geoffrey the Giraffe, after the chain’s bankruptcy filing and liquidation last year...The Village at Burlington (MA) Mall will welcome the next round of personal services, retail and restaurants as part of Simons’s redevelopment of the property. Caffe Nero will open  as part of phase one of the redevelopment. Additional new arrivals in the coming months include uBreakiFix cell phone repair services; Modern Acupuncture; and Gyu-Kaku Japanese BBQ ... Foot Locker is teaming with Nike to roll out interactive “Power stores”, four times as big as typical Foot Locker stores. The newest opened this month in Manhattan. The retailer plans upwards of 50 over the next 3 years. It has 3 in the US today: 1 in Detroit and 2 in Philadelphia... The holding company for Lolli and Pops candy store chain filed for Chapter 11 Bankruptcy protection in the state of Delaware, and has closed all stores, including many in malls owned by Brookfield Properties. Lolli and Pops launched in 2012 and quickly grew to 72 locations across the country. Brookfield partnered with Lolli and Pops in 2017, and has since opened 40 locations at its malls... Boston-based online furniture retailer Wayfair opened its first full-service retail store in Massachusetts at the Natick Mall this month.

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 rose 0.7% last month, after a 0.3% gain in June.

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® rebounded in July, following a decrease in June. The Index now stands at 135.7 (1985=100), up from 124.3 in June.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in July, as the PMI® registered 51.2 percent, a decrease of 0.5 percentage point from the June reading of 51.7 percent. This is the lowest reading since August 2016, when the index registered 49.6 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

Thursday, July 18, 2019

Vacancy: The New Norm

Only a year ago it seemed that the worst was behind us, with retail store closings down dramatically: according to tracking by Coresight Research, there were 5,524 store closings in 2018, down 30% from an all-time high of 8,139 in 2017. Well, records are made to be broken and 2019 will be the year it happens. Coresight reports that 7,062 stores have been closed by U.S. retailers so far this year, and if this pace continues, the research firm projects more than 12,000 store closings by year end, blowing away the 2017 high.

These numbers are offset somewhat by store openings also reported by Coresight. Last year 3,258 stores opened - but that figure still reflects an incremental loss of 2,266 units. This year Coresight indicates that 3,019 stores have opened, so it appears that store openings should be significantly higher at the end of 2019 than in the prior year. Based on these figures, however, the gap between openings and closings will grow immensely.

Nevertheless, there are regions of the country that are doing much better than others. New retail development is announced regularly in many of the major metros in parts of the West Coast and Sunbelt states, particularly California, Texas, and Florida. All these areas benefit from significant population growth and economic development, resulting in higher retail demand. These states generally are in better shape than some Rust Belt states and a few states in the Deep South that have been held back by stagnant economies.

So how are we doing here in the Northeast? As most of our readers know, KeyPoint Partners tracks retail changes in the marketplace and reports on these changes by utilizing our robust, proprietary retail database known as GRIID™, which maintains detailed information on virtually all retail properties in three key regions: Eastern Massachusetts/Greater Boston, Southern New Hampshire and Greater Hartford, Connecticut, which includes approximately 44% of all retail space in New England. GRIID™ has information on nearly 262 million square feet of retail space and nearly 60,000 retail establishments.

For this article, we thought it would be interesting to go back in time for a long-term look at Eastern Massachusetts in order to evaluate the annual change in retail inventory and vacancy throughout the region. We reviewed annual levels as far back as 2003; here’s what we found:


For starters, while retail square footage in the region continues its gradual climb, increasing about 15% since 2003, the change in the number of stores has been nominal. In 2003 the store count was approximately 46,000 units; today it is marginally higher at 46,700. We’ve seen the average store size increase, however, from approximately 3,700 square feet to 4,200 square feet.

With regard to vacancy, the square footage of unoccupied space has increased 71% since 2003 while the number of vacancies has more than doubled. In 2003, only 5.7% of all storefronts were vacant. That number has risen to 12.8% today. The percentage began to spike in 2005, hitting double-digit percentages in 2011 when 11.8% of all stores were vacant. It has remained in double-digits ever since. Within the same time frame, the size of the average vacancy has decreased significantly from 4,100 square feet to 3,100 square feet, suggesting that small tenants have been the most vulnerable during this time frame. The table below illustrates these changes during the 2003-2019 period:
Currently, the vacancy rate in the region stands at 9.4%. Only once since the onset of the Great Recession in December 2007 has the annual vacancy rate gone below 8.5%, in 2013. Prior to the recession, mid-single digit vacancy rates were the norm. Unfortunately the recession coincided with the retail industry undergoing a considerable shift by consumers away from brick-and-mortar retail purchases and toward online shopping. According to Internet Retailer, ecommerce represented 5.1% of total retail purchases in 2007. That figure had nearly tripled to 14.3% in 2018.

If we ever see vacancy rates drop back to 2003 levels, it will have to be a gradual process of converting unoccupied space to non-retail use or mixed-use in conjunction with the currently diminutive pace of new development. In the meantime, however, at least in this region, we’re experiencing the new norm.
Bob Sheehan, Vice President of Research
BSheehan@KeyPointPartners.com

KEYPOINT PARTNERS COMPANY NEWS

See what's for sale at our Investment Sales listing page:

NATIONAL RETAIL NEWS

The Commerce Department said US retail sales increased more than expected in June, pointing to strong consumer spending. Retail sales rose 0.4% last month as households stepped up purchases of motor vehicles and a variety of other goods. Data for May was revised slightly down to show retail sales increasing 0.4%, instead of 0.5% as previously reported. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.7% last month after an upwardly revised 0.6% increase in May. See sales reports below...Kohl’s is now accepting unpackaged Amazon returns at its more than 1,100 stores nationwide. Kohl’s and Amazon previously piloted the program in some 100 Kohl stores in the Los Angeles, Chicago, and Milwaukee markets.

ACCELERATING RETAIL NEWS

Hooters of America has been acquired by Nord Bay Capital and TriArtisan Capital Advisors. Details of the deal were not disclosed. Previous owners Chanticleer Holdings and H.I.G. Capital will retain stakes in the chain. Hooters of America is the franchisor and operator of more than 430 Hooters restaurants in 38 states and 27 countries…Duluth Trading Co. opened its first store in Georgia last month, Duluth’s 55th location nationwide. The company has opened 10 to 11 stores in 2018 and plans to open another 15 this year…Qdoba Mexican Eats and multi-unit operator Premier Queso Kings, LLC are partnering for a 20-unit deal to develop locations in Atlanta and Alabama. The first Atlanta restaurant should open later this year or early next year. Qdoba has more than 750 restaurants in the US and Canada. Premier Queso Kings owns and operates more than 200 restaurants…VSP Global has entered into a definitive agreement to acquire  Visionworks, subject to completion of regulatory approval. With a footprint of more than 700 stores in nearly 40 states, the Visionworks acquisition will be the single largest VSP network investment in the company’s history... Target plans to open 3 more small-format stores on or near university campuses: a 20,000 s/f store on the University of Kentucky campus, a 22,000 s/f store on the Michigan State University campus; and a 21,000 s/f store near the University of Washington in Seattle. Currently, Target operates almost 100 small-format stores, 23 of which are on or near college campuses in 13 states, including 10 locations opened last year. The retailer said it’s looking to open about 30 of the small stores annually over the next several years…uBreakiFix opened 25 new stores in the second quarter, bringing the brand’s total footprint to 522 stores across North America...Big Lots will re-open 17 remodeled stores throughout the Nashville area this month. Big Lots operates approximately 1,400 stores in 47 states... Primark is expanding its US footprint with its first store in the Midwest, in downtown Chicago. Primark will take over a 45,000 s/f building in the heart of the Loop. Primark, based in Ireland and owned by Associated British Foods, opened its first US store in Boston in 2015. The retailer now has 9 US locations, all in the Northeast. Primark is on track to open stores at Sawgrass Malls, Sunrise, FL, and at the American Dream mega-mall in New Jersey during the next 12 months…Crate and Barrel opened its first-ever in-store restaurant, “The Table at Crate,” in its store at Oakbrook Center, Oak Brook, Il. The full-service restaurant is a collaboration between Crate and Barrel and Cornerstone Restaurant Group, its first venture into the retail space. The Table at Crate integrates the dining and retail experience across two levels of indoor and outdoor space. Most of the featured tableware, chairs and table are for sale in the store. The Table at Crate is open for lunch, afternoon tea, and dinner, plus coffee service throughout the day. Crate & Barrel plans to increase the number of new stores with integrated restaurants, wine vaults, and barista bars... ZIPS Dry Cleaners active franchise pipeline includes more than 250 stores set to open over the next several years, adding markets such as Dallas, Houston, Atlanta, Chicago, Portland, OR, and Columbus, OH in the near future, with another 20 markets in the next five years. ZIPS currently has more than 60 locations... Cinnamon roll bakery Cinnaholic has opened 10 franchise locations since January in new markets including New Jersey, Houston, Phoenix and Ottawa, and Ontario, bringing its total location count to 38 units…Lululemon Athletica has opened its largest experiential store to date, a two-level, 20,000 s/f location in Chicago’s Lincoln Park neighborhood. It includes the company’s first-ever restaurant and 3 studio spaces.

DECELERATING RETAIL NEWS

Pier 1 ended the quarter with 967 stores, down 30 a the year ago. The retailer will close 57 locations in the current fiscal year, higher than the chain’s previous estimate of 45, which it gave back in April....Restaurants Unlimited, a Seattle-based company that operates 35 restaurants in 6 states, has filed for Chapter 11 bankruptcy protection. RUI runs restaurants under the names of Clinkerdagger, Cutters Crabhouse, Fondi Pizzeria, Henry’s Tavern, Horatio’s, Kincaid’s Maggie Bluffs, Manzana, Newport Seafood Grill, Palisade, Palomino, Portland City Grill, Portland Seafood Company, Scott’s Bar and Grill, Simon & Seafort’s, Skate’s on the Bay, Stanford’s and Stanley & Seafort’s…Boston Market has closed 45 stores due to underperformance. The chain, owned by Sun Capital Partners Inc., closed 6 restaurants on June 30, while the remaining 39 closed on July 7... Jewelry and accessories chain Charming Charlie has filed Chapter 11 bankruptcy and plans to close all 261 of its stores. The company, which operated in 38 states, had shut down 100 stores as part of an earlier bankruptcy filing last April. Going out of business sales are already underway at many locations and the chain expects to cease all operations by Aug. 31. 2 years ago, there were 390 Charming Charlie stores spread across the US, Canada the Middle East and the Philippines.

NEW ENGLAND RETAIL NEWS

Tatte bakery cafe is planning a 30,000 s/f production facility, test kitchen, office and cafe to anchor National Development’s planned mixed-use project at the vacant former Cole Hersee building at 60-70 Old Colony Ave. in South Boston…The Lower Depths, a Kenmore Square beer bar known for its tater tots and diverse beer selection, has closed…Wachusett Brewing Co.  will open a taproom in the former John Harvard’s Ale House in the basement of The Garage mall in Harvard Square, which closed at the end of May. This will be the third taproom for the brewery, which also announced that it will open a taproom at the Worcester Public Market. Both locations are on schedule to open in September or October... Local coffee and sandwich shop Revival Café & Kitchen plans to open a location at 103 Newbury St.The company has 1 location in Cambridge, near Alewife, and a 2nd location in Somerville’s Davis Square.

MALL NEWS

Work has started on overhauling the former Sears store at the Mall of New Hampshire, Manchester. About half space will become a Dick’s Sporting Goods store before year’s end. A Dave & Buster’s restaurant is slated to open in 2020 in the other half of the space. The renovation work will cost more than $6.4 million, according to documents filed with the city... American Dream, the 3 million s/f retail and entertainment destination located next to Met Life Stadium in East Rutherford, NJ, will open on Friday, October 25, 2019. It is the first time the developer, Triple Five Group, has set a specific date for the opening. In addition to a host of retailers, many of the center’s entertainment attractions will launch on opening day, including Nickelodeon Universe Theme Park, DreamWorks Water Park, Big Snow Ski and Snowboard Park, the center’s NHL‐size skating and hockey facility, and Angry Birds 18‐hole miniature golf course.

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 rose 0.4% last month. Data for May was revised slightly down to show retail sales increasing 0.4%, instead of increasing 0.5% as previously reported.

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 June, following an increase in May. The Index now stands at 121.5 (1985=100), down from 131.3 in May.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in June, as the PMI® registered 51.7 percent, a decrease of 0.4 percentage point from the May reading of 52.1 percent. This is the lowest reading since October 2016, when the index registered 51.7 percent.

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

Thursday, June 27, 2019

Preview: KeyPoint Report forSouthern NH 2019

While the 2019 KeyPoint Report for Southern New Hampshire, based on our proprietary  GRIID™ retail database, is in production, we will again share some of the early results:

Inventory and Vacancy Rate: The retail inventory in Southern New Hampshire included 29.9 million square feet in 2019, indicating a modest increase of 107,800 square feet from a year ago. However, vacancy rose by 130,600 square feet, increasing the vacancy rate to 9.7% from 9.3% last year. The closings of two Sears stores in Manchester and Salem, as well as a Walmart store in Bedford, are largely responsible. Staples also closed one of its two stores in Nashua, while Mattress Firm vacated four stores. Offsetting these vacancies were new stores that now occupy a number of former large vacancies. Ocean State Job Lot moved into a vacant Toy R Us box in Salem, while Bed Bath & Beyond joined Boston Interiors in occupying the former Hannaford store. XtremeCraze, a trampoline and laser tag entertainment venue, opened in the former TJMaxx store at Apple Tree Mall in Londonderry, which had been vacant since 2016. Another backfill occurred in Nashua where HomeGoods and Sierra Trading Post, its first store in New Hampshire, opened in a vacant Sports Authority store.

Size Classifications: Although the vacancy rate in Southern New Hampshire ticked upward this year, there was one size classification that showed remarkable improvement and that was the 25,000-49,999 SF segment, declining from a vacancy rate of 14.1% to 10.9% this year. Much of that was attributed to the large format backfilling of vacant stores such as Toys R Us, Sports Authority, and TJMaxx mentioned above. The 10,000-24,999 SF classification also made significant improvement. Conversely, the 100,000-199,999 SF segment was hit hard by department store closings, resulting in a rise in the vacancy rate from 2.5% to 6.8%. The 5,000-9,999 SF size range was the only other size bracket that was adversely impacted by more than 100 basis points.

Regional Submarket Rankings: There has been no change in the top ten largest regional markets for the second year in a row: Nashua continues to rank first with 6.4 million square feet of inventory; Manchester follows at 5.3 million square feet; and Salem is a distant third at 3.9 million square feet. Seabrook and Bedford follow with 2.0 million square feet and 1.5 million square feet, respectively.

Among towns with at least 500,000 square feet of retail space, Salem remains the lowest in vacancy rate for the third consecutive year at 6.0%, the same as last year. Derry is a runner-up for the third straight year, coming in at 6.1%. Merrimack remained in third place again this year at 6.5%. The Merrimack 360 project in Merrimack, a 67,300 square foot redevelopment of the former Shaw’s anchored shopping center, which had partially opened last year, is nearing full occupancy.

Among towns with the highest vacancy rate, Seabrook remained in the top spot with a vacancy rate of 16.3%; the Sam’s Club vacancy was largely to blame for the high level. Bedford jumped from 10th to 2nd place on the heels of the Walmart closing. Manchester remains in third place at 12.1%.

Retailer Activity: With respect to expansion by store count, no retailer added more than two stores in the region this year; in fact, there were only two that added that many: Verizon Wireless and California Burritos. D’Angelo’s closed six sandwich shops. Payless ShoeSource closed five stores following its announcement to liquidate. Mattress Firm closed four stores.

Expanding the most by square footage was Ocean State Job Lot, which took over the former Toys R Us unit in Salem. Bed Bath & Beyond followed by filling the remainder of the vacant Hannaford store in Bedford. Core Medical Group, a medical staffing agency, came in third, opening as an anchor to The Shoppes at 655 South Willow, a new mixed-use project located on the site of a former manufacturing plant in Manchester. Sears heads the list in space contraction after closing two stores in Manchester and Salem. Walmart is next on the list, vacating a store in Bedford. Staples was third following the closing of its Amherst Street store in Nashua.

Expect to see a lot more on the Southern New Hampshire retail market when we publish the 2019 KeyPoint Report later in July!

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

The KeyPoint Report for Southern New Hampshire examines changes in supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories during the period from July 2018 through June 2019. The study area includes 39 cities and towns, representing more than 835 square miles and approximately 567,600 permanent residents (42% of the state population).

The 2019 KeyPoint Report for Eastern MA/Greater Boston is available now at KeyPointPartners.com.
The report for Greater Hartford, CT will follow soon.