KeyPoints

Eastern Massachusetts KeyPoint Report Preview

2013-05-16T10:59:00.000-07:00

The annual KeyPoint Report for Eastern Massachusetts/Greater Boston, based on our GRIID™, isn’t quite ready for public consumption yet, but we are at a point where we can skim off the top and share some of the key findings with you. So here goes:

Vacancy Rate: After suffering through the most dreadful economy in more than half a century, the Eastern Massachusetts retail climate is finally showing some giddy-up in the pace of activity. Earlier this year the retail vacancy rate fell below 8.0%, perhaps its version of the “Mendoza line”, for the first time since 2008.

The vacancy rate in the region currently stands at 7.8%, declining more than a full percentage point since last year. Although this is the third year in a row that the vacancy rate has declined, it is the largest percentage drop in more than a decade. In order to accomplish that, nearly 2.0 million square feet of unoccupied space in the region were absorbed. Net absorption in Eastern Massachusetts ended the year at 2.05 million square feet, indicating that new construction was limited.

Size Classifications: Another bright note in this year’s results is the fact that not only was there improvement in overall vacancy, but also vacancy rates in all size classifications dropped significantly - other than the 200,000 square feet and above category, which remains fully occupied. Last year, when we saw a nominal decline in vacancy, results across all size classifications were mixed, with vacancy in small tenant categories creeping higher.

Town Rankings: Among towns with at least 500,000 square feet of retail space, there was little movement in the top 10 largest retail markets, with Braintree replacing Leominster in the 10th spot. Following perennial number-one Boston are Cambridge and Natick.

There are five new towns breaking into the top 10 communities with the lowest vacancy rate. These include Avon, Braintree, Bedford, Burlington, and Lexington. Abington remains in the top position with a vacancy rate of a scant 1.1% while 10th ranked Lexington comes in at 3.7%. There were 23
towns ending the study period with vacancy rates under 5.0% compared to just 15 last year.

At the opposite end of the scale, there are a number of towns that continue to be burdened with excessive vacancy. Six towns remain among the top 10 with the highest vacancy rates from the same group last year, including North Reading, Westborough, Norwood, Swansea, West Bridgewater, and Lawrence. Rates among the top 10 range from 20.7% in North Reading to 14.9% in Lawrence. All the carryovers have trended down significantly, with the exception of North Reading, which inched up from 19.4% last year. North Reading’s poor ranking requires some explanation, however. The vacancy rate in towns with limited inventory can be skewed heavily by one or two large format spaces, as is the case in North Reading. Vacant Stop & Shop and Sears Hardware stores represent 68% of total vacancy in that town.

Retailer Activity: Among the top growing retailers in Eastern Massachusetts, Market Basket added 221,700 square feet to the region, the most of any retailer, by opening three new stores in Brockton, West Bridgewater, and Westford and expanding its Chelmsford store. Adding the most units was fast food restaurant chain Subway with 33 new locations. By closing its nine locations in Eastern Massachusetts, Foodmaster tops the list of contracting retailers, vacating 235,000 square feet of space. Leading the decline in store count with 10 stores are Bank of America and Fashion Bug, which was phased out of business when acquired by Ascena Retail Group as part of its Charming Shoppes acquisition. All 600 Fashion Bug stores were closed.

The full report contains much more detailed information on these categories and more, and features an updated, easy-to-read design. It will be available soon at KeyPointPartners.com.

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

This KeyPoint Report examines changes in supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories during the 11-month period beginning April 1, 2012 and ending Mary 31, 2013. The study area includes 189 cities and towns, representing more than 3,500 square miles (44% of Massachusetts’ land area) and approximately 5.05 million people (76.2% of the state population). 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 more than 256 million square feet of retail space and approximately 59,600 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for

each studied area.

Company News

2013-05-16T10:41:00.001-07:00

New Team Member: Laura Schmitt joined KeyPoint Partners as a Property Manager in the Burlington, MA office. Laura comes to KPP from Equity One Realty & Management and The Dartmouth Group. Laura Ferrara has been promoted to Property Manager in the Burlington office. Laura worked at KPP from 2000 to 2003, spent time as a residential realtor, then rejoined the company in 2007 as an Assistant Property Manager...New Business: Vice President of Leasing Don Mace will handle leasing for Horizon Commons, a 107,000 SF center at 1899 Silas Deane Highway in Rocky Hill, Connecticut. Tenants at the center include Kohl's and Aldi Market.

Industry News: National

2013-05-16T10:39:00.000-07:00

US comparable chain store sales for April posted a modest 3.0% gain as measured on a year-over-year basis by ICSC Research's tally of 15 major retail chain stores. The April pace of sales was the strongest since January’s 4.5% gain. Although the April sales performance was an improvement from the pace of recent months, adverse seasonal weather still dampened the sales pace. Among individual retailers, Gap was up by 7.0%, and L Brands (formerly Limited) rose 2.0%; Costco was up 4.0%, and TJX was up by by 8.0% (Note: TJX will no longer report monthly, and will switch to quarterly sales reports). Rite Aid was down 4.6%, and Walgreens was up by 1.2%. See retail sales results below.

Industry News: Accelerating

2013-05-16T10:34:00.002-07:00

New York’s Fairway, a 12-store grocery chain, plans to eventually open 300 outlets across the country. Sterling Investment Partners, a private equity which that acquired an 80% stake in the company in 2007, expanded Fairway in New York, New Jersey and Connecticut...Pep Boys will open 31 Service & Tire Centers and 7 supercenters. Pep Boys is also test-marketing a new store concept, embodied in a prototype store that opened recently in Tampa, FL designed to appeal to a broader swath of customers...Sherwin-Williams’ Paint Stores Group expects to open 70 to 80 new stores. Sherwin-Williams currently has more than 3,500 US stores...RadioShack Corp. is updating its brand and will begin remodeling select locations with a new look and feel over the next few weeks. RadioShack has more than 4,300 company-operated stores and approximately 1,000 dealer outlets across the US...Icing, a division of Claire’s Stores, is being re-branded with a new store design, new logo and updated imagery. The jewelry and accessories retailer plans to open 35 stores this year, including a flagship in Chicago...Tractor Supply Co. will open 100 to 105 new stores in 2013...The Fuzzy Peach has begun national expansion of their frozen dessert stores. The new store count commitment will be 26 locations. The Fuzzy Peach recently celebrated the opening of their 11th store in Boiling Springs, NC...Uniqlo opened its 7th US store in April, and plans more openings in the fall...Getty Realty Corp. acquired 36 convenience stores and gas stations in the New York and Washington D.C. metropolitan areas for $72.5 million.The acquisitions involve sale-leaseback transactions with Capitol Petroleum Group LLC and include 16 Mobil-branded properties,13 Exxon, and 7 Shell-branded locations. Getty Realty Corp. owns and leases approximately 1,050 US convenience stores and gas stations...Salsarita’s Fresh Cantina grew to about 80 units from 2000 to 2011. In 2013 the brand plans to add eight to 10 units, with 20 more units planned for 2014, including stores in Texas, Kansas, New York, and Michigan.....WOW Café will roll out a new look as part of a larger rebrand strategy for the 11-year old company, to WOW Café: American Grill & Wingery. The company will roll out the new design in 20 restaurants over the next year. There are 70 WOW Café: American Grill & Wingery restaurants nationwide. The company expects to open approximately 20 locations in 2013...The Limited opened two stores in outlet centers this month, one in Nashville and another in Michigan. Two other outlet stores will open in early summer in Texas and Illinois. Including the stores set to open in 2013, the company has opened 68 since 2008. The Limited operates 260 US stores...Frozen-yogurt chain TCBY says 68 locations are under development so far this year, and the brand hopes to open more than 100 units in 2013. TCBY currently has 520 units...Meijer will open its 200th store on May 16, the first of six new stores Meijer will open this year.

Industry News: Decelerating

2013-05-16T10:32:00.000-07:00

7-Eleven Inc. tapped NRC Realty & Capital Advisors to help sell 139 convenience stores and/or gas stations. Of the properties, 83 are in Texas, 31 in Florida, 11 in Ohio, 8 in Pennsylvania, 5 in Utah and 1 in Wisconsin. The property sizes range from 10,000 to 75,000 s/f, and store sizes vary from kiosks to 6,700 s/f...The Jones Group Inc. will shutter 170 underperforming US stores by mid-2014. The stores identified for closure include 50 units previously announced in the fourth quarter. Jones owns the Nine West, Jones New York and Anne Klein banners among others.

Industry News: New England

2013-05-16T10:29:00.000-07:00

Potbelly Sandwich Shop has opened its newest MA location at Wayside Commons in Burlington...Nordstrom will open a 33,000 s/f Nordstrom Rack at The Shoppes at Blackstone Valley in Millbury, MA in fall 2013 in the former Wine Nation space. Nordstrom came to MA in 2007 with its Natick full-line store, and went on to open 3 more full-line and 4 Racks, including the recent new Rack store in Boston’s Back Bay...Shake Shack has applied for a permit to operate a restaurant at 57 John F. Kennedy St. in Harvard Square. Shake Shack opened its first Boston-area restaurant in Chestnut Hill in March...After a 20-year run, Pride & Joy has closed its brick-and-mortar retail store in Thornes Marketplace, Northampton, MA...The stalled Westwood Station project is back on track. The 2 million s/f project by New England Development, Eastern Development, and National Development will include Wegmans and Target, each occupying 130,000 s/f anchor locations. The plan also calls for as many as 650 apartments and condos, other stores, offices, a hotel, and an assisted-living facility. About 550,000 square feet of retail space and 350 apartments will be built in the first phase...Cohasset, MA-based Wicked Good Cupcakes brings its concept – cupcakes served in mason jars – to Faneuil Hall in Boston, starting this month...Cheeseboy is seeking to hire 30 team members for its new 1,200 s/f restaurant in Downtown Crossing, expected to open this spring. Cheeseboy operates 8 other locations, including four in MA -- at South Station, the Prudential Center Mall, South Shore Plaza and the Natick Mall...Eastern Mountain Sports is closing its store on Boylston St. in Boston. The shop will be replaced by sandwich chain Pret A Manger, which has 2 Boston locations. Pret A Manger operates more than 300 shops worldwide...Sydney Associates and Spellman Ventures of Natick will break ground on a new 12,000 s/f building at 355 Fresh Pond Parkway, Cambridge, MA which will feature metal and glass storefronts. The new building will replace the former Fresh Pond Seafood store, which closed in 2006 and has sat vacant ever since...WS Development will develop a 500,000 s/f outlet center in Cheshire, CT, expected to open in summer 2015 at the I-84/I-691 Interchange along Route 10. The complex will include public open space, walkways, recreation amenities, a residential component and full service grocer...the Kmart store on Woodbury Avenue in Portsmouth, NH will close in mid-August after 35 years.The closure is part of a series of actions the company is taking to reduce expenses...Local bakery chain Cupcake Charlie’s is opening at Patriot Place, the entertainment-and-shopping complex next to Gillette Stadium. Foxborough will be Cupcake Charlie’s fourth location...Boston developer Samuels & Associates has sold the 265,000 s/f Riverway Plaza in Weymouth, for $21.5 million to CBRE Global Investors. Riverway Plaza is a redeveloped shopping center on Route 3-A on the Hingham/Weymouth line. It is fully tenanted and anchored by Lowe’s and Staples. The stores include CVS, Dollar Tree, Margarita’s and D’Angelo’s/Papa Gino’s.

April Retail Sales Report

2013-05-16T10:26:00.006-07:00

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

2013-05-16T10:24:00.003-07:00

Retail sales edged up 0.1% in April from March, the Commerce Department said, an improvement from a 0.5% decline in March, which was the largest drop in 9 months. Core retail sales, excluding gas, autos, and building supplies, increased 0.5%.

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

Treasury Yields

2013-05-16T10:23:00.003-07:00

Treasury Yield Sources: federalreserve.gov; ustreas.gov

Consumer Confidence Index

2013-05-16T10:22:00.001-07:00

The Conference Board Consumer Confidence Index®, which had declined in March, increased in April. The Index now stands at 68.1 (1985=100), up from 61.9 in March. The Present Situation Index increased to 60.4 from 59.2. The Expectations Index improved to 73.3 from 63.7 last month.

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

Purchasing Managers Index

2013-05-16T10:21:00.000-07:00

Manufacturing expanded in April as the PMI™ registered 50.7 percent, a decrease of 0.6 percentage point when compared to March's reading of 51.3 percent. This month's reading reflects the fifth consecutive month of growth in the manufacturing sector. 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

The Burgers of Burlington, MA

2013-04-17T13:38:00.000-07:00

There are conflicting claims as to its origin and inventor, and its name derives from a city in Germany, but there’s no more American food item than the hamburger. It’s estimated that on average, Americans eat three hamburgers a week – and some are enjoying as many as five (I can tell you right now I’m not meeting my quota). Briefly out of favor due to healthier eating habits, the lowly burger is lately enjoying a renaissance with the rapid rise and widespread expansion of so-called “better burger” restaurants, a category that now includes at least 50 chains, and which, between 2011 and 2012 (according to research firm Technomic), grew by 21% and rang up sales of over $2 billion, even with an average ticket of $15.

In our last KeyPoint Report on Eastern Massachusetts (based on our GRIIDTM), Five Guys Burgers and Fries ranked 6th on our list of retailer expansion by number of stores (Eating Places in general ranked second in our lists of both expansion by square feet and expansion by number of stores). It seems a new burger place opens every day – good news for retail landlords. In the Boston area, Shake Shack recently opened in Newton, and Checkers, Tasty Burger, and other chains are poised to enter the market soon.

Burlington, MA, where our corporate headquarters is located, is a strong retail market (over 3.2 million square feet of retail space in approximately 100 retail properties, including a major regional mall, lifestyle centers, and other property types), which according to GRIID currently enjoys a healthy 97% occupancy rate. There’s also a very strong office population in this area, so it’s a prime market for the proliferation of restaurants in general and burger places in particular. With the recent opening of Bobby Flay’s Bobby’s Burger Palace at the Burlington Mall, several of the key current players in this category are now active within a mile of each other. Burlington, MA, has become a veritable better-burger nexus. Therefore, since I’m always ready for a story that combines legitimate commentary on current retail tenancy with the chance to provide enjoyment to my co-workers – and, you know, eat hamburgers – we present, following a brief profile of the major purveyors of better burgers in Burlington, an informal, unscientific rating of the bun-encased offerings of each nearby chain, conducted by a distinguished panel of volunteer taste-testers. The players:

Bobby’s Burger Palace: Bobby's Burger Palace was inspired by Flay's “extensive travels throughout America and love of the grill in a convenient casual setting”, according to their website. BBP burgers are made with Certified Angus Beef and served on a sesame seed bun. You can get your burger “crunchified”, which means topped with potato chips. BBP has one location in the Boston area (this one), with others in the works, and 14 locations nationwide.

b. good: b. good is a locally-based chain. The creators, best friends who grew up “eating in our uncle's kitchen”, based their restaurants on “a simple idea - make fast-food "real" by making it the way it should be…by people not factories”. b.good has nine Massachusetts locations, and plans 30 or more throughout New England.

Five Guys Burgers and Fries: Five Guys began in Washington, DC in 1986. They serve “only hand-formed burgers cooked to perfection on a grill along with fresh-cut fries cooked in pure peanut oil”. In 2003 Five Guys began offering franchise opportunities, and in just under 18 months, sold options for over 300 units. There are now over 1,000 locations nationwide and over 1,500 units in development. There are 31 in New England, including 25 in Massachusetts.

Johnny Rockets: Retro-diner-themed Johnny Rockets, whose tagline is “The Original Hamburger”, was launched in 1986 as a place where diners “can escape from today’s complicated world and experience the uncomplicated goodness of classic Americana. The name originated by combining the timeless Johnny Appleseed story with the classic Oldsmobile Rocket 88”. Johnny Rockets has 300 restaurants in 30 states and 16 countries, including 11 cruise ships, and they serve, according to their website, 17 million burgers a year. They have 4 Massachusetts locations.

The Ratings: Judges were asked to rate each better burger bistro on a scale of 1 to 5 (1 = poor, 5 = excellent) in the following categories:

Restaurant: Atmosphere; cleanliness/orderliness; service
Burger: General appearance; quality of patty; quality of roll/bread; quality/quantity of toppings
General: Ratings were also given on value in relation to price, and overall experience.

Company News

2013-04-17T13:32:00.000-07:00

Industry News: National

2013-04-17T13:22:00.005-07:00

U.S. comparable chain store sales for March posted a modest 1.4% gain as measured on a year-over-year basis by ICSC Research's tally of 16 major retail chain stores, below the ICSC's expectations for a 2-3% gain overall. An early Easter and particularly cold weather throughout much of the US were likely contributing factors. Among individual retailers, Gap was down by 1.0%, and Limited rose 5.0%; Costco was up 5.0%, and TJX was down by by 2.0%. Rite Aid was down 2.0%, and Walgreens was up by 4.2%. See retail sales results on Page 4...Limited Brands has temporarily changed its name to L Brands as part of a planned transition process required after the sale of its original chain of stores, The Limited, to Sun Capital Partners. The retailer, parent of chains such as Victoria’s Secret and Bath & Body Works, will announce a new permanent name in a few months...J.C. Penney has no plans to close stores or reduce headcount, the retailer stated after drawing $850 million out of a $1.85 billion revolving credit facility to help buy inventory after a failed turnaround. Penney will use the proceeds to fund working capital needs and capital expenditures. Penney brought in Ron Johnson as CEO in 2011. Its sales slid in 2012 as his dramatic changes alienated core customers without bringing in new ones. Johnson has been replaced by his predecessor, Myron Ullman.

Industry News: Accelerating

2013-04-17T13:21:00.001-07:00

Twin Peaks Restaurants has awarded its second largest franchise commitment. GT Hospitality Restaurant, LLC, signed an agreement to expand into Southern Virginia, Kentucky and Ohio with 16 stores over the next seven years. Twin Peaks, owned by Front Burner Restaurants LP, opened locations in Chicago and Las Vegas last month and will open its 32nd restaurant in Kansas this month. The chain has 31 locations in 15 states and expects to have 50 restaurants by the end of the calendar year...Nordstrom will open a 33,000 s/f Nordstrom Rack store at Shelbyville Road Plaza in Louisville, KY, and a 35,000 s/f store at the Shoppes at University Town Center in Sarasota-Bradenton in Florida. The retailer currently operates 9 full-line stores and 8 Rack stores in Florida...Francesca's Holdings Corp. plans to open 80 stores in fiscal year 2013...Rue21 opened its 900th store last month in Missouri. Rue21 has opened more than 500 stores in the last 5 years, and expects to open another 125 stores in 2013. It expects to open its 1,000th store in the fourth quarter. The retailer’s plan is to grow to more than 1,700 US stores...Health club chain Crunch signed a deal with Fitness Holdings LLC & RLB Holdings to open an additional 42 clubs across New York, New Jersey, Massachusetts and Pennsylvania. Crunch has 61 gyms worldwide...Panda Express will open 100 more units this year. The chain has 1,600 units currently...New York & Company will open 8 to 12 outlet stores, remodel 10 to 15 existing locations, and close between 30 and 36 stores, ending the year with between 491 and 501 stores...Smoothie King Franchises will open 70 franchise and 30 corporate US locations in 2013...E&I Holdings, Inc., franchisor of The Egg & I Restaurants, has opened its 73rd and 74th restaurants, in Portland, ME and Dallas, TX continuing its rapid US expansion. The company currently has 24 new restaurants under development and has commitments for the development of 92 restaurants over the next few years...Five Below expects to open 60 stores this year, including new markets in Texas, as well as adding units in existing markets...Signet Jewelers Ltd., parent of Kay Jewelers and Jared, anticipates opening 65 to 75 new US stores for the year...Upscale ice cream emporium Sloan’s has launched a national franchising program, targeting Florida, the Carolinas, Georgia, New York, New England and California. Sloan’s anticipates a total of approximately 200 US franchise locations...The Bon-Ton Stores Inc.’s 29,000 s/f Boston Store Clearance Center, its first-ever standalone clearance store, opened this month in Wisconsin. Bon-Ton has 271 department stores, including 11 furniture galleries, in 24 states under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers brand names...Saks Fifth Avenue Off 5th opened a 28,000 s/f store is in Phoenix Premium Outlets, Chandler, AZ...Shoe Carnival expects to open 30 to 35 new stores, relocate 7 stores and close 5 to 7 stores in 2013...Leslie’s Poolmart opened 15 Leslie’s Swimming Pool Supplies stores across 10 states this month, part of a plan to open 48 new stores this spring...Aaron's plans to open 125 stores this year. The rent-to-own company has more than 2,075 stores...Polaroid opened its first-ever retail store, Polaroid Fotobar, a 2,000 s/f store where customers can upload and print digital images, in Delray Beach, Fl. Nine additional US locations are scheduled to open by the end of the year...Samsung Electronics and Best Buy Co. have entered into a partnership to install Samsung in-store shops in more than 1,400 Best Buy and Best Buy Mobile stores across the US beginning this month. The shops will feature Samsung’s full range of mobile products including smartphones, tablets, laptops, connected cameras and accessories...7-Eleven has acquired 46 Hickory Point and Palms Stores in the Carolinas from CB Mart...Family Dollar will open 500 new stores in 2013 and close 30 to 50...Build-A-Bear Workshop will open 20 to 25 stores in 2013, all under the newly introduced store design. The retailer opened six stores under the new design in fall 2012, and the success of the stores prompted an escalated rollout...Sony launched a new Sony Store in California, and plans to reopen three other concept stores in Miami, San Diego and Orlando. Sony also plans to create freestanding “Sony Galleries” in major shopping centers. The first opened in San Diego at Westfield UTC Mall.

Industry News: Decelerating

2013-04-17T13:17:00.002-07:00

Supervalu said it would cut an estimated 1,100 jobs in the wake of its sale of its largest retail chains Albertsons, Jewel, Acme and Shaws/Star Market. The cuts affect most departments within the organization...Caribou Coffee will close 80 stores nationwide and turn 88 other locations into Peet's over the next 12 to 18 months. Caribou had 610 locations at the end of 2012. That number will be trimmed to 486 by 2015...Pool and patio supply company Namco LLC filed for Chapter 11 status in US Bankruptcy Court. Namco operates 37 US east coast stores.

Industry News: New England

2013-04-17T13:15:00.002-07:00

Boston’s first Shake Shack opened in Chestnut Hill, MA last month. The 3,000 s/f Chestnut Hill Shack is constructed with recycled and sustainable materials...Downtown restaurant Remington's of Boston isn't renewing its lease on Boylston St., which means Dick Doherty's Beantown Comedy Club is seeking a new location...Faneuil Hall restaurant Durgin-Park has opened a 3,405 s/f restaurant in Logan’s Terminal E...Construction is under way on Hit Wicket, a cricket-themed Inman Square, Cambridge restaurant and bar that will serve popular food from major cricket-playing nations and broadcast live cricket matches. Hit Wicket will also broadcast Bruins, Celtics, Red Sox and Patriots games...Kings Bowl will join a Wegmans as an anchor tenant for the Nordblom Co. 3rd Ave mixed-use Burlington, MA project, which is part of Northwest Park, a 4.6 million square foot redevelopment. Kings Bowl has signed a lease for just over 27,000 s/f of space, and is expected to open later this year. Wegmans is projected opening is spring 2014...The 31,000 s/f former Johnnie’s Foodmaster on Beacon Street in Brookline will open next month as a Whole Foods Market. In November, Johnnie’s closed its 10 stores and Whole Foods purchased six leases for $30 million...Plaster Fun Time, which has locations in Braintree, Framingham, Newton, Reading, Salem, Saugus, Chelmsford, Dedham, and Waltham offers plaster painting for kids, is looking for a strategic investor or buyer to help the company grow nationally and internationally...Panera Bread Co. opened a 4,000 s/f store at Fresh Pond Mall in Cambridge, MA, and has opened a store at Wayland (MA) Town Center. Panera has 1,650 US cafes..Federal Realty, of Rockville, Md has acquired a Darien, CT retail complex of 6 properties totaling 90,000 s/f for $47.3 million. The portfolio consists of buildings leased to Stop & Shop, Citibank, Equinox Fitness and Chase Bank, as well as several others...Treat Cupcake Bar is expanding to a second location at The Street in Chestnut Hill. Treat is leasing 1,100 s/f of space in the newly renovated retail center on Route 9.

March Retail Sales Report

2013-04-17T13:13:00.000-07:00

Commerce Department Monthly Sales

2013-04-17T13:10:00.004-07:00

Retail and food service sales in the U.S. fell 0.4% last month after a slightly revised 1.0% gain in February, according to the Commerce Department.

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

Treasury Yields

2013-04-17T13:10:00.000-07:00

Treasury Yield Sources: federalreserve.gov; ustreas.gov

Consumer Confidence Index

2013-04-17T13:07:00.003-07:00

The Conference Board Consumer Confidence Index®, which had improved in February, declined in March. The Index now stands at 59.7 (1985=100), down from 68.0 in February. The Present Situation Index decreased to 57.9 from 61.4. The Expectations Index declined to 60.9 from 72.4 last month.

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

Purchasing Managers Index

2013-04-17T13:06:00.003-07:00

Manufacturing expanded in March as the PMI™ registered 51.3 percent, a decrease of 2.9 percentage points when compared to February's reading of 54.2 percent. This month's reading reflects the fourth consecutive month of growth in the manufacturing sector. 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

Are You Buying What Best Buy Is Selling?

2013-03-19T09:26:00.000-07:00

It was named “Specialty Retailer of the Decade” by Discount Store News in 2001, Company of the Year by Forbes in 2004, and as recently as 2006 was placed on the List of Most Admired Companies by Fortune. Now be honest: had the title of this article been a little more obscure, would you have guessed that Best Buy was the recipient of these honors?

Just a few years later, on March 8, 2009, following a bankruptcy filing and subsequent inability to find a buyer, Best Buy’s number one rival Circuit City closed all its stores, freeing up over $11 billion in appliance and electronics business. While some retailers were experiencing double digit sales declines between 2008 and 2010, Best Buy total revenue gained a dramatic 23.4%. Benefiting from the Circuit City liquidation, as well as its own acquisition of a 50% interest in Best Buy Europe, sales leaped from $39.9 billion to $49.7 billion. At that point it was believed by some that Best Buy had a monopoly on the electronics market. Euphoria, right? But then Best Buy began to show definite cracks. What happened?

First of all, although Best Buy was a substantial beneficiary of those Circuit City sales dollars, it wasn’t the only one. Not only were internet retailers picking up business in this category, but Wal-Mart was gaining market share as well, expanding its electronics mix with more depth and breadth - and at higher price points. In the 24-months from the end of 2010 to the end of 2012, Best Buy revenue growth slowed to a modest 3.0% while comp store sales showed consecutive annual declines of 1.8% and 1.7%.

2013 started out no better. In March 2012, Best Buy announced that it would begin testing a prototype which was 20% smaller than stores it was currently operating, and would close 50 large format stores, including three in New England (Boston and Wareham MA, and Middletown RI). The following month, its CEO announced his abrupt resignation following an internal investigation into his “personal conduct.” The bad news continued the following month as the chief marketing officer and chief financial officer of its international division departed. Then late last year, the head of BestBuy.com left the company, a short nine months after coming on board. Sounds like one mess after another.

However, in the midst of all this, Best Buy hired a new CEO, Hubert Joly, who was regarded as a turnaround expert, having done so with the likes of TGI Friday, Radisson Hotels, EDS, and others. Within 10 weeks, Joly announced his turnaround strategy: a multi-step plan to “Renew Blue.” Joly emphasized the need first to stabilize and then grow same-store sales and profit margins. The aim was to hit operating margins of 5-6%, which had recently been running about 2.1%. He acknowledged that Best Buy had a price perception issue, and instituted a price matching policy during the holiday season. He also discussed increasing revenue by attracting and developing “transformational leaders” to improve the customer experience both in-store and online by energizing and empowering employees to deliver “extraordinary results.”

So far Joly has been able to attract a few new key executives following the departures of several. Building on the apparent success of its holiday price-matching program, Best Buy announced that the program would go into effect permanently. This started earlier this month - and not a day too soon.

In the branded world of consumer electronics, price is the driving motivator. If Best Buy is going to compete, it has to be more than a showroom to the consumer. And with the particular hit it’s taken in electronic entertainment hardware and software sales, Best Buy needs to find ways to better allocate space toward its most profitable merchandise lines.

Joly responded recently by announcing that Best Buy would put more focus on appliances, a category that had been relegated to the back of the store as high tech took over. Joly wants appliances to have a front and center position now, a shrewd tactical move in light of the housing recovery and the potential demand that should ensue. The competitive environment in appliances is much more favorable as well. After all, how often do you shop online for a refrigerator, washer, or dryer?

Best Buy’s latest announcement is the elimination of the work-at-home program, a move that, although it surely resulted in more than a few disgruntled employees, was designed to encourage employees to focus on the tasks at hand. While it’s still too early to tell if Joly’s Best Buy plan will be effective, it appears to be moving the company in the right direction. From a strategic perspective these recent moves should be applauded; but the big question now is, will it translate to the bottom line, and regain for Best Buy at least a little of the glory it once enjoyed?

Bob Sheehan, Vice President of Research

BSheehan@KeyPointPartners.com

KeyPoint Partners Company News

2013-03-19T09:18:00.003-07:00

New Business: KeyPoint Partners has been awarded Property Management contracts for 1080 Route 28, an Ocean State Job Lot in South Yarmouth, MA and 978 Boylston Street, a CVS store in Newton, MA; and Property Management and Leasing contracts for Treble Cove Plaza, a 114,000 square foot shopping center anchored by Market Basket in Billerica, MA; Marathon Realty awarded the contracts.

Industry News: National

2013-03-19T09:17:00.002-07:00

US chain store comp retail sales for February rose 1.7% year-over-year as measured by the ICSC's tally of 22 major retail chains. According to the ICSC, sales were negatively impacted by adverse weather, higher payroll taxes and uncertainty surrounding the federal government’s sequestration. The ICSC is continuing to modify its reporting as more retailers, most recently Kohl’s, Target, and Macy’s, switch to quarterly sales reports. The National Retail Federation's February retail sales report shows sales excluding automobiles, gas stations and restaurants increased 0.7% seasonally adjusted from January and inched up 0.5% unadjusted year-over-year. Among individual retailers, Gap gained 3.0%, and Limited rose 3.0%; Costco was up 6.0%, and TJX rose by 1.0%. Rite Aid was down 3.6%, and Walgreens was down 0.6%. See retail sales results on Page 4...Casual Male Retail Group has changed its corporate name as of Feb. 25 to Destination XL Group, Inc...DSW Inc. launched its new Luxe810 e-commerce site with five pop-up stores promoting the site, selling ready-to-wear women’s and men’s designer shoes, handbags and other accessories, including a 6,200 s/f location at the Mall at Chestnut Hill (MA) and others in New York, San Francisco, Boca Raton and Washington, DC...Several months after buying discount Internet retailer Sierra Trading Post, TJX Cos. plans to use the platform launch limited TJX brands ecommerce websites.