Wednesday, December 14, 2011

Annual Re-cap

Seasons Greetings. As we approach the end of yet another eventful year, we thought that, as we did last year, we’d review some of the observations, predictions, and pronouncements we’ve made in this publication in 2011.

In Closing The Book On Borders? in the January issue, Vice President of Research Bob Sheehan wrote about the potential impact of Borders’ demise: “This week we hear that Borders has hired bankruptcy and restructuring lawyers to figure out its next move. On a local level, according to KeyPoint Partners’GRIID™, Borders currently operates 15 superstores in Eastern Massachusetts, with stores averaging approximately 25,300 square feet. Under a worst case scenario, Borders liquidation would result in approximately 379,000 square feet of vacant space in Eastern Massachusetts, potentially bumping up the vacancy rate in the region from its current level of 8.6% to 8.8%. How bad would that be for the retail real estate industry in this area? Well, using the recent closings of Circuit City and Linens ‘n Things as reasonable gauges of expectations, it’s not so bad. Those two chains operated 38 stores in Eastern Massachusetts, with an average store size of approximately 32,000 square feet. In just about two years, the majority of those units have been absorbed, with only 9 vacant stores remaining. With an improving economy and somewhat smaller prototypes, finding replacement tenants shouldn’t be too daunting a task.”

In Are You Listening? in the February issue, Marketing Manager Chris Cardoni reinforced the importance of listening in personal as well as business relationships: “Of course listening is of the utmost importance in a personal relationship, but its importance in the business world, no matter your business, is absolutely vital. Are you listening, really listening, to your customers, clients, co-workers, constituents... none of us can afford to be complacent; we have to keep listening, because the consequences of not listening can be serious, even dire. Was the government of Egypt listening? Has Blockbuster been “listening” carefully to the business environment? Has Borders?”

In Sears Goofing Up Again? in the March issue, Bob Sheehan pondered the direction of the perennially direction-less Sears: “For more than a decade now, in a series of corporate “goof ups”, Sears has been searching for an ever-so-elusive identity. One could argue that the real value in Sears Holdings lies mainly in the real estate, and secondarily in selected brands such as Kenmore, Lands’ End, Craftsman and Die Hard. In addition to marketing closed-store opportunities, Sears Holdings Corporation Realty is currently marketing surplus space to other retailers in existing Sears stores that are inefficiently oversized. It is also not unreasonable to conjecture that Sears could develop relationships with other competing retailers to sell Sears brands in their locations. Perhaps very soon you’ll buy your Craftsman circular saw or Kenmore washer somewhere other than Sears. But will that scenario, coupled with the sale or sub-lease of Sears space, be enough to reinvigorate the storied Sears name? Time alone will reveal the direction in which D’Ambrosio will steer the company, and tell us whether he’s the real deal, or just another Sears goof-up.”

In Time to Pay More (Tax) Attention? in April, Bob commented on the online sales tax issue: “If I walk to the shopping center down the street and make a purchase, I’ll pay a state sales tax on that purchase, as I’m sure you would, too. But what if I go online and purchase the same item? A 1992 Supreme Court ruling prevents states from collecting sales tax from an online retailer if that retailer has no physical presence in that state. Technically consumers are required to pay the applicable state sales tax, via the honor system, in the form of a “use” tax – which we all do scrupulously, correct? I didn’t think so. Assuming an average 5% sales tax across the nation, total electronic shopping and mail-order house sales of $272 billion would generate tax revenue of $13.6 billion. That’s a great deal of lost revenue – revenue that lawmakers and others are gearing up to claim.”

In With Borders Gone, Who's Next? in the August issue, Bob Sheehan pondered the next big retail bankruptcy: “Right out of the box, we'll tell you that we haven't the foggiest. I suppose we have a number of names that make the Watch List, but no particular retailer stands out. While we continue to see fallout from some furniture operators and other independents, there is no significant chain that jumps out at us regarding a looming bankruptcy.”

In Mixed Signals in November, Bob commented on retailers who were expanding, while others are downsizing: “Most of us would agree that the worst of the retail cycle is behind us. But as we tread wearily through a very sluggish recovery, we are seeing a number of prominent (and some not so prominent) retailers announcing substantial store closings and even liquidations. We’ve observed a number of additional store closing announcements of late, especially in our geographic territory, including the Syms/Filene’s Basement shutdown of 46 store locations. Daddy’s Junky Music, a 39-year old, New England-based chain of 12 units, is another permanent casualty, and so is Priscilla of Boston, the 19-unit, high-end bridal boutique, which operated a store on Newbury Street since 1945. Gap also announced a substantial store reduction of 189 namesake stores, or 21% of its U.S. total, by the end of 2013. A number of weak retailers are holding their collective breaths for holiday season sales results, because a poor performance at the end of this difficult year could lead to substantial closings after the New Year. Stay tuned for our January issue!”

The full versions of these articles can be found at KeyPoint Partners.com. We encourage you to visit, review our KeyPoint Reports on key retail markets, look at our Properties For Lease listings, read the KeyPoint Retail RoundUp, or simply find out more about us and our services. And of course we welcome you to contact us with all your commercial real estate needs. On behalf of all of us at KeyPoint Partners, have a happy holiday season and a peaceful, prosperous New Year.

The Partners of KeyPoint:
Mark A. Becker, MBecker@KeyPointPartners.com
Robert K. Lemons, RLemons@KeyPointPartners.com
William A. Lawler, WLawler@KeyPointPartners.com
Brian Kelley, BKelley@KeyPointPartners.com

Company News














Honored: Bob Lemons, KeyPoint Partners’ Managing Partner, was named Executive of the Year at the BOMA Boston TOBY & Industry Awards ceremony on November 17...New Employee: Catherine Connors has joined the Middleboro, MA office as a CAM Specialist. Cathy comes from Beacon Capital Partners, where she worked for 13 years.

Industry News: National

US comparable chain store retail sales for November rose by 3.2% year-over-year as measured by the ICSC's tally of 21 major retail chains, the slowest pace since March, according to the ICSC. Among merchandise categories, Wholesale Clubs rose by 9.0%, followed by Luxury Stores with a 6.5% gain. Discounters gained 2.3%. Apparel gained 0.8%, Department Stores rose 0.4%, and Drug Stores rose 1.9%. Among individual retailers, Gap dropped by 5.0% and Limited gained 7.0%; Costco was up 9.0%. Nordstrom was up 5.6% and Saks gained 9.3%; Target grew by 1.8% and TJX by 4.0%. Macy’s gained 4.8%, JCPenney dropped 2.0%, and Kohls fell by 6.2%; Rite Aid rose 1.9%.

Industry News: Accelerating

Hot Topic Inc.’s Torrid division will open more than 20 plus-size fashion Torrid stores in 2012, many of them located in strip centers rather than traditional malls. The fleet of Torrid stores could grow to more than 335 locations. Hot Topic runs more than 634 Hot Topic stores and 146 Torrid stores, mostly in the continental US…City Sports has opened its 21st store, in downtown Silver Spring, Md. It is the retailer’s second location in the metro DC area to open in the past year. The store features an interactive electronics section that offers shoppers the use of in-store iPads to access information about products and the ability to wear-test headphones…A new retail concept, Wonder!, has opened it first location in Deerfield, Il. The 135,000 s/f space combines a broad selection of baby gear, furniture, bedding, apparel, and toys with an array of experiential elements, and features a half-acre interactive play area, 10 classrooms and a stage that will host special events, concerts and activities…1-800-FLOWERS.COM, Inc. announced the signing of a 45-store franchise development agreement for its Fannie May Fine Chocolates division with GB Chocolates, LLC. GB Chocolates will open a minimum of 45 new Fannie May franchise stores beginning in December 2011. All stores under the agreement are required to be opened and operating by year-end 2014. GB Chocolates has also acquired 17 existing Fannie May stores from the Company…P.F. Chang’s China Bistro Inc. plans to open an even more limited-service and pared-down-menu version of its fast-casual Pei Wei Asian Diner in Phoenix next April, executives said Friday. Called Pei Wei Asian Market, the new test restaurant will take over an existing Diner unit in Phoenix, said K.C. Moylan, president of the 173-unit Asian Diner division. The division is also looking for three to five additional locations around the country...Dollar General Corp. will open 40 new Dollar General Markets, its expanded grocery concept, in 2012, the first new DG Markets since 2007. The company operates 62 Dollar General Markets…J.C. Penney Co Inc bought a stake in Martha Stewart Living Omnimedia Inc and will build mini-stores under that brand. Martha Stewart store-in-stores will open at Penney in February 2013. ..Wingstop, the national chicken wing chain, opened its 500th restaurant this month, in Brooklyn, NY. Wingstop was founded in 1994 and began franchising in 1997.

Industry News: Decelerating

Brown Shoe Co., parent of Famous Footwear, said it will close between 70 and 75 Famous Footwear stores in fiscal 2011 and 2012, for a total of about 145 store closures. The company will also be closing all of its Brown Shoe Closet and F.X. LaSalle stores, and will exit several business units including all of its children's wholesale and some women's specialty and private brands...Charming Shoppes will seek to sell its Fashion Bug clothing store chain and concentrate on growing its flagship Lane Bryant brand. The company will also undergo a strategic review of all its operations and finances. The company plans to open 125 new Lane Bryant stores over the next few years, relocate 125 stores from malls to lifestyle and strip shopping centers, and close 50 stores when their leases expire, bringing the number of Lane Bryant stores and outlets to 900...Pacific Sunwear of California Inc. will close as many as 200 of its weaker-performing stores around the country...RoomStore, the last surviving segment of the Heilig-Meyers furniture store chain, filed for Chapter 11 bankruptcy protection, with plans to reorganize around a smaller core of stores. RoomStore operated 66 RoomStore locations at the end of its second quarter, and owns 65% of Mattress Discounters, with 83 bedding specialty stores in the mid-Atlantic. RoomStore said it will continue to operate its stores while restructuring, and will retain its interest in Mattress Discounters…Sears Holding Corp. will spin off its Orchard Supply Hardware Stores later this month, with the hardware chain becoming a standalone public company. Sears bought Orchard Supply in 1996.

Industry News: New England

TD Bank has notified federal banking regulators that it plans to close down four of its facilities in Gloucester, Essex, Salisbury, and South Yarmouth, Massachusetts after the first of the year. TD is also planning to close one branch each in Connecticut, Vermont, New York state and New Jersey.  TD Bank has more than 1,200 branches in 15 states from Maine to Florida and the District Columbia. It includes branches in 114 cities and towns in Massachusetts alone...A Container Store will open in the Northshore Mall in Peabody, MA. The store will occupy 25,000 s/f of space previously occupied by a Bugaboo Creek Steakhouse; this will be the chain’s third Container Store in MA…Wegmans, which opened a full-scale store in Northborough, MA in October, plans to build a 70,000 s/f store at Chestnut Hill Square on Route 9, directly across from The Mall at Chestnut Hill in Newton, MA. The company does not have a construction schedule or opening date planned, however, according to a press release. Founded in 1916, Wegmans has 79 stores in New York, Pennsylvania, New Jersey, Virginia, Maryland and Massachusetts…Kelly's Roast Beef is closing its Allston operation at 1245 Commonwealth Ave. after a little more than a year there…The Palm Restaurant at Westin Copley Place in Boston will close at year’s end, and move to Boston's Financial District. The restaurant was unable to renew its lease at the Westin Copley.The Palm operates 30 locations. It opened in Boston in 1996...Bernie & Phyl’s will open two stores in Natick, MA  next month, buildings at the former Lexington Furniture site in a 34,000 s/f building and a 5,000 s/f. Plans call for a large showroom along with an upscale “Metro Living” concept in the smaller building. The company currently has seven stores…Dave & Buster’s opened its first Massachusetts location in Braintree as part of a national expansion. Dave & Buster’s plans to open 20 new locations across the country over the next five years. The Braintree location, in the former Circuit City building at the South Shore Plaza, is the third new Dave & Buster’s to open this year...Brio Tuscan Grille opened last month at Danbury (CT) Fair Mall, one of 50 of the restaurants that have opened since 1992. Brio joins The Cheesecake Factory, Dick's Sporting Goods and Forever 21 in space formerly leased by Filene's...Big Y has entered into an agreement to buy the assets of two pharmacy locations in Springfield and Wilbraham, MA  operated by Louis & Clark Drug Stores. Big Y will operate the stores as Big Y's Louis & Clark Pharmacies. With the addition of these two locations, Big Y will have 40 pharmacies throughout their 62-store chain.

Commerce Department Monthly Sales

Retail sales rose 0.2% in November, the Commerce Department reported this month, lower than October's gain, which was revised higher to show a 0.6% increase. nsumer spending rose sharply in the third quarter but November's retail sales growth was the weakest in any month since June.

Treasury Yields

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had declined in October, improved in November.The Index now stands at 56.0 (1985=100), up from 40.9 in October.The Present Situation Index increased to 38.3 from 27.1. The Expectations Index rose to 67.8 from 50.0.

Purchasing Managers Index

Manufacturing continued its growth in November as the PMI registered 52.7 percent, an increase of 1.9 percentage points when compared to October's reading of 50.8 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Thursday, November 17, 2011

Mixed Signals

Using a favorite Yogi-ism, it seems that the retail industry is confronted with “déjà vu all over again.”

Most of us would agree that the worst of the retail cycle is behind us. But as we tread wearily through a very sluggish recovery, we are seeing a number of prominent (and some not so prominent) retailers announcing substantial store closings and even liquidations (some of which are reported in this month’s Industry News, and on our Retail RoundUp).

Based on International Council of Shopping Centers data, store closings showed an increase in Q3 this year of 75.9% versus Q3 last year, a clear indication that things aren’t over yet. Of course, Borders was the biggest news, announcing that it was closing its remaining 355 namesake stores as well as 44 Waldenbooks stores, equating to approximately 60% of all square footage that was closed during the quarter. But bookstore closings are only one page of the story.

We’ve observed a number of additional store closing announcements of late, especially in our geographic territory, including the Syms/Filene’s Basement shutdown of 46 store locations. Daddy’s Junky Music, a 39-year old, New England-based chain of 12 units, is another permanent casualty, and so is Priscilla of Boston, the 19-unit, high-end bridal boutique, which operated a store on Newbury Street since 1945. Gap also announced a substantial store reduction of 189 namesake stores, or 21% of its U.S. total, by the end of 2013. This move coincides with a previously announced plan to reduce overall company square footage by 10% between 2007 and 2013. Furthermore, these store closings will result in a 34% decline in the number of the Gap division units during this four-year stretch, going from 1,056 to 700 brick-and-mortar locations.

Speaking of bricks and mortar (and other building supplies), Lowe’s Home Improvement made a rare announcement recently, stating that it will close 20 underperforming home improvement stores, not surprising given the sales slump in the home improvement category since the housing bubble burst back in late 2006. Additionally, Lowe’s said that it will reduce future store growth to 10 to 15 stores annually, down from its previous target of 30 stores per year. Evidence of the pullback is the fact that Lowe’s recently announced it was aborting development plans in Salem and Auburn, Massachusetts.

And say farewell to the Fribble: another effort to shed underperforming stores occurred last month when Friendly’s Ice Cream filed for bankruptcy and abruptly closed 63 stores, more than 10% of the chain’s nearly 500 units. Nearly one-half of the store closings were located in Massachusetts. Also in October, after closing seven stores during the past two years, Saks Fifth Avenue CEO Steve Sadove announced that the company would shutter several more units citing, “I don’t think the U.S. needs more stores.”

The other shoe is dropping in the footwear segment, with recent announcements by Payless ShoeSource and Stride Rite that they are closing 275 and 75 stores respectively. In the apparel category, Christopher & Banks just reported that it will close 100 underperforming stores over the next three months, about 13% of the chain, as part of a restructuring plan which also includes format consolidations.

While none of this is good news, retailers are not generally running away from store expansion, although much of the CAPEX will go to the outlet store sector. Gap is opening 75 new stores this year, mostly in its outlet arm but also in its new Athleta division. Saks is adding five Off Fifth locations and Macy’s announced that it will open three new full-line stores, in addition to the two new Bloomingdale’s outlet stores recently opened, including a store at Wrentham (MA) Village Premium Outlets, and a third Bloomie’s outlet on the way. Ann Taylor is not just changing its name (now Ann Inc.), it’s changing its store format, rolling out 40 new concept stores and conversions in 2011, as well as 14 new LOFT stores and 40 outlet stores.

As one might expect from the current economy, value retailers are virtually all performing well, and most are in a growth mode. Family Dollar, Big Lots, Ocean State Job Lot, and Dollar Tree are all adding stores – and the list goes on.

However, here’s an interesting fact: through Q3 2011, store closings are down 34.6% compared to year-ago levels. The favorable comparison in 2011 results from a difficult front half in 2010 when 79% of the 5,572 store closings for the entire year occurred and when Eastern Massachusetts vacancy happened to peak at 9.7% (see our latest KeyPoint Report for Eastern Massachusetts/Greater Boston).

Nevertheless, the acceleration in store closings during Q3 this year does not bode well for 2012. A number of weak retailers are holding their collective breaths for holiday season sales results, because a poor performance at the end of this difficult year could lead to substantial closings after the New Year. Stay tuned for our January issue!

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

Company News















Burlington, MA Property Management Team promotions: Mario Boiardi has been promoted to Assistant Property Manager. Mario joined KeyPoint Partners in 2009 as a Summer Intern on various management projects, before becoming an Accounts Payable Clerk. Kris Dalen has been promoted to Property Manager. Kris joined the Accounting Team in 2007, moving to Property Management in 2010...Loran Macumber joined the Burlington, MA office as a Construction/Project Manager. Loran's most recent experience was with Jones Lang LaSalle.

Industry News: National

US comparable chain store retail sales for October rose by 3.7% year-over-year as measured by the ICSC's tally of 26 major retail chains, the slowest pace since March, according to the ICSC. Among merchandise categories, Wholesale Clubs rose by 9.0%, followed by Luxury Stores with a 4.5% gain. Discounters gained 3.2%. Apparel was flat, Department Stores rose 1.8%, and Drug Stores rose 2.7%. Among individual retailers, Gap dropped by 6.0% and Limited gained 6.0%; Costco was up 9.0%. Nordstrom was up 5.4%; Target grew by 3.3% and TJX by 3.0%. Macy’s gained 2.2%, Kohls rose by 3.9%; Rite Aid rose 2.9% and Walgreens by 2.6%. See our more extensive list of retail sales results on Page 4...Macy’s plans to spend $400 million to remodel and update its Herald Square store in Manhattan. The store’s space will be expanded by 100,000 s/f,  giving it a total of 1.2 million s/f of selling space. Work will begin in early spring 2012.

Industry News: Accelerating

Capital Group has acquired 15 JCPenney Outlet Stores from JCPenney Co. and will rebrand the units as JC’s 5 Star Outlet. The stores will operate for a transitional period as JCPenney Outlet Stores. Penney will supply the stores with overstocks and end-of-season merchandise, and existing staff and management have been retained…Lord & Taylor plans to open 3 new stores in the coming year, an 80,000 s/f store in Yonkers, NY, a 120,000 s/f store in Rockingham, NH in March, and an 80,000 s/f location in Boca Raton, FlL in fall 2012, bringing the total number of Lord & Taylor stores to 50...SuperValu will remodel 80-90 stores in fiscal 2012. Its Save-A-Lot unit will increase its store count by 80 to 90 stores...Vitamin Shoppe opened 10 stores during the latest quarter, and expects to open 48 stores this fiscal year and 52 locations in fiscal 2012…Dunkin' Donuts has 86 new restaurants planned in the Washington, DC, market by 2020. 15 development agreements were signed over the past year for 64 new restaurants, in addition to 22 previously contracted restaurants…Books-A-Million has been taking over the leases of former Borders stores and will transform 41 of the sites into BAM stores this month. Most locations represent new markets for the bookseller. In addition to opening the 41 outlets, the company is closing 21 locations...Pep Boys exceeded the company’s goal to open 50 stores this year and hit 119 stores, 99 by acquisition. In 2012, Pep Boys plans to add 75 more centers through growth or taking over closed auto repair facilities...Buffalo Wild Wings opened restaurants in Florida, Tennessee, Washington and California, marking the chains 800th location across 45 states…Jamba, Inc. is meeting its 2011 goal to open between 50-70 Jamba Juice locations. As of October 4, there were 752 US locations and 10 international stores…C. Wonder made its retail debut with a 5,000 s/f NYC store.The company is on track to open 3 mall  locations this fall.  An additional 20 locations are planned for 2012. C. Wonder offers apparel, accessories and home-décor items under its own brand..H&R Block will set up kiosks inside 300 Walmart locations, adding to a network of more than 11,000 US offices. Service will be available starting in December...The Great Atlantic & Pacific Tea Co. has secured a $490 million financing package from Yucaipa Cos., Mount Kellett Capital Management and investment funds managed by Goldman Sachs. The package will allow the grocer to emerge from Chapter 11 bankruptcy protection early in 2012. A&P filed for Chapter 11 in December 2010. The agreement is subject to court approval...Wal-Mart opened its smallest-format stores yet in California for the 2011 holiday season. 2 new test stores, one 1,000 s/f, and the other 3,000 s/f, are designed to drive sales through Walmart.com, and are expected to remain open through December 31. Wal-Mart also opened three new Neighborhood Markets in Wichita, KS, each between 30,000- 40,000 s/f…Williams-Sonoma has acquired Rejuvenation Inc., a manufacturer and retailer of authentic reproduction lighting and house parts. 

Industry News: Decelerating

Filene’s Basement has filed for bankruptcy protection for the third time in a decade and will shutter for good after the holiday season. Filene’s Basement is owned by Syms Corp., which purchased the company out of bankruptcy in June 2009. Syms also filed for Chapter 11. The liquidation of stores is expected to run through January 2012, the schedule to be determined as the liquidation of merchandise is completed. Filene’s Basement has about 21 stores. Before Filene’s Basement filed for bankruptcy in 2009, it shut down 11 locations. After the latest round of closings is finished in December, only 20 will remain...Dippin' Dots Inc. filed for Chapter 11 bankruptcy protection. The company has 140 Dippin' Dots retail locations, mostly controlled by franchisees, and agreements with 9,952 small vendors at fairs, festivals and sports games...Christopher & Banks will close about 100 underperforming stores over the next 3 months and will accelerate plans to convert or consolidate a number of existing Christopher & Banks and CJ Banks stores into dual-format stores. The retailer currently operates 761 stores in 45 states.

Industry News: New England

The Book Shack opened in the former Borders space at the Kingston, MA Independence Mall this month. The Book Shack will sell most of its titles at discounts of up to 60%, and carry best-sellers at 10% off list prices. The owners are reaching out to local book clubs, authors and community theater groups to use a 300-seat theater that will occupy part of the 23,000 s/f store.The space has been vacant since Borders closed in August…Bloomingdale's The Outlet Store opened this month at Wrentham (MA) Village Premium Outlets. The 24,000 s/f store is located on the last remaining buildable parcel fronting the outlet mall. The Bloomingdale's will be one of three such stores opening across the country. It is a division of Macy's, which has corporate offices in New York and Cincinnati and operates about 850 department stores...The building at 350 Washington St. in Boston’s Downtown Crossing which houses T.J. Maxx, Marshalls, H&M, and Town Sports International has been sold for $128 million. Real Estate Capital Partners sold the building to Invesco Real Estate Advisors...39-year-old locally-based music store chain Daddy's Junky Music ceased operations this month. At its closing Daddy's counted 12 stores in 4 states, including locations in Manchester, Nashua, Salem and Portsmouth, NH. The company also has stores in Vermont, Massachusetts and Connecticut...Books-A-Million recently opened its first New Hampshire store in North Conway and will open two more this month in Concord and West Lebanon in former Borders spaces. The expansion into New Hampshire is part of an aggressive growth plan by Books-A-Million in the wake of Borders' shutdown. Books-A-Million operates 232 stores in 24 states, and in just a matter of months has opened or will open 41 more stores in 18 states…RCS Real Estate Advisors has been retained by bridal retailer Priscilla of Boston to facilitate the closing of all 20 Priscilla of Boston locations, effective Dec. 31, by negotiating cost-effective lease terminations or locating replacement tenants. The company announced its closing in September...buybuy Baby opened its first Massachusetts location this month, a 33,000 s/f store at 160 Granite St. in Braintree, replacing the empty Linens ‘n Things store. The subsidiary of Bed Bath & Beyond offers merchandise for newborns to toddlers.

October Retail Sales

Commerce Department

The Commerce Department reported that retail sales were up 0.5% compared to September, just above the 0.4% forecast. Excluding auto sales, retail sales shot up 0.6%, three times stronger than expected.

Treasury Yields

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had slightly improved in September, declined in October. The Index now stands at 39.8 (1985=100), down from 46.4 in September. The Present Situation Index decreased to 26.3 from 33.3.

Purchasing Managers Index

Manufacturing continued its growth in October as the PMI registered 50.8 percent, a decrease of 0.8 percentage point when compared to September's reading of 51.6 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Tuesday, October 18, 2011

Boo Again: Return of the Halloween Article!

It’s October already. Happy Halloween, and welcome to the Halloween Article!

I’ve written about Halloween from time to time in this publication, partly because, well, I like Halloween, and partly because Halloween, as the current press has been trumpeting for weeks, has in the last few years grown into an exponentially more significant retail milestone than it had ever been. It’s become not only a measure of retail health itself, it’s come to be regarded as precursor to, and an indicator of, the potential success or failure of the holiday shopping season.

So here it is: according to the National Retail Federation’s annual survey, a record 69% of Americans intend to participate in Halloween this year. Imagine a political candidate who could get 69% of Americans to do anything.

Total Halloween spending is forecast to reach $6.86 billion, the highest in the 10 years the retail trade group has been conducting the survey. The average person plans to spend $72.31 on decorations, costumes and candy, up from $66.28 last year.

When I write for these pages I tend to look for subjects that not only have significance for the retail industry, but contain some social and/or emotional element. There’s often a relationship between how, what, and why we buy (or don’t buy) and how we’re all feeling about the economy, the country, and ourselves.
Halloween, in difficult economic times, is a measure of how much we need to celebrate. Also, it’s fascinating to read about what the popular costumes are every year, because they say a great deal about who our particular heroes – and villains – are.

For example, in my Halloween article two years ago, I reported that the most popular costume purchase was a Bernie Madoff mask. Halloween revelers were choosing to masquerade as a supreme symbol of financial villainy (Halloween, The Holidays, and the Madoff Mask, October 2009).

This year’s most popular figure: Charlie Sheen. Yeah, it scares the heck out of me, too.

In preparation for this article (okay, partly in preparation for this article, and partly just for fun), I took a tour of the big Halloween pop-up store that’s running now in the nearby vacant Borders (that sentence alone is fraught with all kinds of resonance for the retail industry - the number of pop-up stores dedicated to Halloween merchandise rose an estimated 8% this year; last year, pop-up shops expanded by 15%).

Here are my entirely unscientific observations:

• Costumes are expensive!
• Sexy costumes outnumber other types by two to one
• The “classics” are as popular as ever: clown, gypsy, hobo, cowboy, etc.
• That original Halloween movie Mike Meyers mask is still pretty scary

According to the NRF, adults will spend $1 billion on costumes, up from $840 million last year. Besides Mr. Sheen, other popular costume choices this year include Green Lantern, Lady Gaga, zombies, Smurfs, Angry Birds, Katy Perry, Jersey Shore star Snooki, singers Nicki Minaj, Taylor Swift, and Justin Bieber, and Dog the Bounty Hunter. Zombies jumped to No. 4 on the list for adults this year, up from No. 7 last year, and to No. 9 from No. 22 for kids. "Zombies are everywhere," commented one NRF spokesperson - another statement that’s fraught with all kinds of resonance.

As of this writing we’re entering the final days of the Halloween shopping period, and the holiday merchandise has already appeared on store shelves. How does the optimistic Halloween retail sales forecast jibe with expectations for the holiday season? Holiday retail sales are expected to rise 2.8% to $465.6 billion, the National Retail Federation predicts. This growth, while far slower than last year’s 5.2% gain, is slightly higher than the NRF’s 10-year average holiday sales gain of 2.6%. We’ll see.

By the way, you may have heard dire tales of pumpkin shortages, such as this recent report: “Hurricane Irene flooded pumpkin fields up the East Coast and into Canada, worsening a fungus outbreak and wiping out pumpkin crops at some farms. Tropical Storm Lee dropped more rain over pumpkin fields in the Southeast, causing problems there as well…news reports about possible pumpkin shortages have caused early pumpkin-panic buying and prices have jumped 30 to 40%.”

But don’t worry: reports of shortages are exaggerated. There are plenty of pumpkins to be had. Oh, and a Charlie Sheen mask, complete with mischievous grin, costs just $19.99 at Spirit Halloween. Enjoy your October!

Chris Cardoni, Marketing Manager
CCardoni@KeyPointPartners.com

Industry News: National

US comparable chain store retail sales for September rose by 5.5% year-over-year as measured by the ICSC's tally of 26 major retail chains, the strongest showing since June, according to the ICSC. Among merchandise categories, Luxury Stores continued to rise, with a 10.4% gain, followed by Wholesale Clubs, which rose by 8.0%. Discounters gained 4.9%. Apparel was up 2.3%, Department Stores rose 3.9%, and Drug Stores rose 2.6%. Among individual retailers, Gap dropped by 4.0% and Limited gained 11.0%; Costco was up 12.0%. Nordstrom was up 10.7%; Target grew by 5.3% and TJX by 4.0%. Macy’s gained 4.9%, Kohls rose by 4.1%; Rite Aid rose 1.3% and Walgreens by 3.1%. See our more extensive list of retail sales below.

Industry News: Accelerating

The Wilson Farms Inc. convenience store chain, acquired by 7-Eleven Inc. this year, has begun its transition to its new brand. A handful of the 188 locations have begun flying the 7- Eleven banner. 7-Eleven has about 8,800 stores in North America and about 42,700 worldwide…Sur La Table has been acquired by global asset management firm Investcorp. Sur La Table operates 86 stores nationwide, and no management changes are expected. Investcorp’s past investments include luxury brands Gucci and Tiffany & Co…Dunkin’ Donuts has begun an expansion in the Washington, DC market. Dunkin’ plans to boost its number of stores from its current 125 to nearly 200…Kohl’s Department Stores opened 30 stores across 20 states last month. The company is also remodeling approximately 100 stores this year…Family Dollar plans to open as many as 500 new stores over the next 12 months as the retailer pursues an aggressive expansion plan. Family Dollar has about 7,000 stores…T-Mobile USA announced the rollout of a new design for nearly 400 new and remodeled stores across the country. T-Mobile is opening or remodeling in 65 markets across the country, led by openings in Boston, and Washington, D.C…H&M will add 265 new stores, up from the 250 previously planned…Best Buy will open its 250th Mobile store next month and is on track to have 275 of the stand-alone specialty shops open by Thanksgiving. The company currently operates 240 freestanding Mobile stores, having added more than 30 new locations over the past two months alone, and plans to ultimately operate 800 stores within five years. Best Buy also maintains Mobile departments within all 1,104 of its big-box stores...Subway opened more than 400 shops in August/September. The new restaurants bring the total number of Subways to just over 35,300 locations in 98 countries. The chain also opened 5 new “Green” Subway Eco-Restaurants, making 14 in all...Buffalo Wild Wings opened its 500th US franchised location last month, one of nearly 800 total restaurants in Buffalo Wild Wings’ portfolio. The brand foresees 1,400 US locations, and this year’s plans call for 55 company-owned and 60 franchised restaurants…Uniqlo plans to launch 200 to 300 new stores worldwide each year, with two set to launch in New York this month. Uniqlo has nearly 1,000 stores in 12 countries...Ruby Tuesday entered a deal with Lime Fresh Mexican Grill, a 10-unit fast-casual Mexican chain based, to franchise the brand east of the Mississippi River. For fiscal 2012, Ruby Tuesday will close three to five company-owned restaurants; convert six to eight low-performing, company-owned restaurants to other casual dining concepts; open one new Truffles Grill unit; and open six to eight Lime Fresh Mexican Grill restaurants…Auntie Anne’s pretzel chain projects to open 120 stores in 2011, of which over 60 will be in the US. In November 2010, Auntie Anne’s was acquired by FOCUS Brands Inc., the franchisor and operator of Carvel, Cinnabon, Schlotzsky’s, Moe’s Southwest Grill and Seattle’s Best Coffee locations...The Canada Pension Plan Investment Board is partnering with Ares Management to buy 99 cent Only Stores, which has 289 western US stores…JCPenney will acquire the worldwide rights for Liz Claiborne brands. The deal includes Liz Claiborne, Claiborne, Liz, Liz & Co., Concepts by Claiborne, LC, Elizabeth, LizGolf, LizSport, Liz Claiborne New York (LCNY) and Lizwear brands. Once its brands are divested, Liz Claiborne will focus on its Juicy Couture, Lucky Brand and kate spade brands…Stage Stores will launch a new off-price concept, called Steele’s. The first three stores are slated to open in November. The company plans to open an additional 25 to 35 new Steele’s stores in 2012. Stage also plans to open 30 to 35 new department stores in 2012. The company currently operates 805 stores in 40 states under the Bealls, Goody’s, Palais Royal, Peebles and Stage names…Chester's International LLC has recently added 14 more stores in the US and Puerto Rico...Darden Restaurants, Inc. and Eddie V’s Restaurants, Inc. announced an agreement for Darden to purchase the Eddie V’s Prime Seafood and Wildfish Seafood Grille brands. Darden’s Specialty Restaurant Group, includes The Capital Grille, Bahama Breeze and Seasons 52. Eddie V’s currently owns and operates eight Eddie V’s restaurants and three Wildfish restaurants. Darden owns and operates more than 1,900 restaurants.

Industry News: Decelerating

Esprit Holdings is divesting its North American businesses. The company is actively looking for a partner to acquire its North American operations, which include 93 US stores…Yum! Brands Inc. has signed definitive agreements to sell Long John Silver’s Inc. and A&W Restaurants Inc. to two separate groups of franchisees. Terms of the deals were not disclosed. Yum Brands, which also franchises KFC, Pizza Hut and Taco Bell, said Long John Silver’s would be sold to LJS Partners, a consortium of franchisees and other investors. A&W Restaurants will be sold to A Great American Brand. Yum! Brands bought Long John Silver’s and A&W from Yorkshire Global restaurants in 2002. The two brands together accounted for 1,630 units...The 134-store arts and crafts chain A.C. Moore has agreed to be acquired by an affiliate of arts and crafts distributor Sbar’s Inc. for about $40.8 million...Gap is on track for a 10% reduction in overall store square footage by the end of 2012. Gap will cut its square footage 34% overall, resulting in 700 US Gap stores and 250 Gap Outlet stores. Old Navy will have roughly the same number of stores in North America, but with a smaller footprint, and will remove another 1 million s/f by fiscal year end 2013. The company is growing its Athleta athletic apparel brand, which will have opened 10 stores by the end of 2011, and 50 by the end of 2013…Filene’s Basement is closing four MA stores, about 15% of the chain’s locations, by the end of the year. 3 Filene’s Basement locations in MA will remain, in the Back Bay, Newton, and Norwood…Lowe's will close 20 underperforming locations in 15 states. However, Lowe’s will open 10 to 15 stores annually from 2012 forward.

Industry News: New England

Quiznos announced a partnership with Vermont-based convenience and gas retailer, Champlain Farms, to open Quiznos restaurants inside Champlain Farms’ 40 locations throughout Vermont, situated in colleges and universities, interstate exits, and tourism destinations. The initial launch will include 10 locations, the first of which will open next month. Plans call for expansion to all 40 locations in the future. Quiznos opened more than 200 convenience store locations in 2011…Restoration Hardware has signed a lease for 234 Berkeley St. in Boston, once home LouisBoston. Restoration Hardware has yet to announce when it will open its store…Uno Restaurant Holdings Corp. will open the flagship location of Uno Dué Go, its three-year-old fast-casual café concept, in Boston this month. Boston-based Uno has 150 company-owned and franchised restaurants...Bruegger’s Enterprises opened the first US Timothy’s Coffee restaurant in Boston’s Hancock Village. The location is the Canadian coffee house chain’s 90th unit. Bruegger’s Enterprises operates 300 Bruegger’s bakeries...Iconic Wilbraham, MA-based restaurant chain Friendly Ice Cream Corp. closed 63 of its nearly 500 locations as it looks to reorganize under Chapter 11 bankruptcy protection. Roughly 30 of the closings are in Massachusetts. Friendly’s was founded by brothers Prestley and Curtis Blake in Springfield, MA in 1935, who sold it to Hershey in 1979. In 2007, Friendly’s was bought for $337.2 million by Sun Capital Partners Inc....Burtons Grill will close its location near Fenway Park. Burtons, which has locations in Hingham, North Andover and Peabody, MA, will open a new restaurant in Burlington, MA in December. In addition to its Massachusetts locations, Burtons also has locations in Connecticut, Virginia and New Hampshire.

September Retail Sales

Commerce Department

Retail sales rebounded in September at their fastest pace in seven months, according to the Commerce Department. Sales rose 1.1% from a month earlier, boosted by strong auto purchases. Excluding autos, sales increased 0.6% in September.

Treasury Yields

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had declined sharply in August, remained essentially unchanged in September. The Index now stands at 45.4 (1985=100), up slightly from 45.2 in August.

Purchasing Managers Index

Manufacturing continued its growth in September as the PMI registered 51.6 percent, an increase of 1 percentage point when compared to August's reading of 50.6 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Monday, September 26, 2011

Greater Hartford, CT Report Preview

The KeyPoint Report on retail real estate in Greater Hartford, Connecticut will be available soon at KeyPointPartners.com. This is our third report of 2011, and follows our Reports on Eastern Massachusetts/Greater Boston and Southern New Hampshire, both of which are available at KeyPointPartners.com. The 2011 Greater Hartford report will be released shortly. Here are just a few highlights from this year’s report:
Overview
Total retail space in the Greater Hartford region included 37.5 million square feet at the end of the 2011 study period, a modest increase from the 37.3 million square feet reported last year. The most significant new development in the region was the construction of the Stop & Shop-anchored Elmwood Plaza in West Hartford, which added approximately 79,000 square feet of new retail space. This was the only significant shopping center constructed during the study period, reflecting the dramatic slowdown in new development.
Following an alarming rise in the Greater Hartford vacancy rate during the prior study period from 10.6% to 13.1%, the region reversed the trend, lowering the level of unoccupied space to 11.8%. This equates to a reduction of unoccupied space of approximately 448,000 square feet, which stood at 4.4 million square feet at the close of the study period.

Submarkets
Similarly, vacancy rates in all Greater Hartford submarkets improved during the study period, a year after each suffered declining occupancy. Receiving the only “A” for effort, however, was the City of Hartford, which lowered its vacancy rate from 19.3% to 15.0%. However, it had the most room to improve and still remains the sector with the highest vacancy rate.
Nevertheless, all other sectors showed significant improvement, lowering vacancy rates by 1-2%, with the exception of the Northwest submarket, where the rate declined by 0.7%. But even though improvement was shown throughout the region, high vacancy remains a concern with the Northwest sector ending up as the only submarket in single digits at 9.0%.
Town Rankings
At the municipal level, the Town of Manchester remains the dominant retail community by total retail space, with approximately 5.6 million square feet of inventory, with no appreciable change from a year ago. Enfield, Hartford, West Hartford, and Newington follow, all encompassing between 2.5 and 3.0 million square feet of space. Among municipalities with at least 500,000 square feet of retail space, after holding the spot for the past three years, Simsbury no longer tops the list of healthiest retail communities. That honor now goes to Wethersfield, which has the lowest vacancy rate in the region at 4.0%. Much of the Top 10 remains the same as last year. The only addition to the list is Bolton, replacing Simsbury, which dropped out due to the closing of the local Borders store.
Although Hartford had the highest vacancy rate among submarkets in the Hartford region, it was not the worst among municipalities. Vacancy rates in both Berlin and East Hartford exceeded 20%, coming in at 23.9% and 22.5%, respectively. New Britain, East Windsor, and South Windsor also experienced higher vacancy rates than Hartford.

Store Size Rankings

While other markets studied by KeyPoint Partners reported regional vacancy declines, Greater Hartford is the first to avoid vacancy declines in all size classifications. Vacancy among storefronts less than 2,500 square feet was 17.0% at the end of the 13-month period, clearly the worst performing category but still 140 basis points below the vacancy level of a year ago. For stores ranging between 2,500 and 4,999 square feet, the vacancy rate dropped from 14.7% to 12.8%. Until now, it was these smaller size categories, including significant numbers of independent retailers, which experienced continued erosion in occupancy levels within other New England regions. The most significant improvement occurred within the 10,000-24,999 and 25,000-49,999 square foot segments. These categories declined from 11.9% to 9.8% and 16.1% to 13.8%, respectively.
Among the smattering of retailers now occupying the previously vacant 10,000-24,999 square foot units are Aldi, Ulta, EMS, Tractor Supply, and DSW while PC Richards acquired the bulk of the 25,000-49,999 square foot spaces via former Circuit City stores. Stores of 100,000 square feet or more experienced no changes and remain near full occupancy.

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

The 2011 KeyPoint Report on the retail real estate marketplace for Greater Hartford, Connecticut focuses on changes in the region's retail activity, and examines supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories between May 1, 2009 and June 1, 2010, a 13-month span. The Greater Hartford market includes 26 cities and towns and represents more than 835 square miles and approximately 808,700 persons, equating to 23% of the Connecticut total population.

Industry News: National

US comparable-chain-store sales for August rose by 4.6% year-over-year as measured by the ICSC's tally of 26 major retail chains, the same percentage as last month. According to the ICSC, the “stock-up effect” of Hurricane Irene helped some retailers (mergency supplies, food), and hurt others (apparel). Among merchandise categories, Wholesale Clubs saw the strongest rise at 11.1%, followed by Luxury Stores, which rose by 6.6%. Discounters gained 3.3%. Apparel was up 1.2%. Among individual retailers, Gap dropped by 6.0% and Limited gained 11.0%; Costco was up 11.0% and BJs gained 11.5%. Nordstrom and Neiman Marcus gained 6.7%; Target grew by 4.1% and TJX by 1.0%. Macy’s gained 5.0%, Kohls dropped by 1.9%; Rite Aid rose 2.5%. See our more extensive list of retail sales results below.

Industry News: Accelerating

Casual Male Retail Group plans to open 13 DestinationXL stores this year, 20-30 stores in 2012, and approximately 100 stores over 4-5 years…mall retailer Spencer Gifts has leased its first-ever Manhattan location. The chain operates more than 600 stores…Del Frisco’s Restaurant Group opened the first unit of its newest concept, Del Frisco’s Grille, in New York, and plans to open another 4-6 units every year for the next several years. Del Frisco’s Grille is a smaller, more casual version of its 9-unit Del Frisco’s Double Eagle Steakhouse concept, The company, which also operates 20 Sullivan’s Steakhouse restaurants, plans to “backfill” the 9 markets in which Del Frisco’s currently operate: Dallas; Fort Worth; Denver; Houston; Charlotte, N.C.; Las Vegas; Boston; Philadelphia and New York. The company plans one new Del Frisco’s restaurant and one new Sullivan’s Steakhouse each year…Toys “R” Us will open 21 stores across 13 states by yearend, including 11 “R” Superstores (full-size Toys “R” Us and Babies “R” Us stores under one roof) and 10 “Side-by-Side” locations, and expects to have completed the remodeling of 23 existing Side-by-Side locations by the end of the year. Toys “R” Us embarked on its integrated store strategy in 2006, and since then has converted more than 100 of its traditional US stores to the Side-by-Side format. In 2007, the company opened the first of its new “R” Superstores. By the end of 2011, the company will operate 43 “R” Superstores nationwide...Tiffany & Co. plans to open 17 company-operated stores between now and fiscal year-end 2012, which includes six in the Americas…Bebe Stores expects to open four Bebe stores and as many as seven 2b stores in the new fiscal year, including two stores to be converted from Bebe to 2b. It plans to close 10 Bebe locations. International licensees are expected to add up to 30 standalone stores and 30 shop-in-shops...New Balance has opened its first Experience Store, in New York City. The approximate 4,000 s/f space is designed to reflect the heritage of the century-old brand, the only athletic brand to continue to manufacture shoes in the US. The decor features restored original brick walls and floor-to-ceiling columns .A two-lane track runs along one of the store’s perimeter walls which features a sunken treadmill. Behind a glass-enclosed space, an associate from the company’s Maine facility will assemble No. 880 running shoes. Each pair will be sold in a special ‘Assembled in NYC’ drawstring bag stamped with the date made and edition number. The store will host a live video feed from the company’s Lawrence, MA manufacturing floor...Saks Inc. announced the addition of 5 Saks Fifth Avenue Off 5th stores for 2012, located in upscale outlet, lifestyle, and strip centers in Merrimack, NH, Syracuse, NY, Livermore, CA., Grand Prairie, TX, and Nashville, TN. Saks had previously opened 2 new Off 5th stores and plans to open 3 more later this year. The stores feature an open loft-like environment and range from 25,000 to 28,000 s/f...A federal bankruptcy court judge has approved a deal allowing Books-A-Million to buy the leases of 14 Borders stores. Books-A-Million, now the nation’s second largest bookseller after Barnes & Noble, initially had sought to buy out the leases of 30 to 35 Borders stores. The deal gives Books-A-Million its first stores in New England, expanding its geographic footprint. Books-A-Million operates 231 US stores…A Delaware court has approved the reorganization plan of Harry & David Holdings Inc. The company expects to emerge from bankruptcy on or around Sept. 13. The mail-order food company, known for its fruit baskets, filed for Chapter 11 protection in March, citing falling sales and competition from big-box retailers...Dollar General is on track to expand into Nevada, Connecticut, and New Hampshire in the second half of the year. Dollar General opened 301 new stores in the second quarter and expects to grow square footage by about 7% for the year. The company currently operates more than 9,640 US stores...Seattle’s Best Coffee announced the addition of 12 new locations which have opened since April 2011, completing a portfolio of locations in venues such as city centers, college campuses, airports and office complexes. There are nearly 100 Seattle’s Best locations in the US and Canada...The first Lord & Taylor Home store opened in NJ. The 23,000 s/f store will carry kitchen, bath and bedroom merchandise. Lord & Taylor’s parent, Hudson's Bay Trading Co., owns the license to the Linens 'n Things brand name, and the store will carry Linens 'n Things merchandise.

Industry News: Decelerating

Collective Brands, parent company of Payless and Stride Rite shoe chains, announced that it would close 475 underperforming stores over the next three years and has hired a firm to help it explore options. The company currently operates 4,844 stores, of which 4,461 are Payless stores. Of the 475 stores to close over the next three years, more than 300 will be shuttered by the end of the year, including about 275 Payless and 75 Stride Ride stores.

Industry News: New England

Bloomingdale’s, The Outlet Store will open at the Wrentham (MA) Village Premium Outlets in October. The 25,000 s/f Wrentham location will be the company’s sixth outlet and first in MA.The company is looking at additional MA opportunities…Priscilla of Boston, the bridal boutique that got its start on Newbury Street in 1945 and shot to prominence after making Grace Kelly’s wedding gown, is closing. Its parent company, David’s Bridal, will shutter the store’s 19 national locations, including its store on Boylston Street. Priscilla of Boston was started by Priscilla Kidder, who cemented her reputation when she designed the 1956 wedding of Grace Kelly to Monaco‘s Prince Rainier…Noodles & Company announced a new development agreement with franchise group Hartford Noodles, LLC, in Hartford, CT to open its first Noodles & Company location in Hartford in 2012, and several additional locations over the next five years. Noodles & Company is a collection of more than 260 neighborhood restaurants in 20 states. The partners of Hartford Noodles previously developed Five Guys Burgers & Fries locations in CT...The Finish Line Inc. has invested $8.5 million to buy Greater Boston Running Co. - which consists of 3 MA stores - and its affiliated stores in 7 other states. Finish Line has 650 mall-based stores...Boston jeweler Shreve, Crump & Low will move next year from Boylston Street to a smaller store on Newbury Street. The retailer had previously vacated its long-time space at the corner of Arlington and Boylston streets for the former FAO Schwarz toy store building nearby.

August Retail Sales






































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. *Includes Hannaford Bros., Food Lion, Bloom, Bottom Dollar, Harveys, Kash n' Karry and Sweetbay

Commerce Department Monthly Sales

After seven months of increases, total U.S.retail sales remained flat in August, the U.S. Commerce Department reported. Excluding autos, gasoline and building materials, retail sales were unchanged, the weakest performance so far this year, after a 0.3% increase in July.
Source: U.S. Department of Commerce - commerce.gov



















Treasury Yield Sources: Bloomberg, L.P.; Bondsonline.com; Wall St. Journal; federalreserve.gov; ustreas.gov

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had improved slightly in July, plummeted in August. The Index now stands at 44.5 (1985=100), down from 59.2 in July. The Present Situation Index decreased to 33.3 from 35.7. The Expectations Index decreased to 51.9 from 74.9 last month.
Source: The Conference Board - www.conference-board.org

Purchasing Managers Index

Manufacturing continued its growth in August as the PMI registered 50.6 percent, a decrease of 0.3 percentage point when compared to July's reading of 50.9 percent. The PMI registered the lowest reading since July 2009, when it registered 49 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

Tuesday, August 23, 2011

August Commentary: With Borders Gone, Who's Next?

Right out of the box, we'll tell you that we haven't the foggiest. I suppose we have a number of names that make the Watch List, but no particular retailer stands out. While we continue to see fallout from some furniture operators and other independents, there is no significant chain that jumps out at us regarding a looming bankruptcy.


Rite Aid has been a concern, but comp store sales at the pharmacy chain have recently turned positive. Rite Aid has not shown a recent profit, but as it continues to pare unprofitable stores count, chances that the company will hang around for a while continue to improve. The long term outlook, however, may not be so promising.

We continue to see other chains downsizing, particularly those most impacted by E-commerce. Online sales may ultimately play a villainous role in determining from which retail category the next victim may hail. A recent report from ComScore indicated that online US retail spending was up 14% in Q2. We have to go back two years to Q3 2009 to find the last quarter that wasn't a double digit gain, a far cry from retail sales trends overall. In fact, ComScore reported that nearly $1 of every $10 in discretionary spending is done online, although this factoid reflects items such as event tickets and travel.

E-commerce (online) sales as a percent of total non-auto retail are approximately 5.6% but if we add in mail order sales the ratio jumps to 8.9%. E-commerce sales have grown more than sevenfold since the beginning of 2000 when online sales were not much more than a mere nuisance to brick and mortar retailers. To help put it into perspective, during the12-month period through Q1 2011, E-commerce sales were $173.4 billion, the rough equivalent of Target, Best Buy, Macy's, Kohl's, JCPenney, and Staples aggregate total sales.

In its report, ComScore goes on to say that the best performing online categories have been consumer electronics, computer hardware, and computer software with each growing by at least 15% since last year. That doesn't bode well for retailers selling these categories but many have indicated that stores will be downsized appropriately and in some cases remerchandised.

Best Buy, for example, has experienced significant declines in sales of consumer electronics (TVs, cameras, camcorders, etc.) and entertainment (video gaming hardware and software) products. Combined, the company has seen these categories decline from 60% to 51% of total sales since FY 2006 as online sales and digital content take a toll. Although mobile phone and mobile computing sales have offset some of the impact, it certainly hasn't offset the floor space required to sell those products. Consequently, Best Buy has decreased its prototypical size from 45,000 to 36,000 square feet while it continues to grow its Best Buy Mobile division both in-store and geographically. In existing stores, excess space will be subleased.

Staples is another retailer which is in the midst of downsizing. Computers and office machines currently account for only 46% of sales after generating as much as 52% of the revenue as recently as 2006. With 500 leases expiring over the next three years, and on the heels of disappointing sales, Staples going-forward plan is to open smaller stores.

Walmart announced a few months ago that it also was reducing electronics floor space in its stores and reallocating square footage to apparel. Additionally, this retailer is developing smaller concepts such as Walmart Market, prototypically 42,000 square feet, and Walmart Express, which runs about 15,000 square feet. Both divisions will take advantage of urban markets where real estate is at a premium and where it can go head to head with grocery and dollar stores.

Several other retails, including Sears, Office Depot, Target, and LL Bean have announced smaller store plans. Sears will sublease excess space where store productivity warrants it. Office Depot is facing similar obstacles to Staples. Target is moving into urban markets with City Target with stores ranging from 60,000 square feet to100,000 square feet. LL Bean just announced that it will be opening its second 14,000 square foot store in November, much smaller that the 30,000 square foot units it had been opening during the past several years. The company is planning to add 14 stores between now and 2014 and all are expected to be the smaller prototype.

The trend toward smaller stores is clearly a sign of the times. Consumer belt buckles have tightened and online retailing continues to make inroads on brick and mortar space. It's becoming more apparent every day that the retail industry has entered a new era. We all better adapt!

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

Industry News: National

US comparable-chain-store sales for July rose by 4.6% on a year-over-year basis as measured by ICSC Research's tally of 27 major retail chain stores.  All segments tracked saw the July comparable-store sales pace moderate from a strong June pace. Among merchandise categories, Apparel was particularly weak in July, up 1.4% following a strong 5.5% jump in June. Luxury Retailers, however, continued to outpace the industry with a 8.0% sector gain. Other segments ran as follows: Wholesale Clubs were up 9.9%, Department Stores gained 3.5%, Discounters increased 4.1%, and Drugstores were up 2.5%. Among individual retailers, Gap dropped by 5.0% and Limited gained 6.0%; Costco was up 10.0% and BJs gained 9.2%. Nordstrom and Neiman Marcus gained 6.6% and 7.7% respectively; Target grew by 4.1% and TJX by 4.0%. Macy’s gained 5.0%, Kohls dropped by 4.6%; Walgreens was up 2.7%, and Rite Aid rose 1.7%. See our more extensive list of retail sales results below.

Industry News: Accelerating

Hhgregg is on track to open 24 stores in its fiscal second quarter, for a total of 31 new store openings in the first half of this year…Thrift-store retailer Value Village plans to open 23 new stores in 2011, for a total of 287 across the US, Canada and Australia, and another 25 stores in 2012, pushing the total to more than 300...Several retailers have pledged to open stores in what the Department of Agriculture calls “food deserts”: low-income markets throughout the country where finding nutritious food options can be difficult. Walmart plans to open between 275-300 stores and Supervalu plans to build 250 Save-A-Lot stores by 2016. Walgreens committed to converting or opening at least 1,000 food oasis stores across the country over the next five years... Victorinox Swiss Army will open five stores in 2011, the first of which opened July 1 in White Plains, NY. The company operates 9 international stores...Books-A-Million submitted a bid to purchase inventory, fixtures, equipment, and leasehold interests for 30 Borders locations. Under the proposed bid, Books-A-Million will assume the leases for these locations and continue to operate these stores. The move came as Borders Group began to liquidate its business. Books-A-Million operates US 231 stores. With the liquidation of Borders, Books-A-Million will be the nation’s second-largest book chain, after Barnes & Noble. The majority of its stores are in the Southeast, but the Borders deal would expand its reach in the Northeast. Simon Property Group announced that its Premium Outlets division will expand four of its Premium Outlet properties in California, Florida, Illinois and Washington. Construction on these expansions is scheduled to begin in 2012, and total 450,000 s/f of added space…Starbucks expects to open 100 US units this year, and 200 next year, as well as 600 new locations internationally in 2012, about 25% of which will be in China....Fresh & Easy Neighborhood Market, the US division of Tesco, plans to test a new smaller-format store concept, called Fresh & Easy Express, in San Pedro, CA. Fresh & Easy’s new format will be approximately 4,000 s/f, compared with its typical 10,000 s/f size...Best Buy is expanding its Best Buy Express kiosk business to college campuses and the DisneyLand resort. It has opened 150 Express locations in the last 3 years and will add 100 more in the next year. The self-service kiosks are generally located in airports, train stations, casinos and rest stops...Sports Authority opened six new stores on Aug. 13 in Miami, Los Angeles, Salt Lake City, Chicago and Milwaukee...Self-serve frozen yogurt franchise Menchie's opened its 100th store this month in Houston. The chain has  opened nearly 40 stores already in 2011 and plans to open another 30 before the end of the year, aiming for  250 stores in the next 12 months across the United States and beyond…Gap opened two Athleta stores this month in Manhattan. The openings mark the women’s active wear brand’s entry into the East Coast market, and support Athleta’s plan to open up to 50 stores by 2013...Kohl’s is on track to open an additional 31 stores this year, as well as remodel another 15 stores. The company opened 9 and remodeled 85 stores in the first half of the year...Newk’s Express Café has signed 35 agreements for new locations in 2011. 6 restaurants have opened so far this year and at least 14 more are expected to open soon, bringing the total number of Newk’s locations to 50 by the end of the year.

Industry News: New England

Cheeseboy continued its Boston expansion with the opening of its 4th store, at the Prudential Center Mall. The chain plans to open more locations later this year. Boston-based Cheeseboy serves made-to-order grilled cheese sandwiches, tomato soup and macaroni and cheese, among other offerings. Cheeseboy is owned by Grilled Cheese to Go LLC, which has locations in Boston and Braintree, MA and Milford, CT. Teen retailer The Buckle Inc. will open its first Massachusetts store on the upper level of the at the Natick Mall mall after making its New England debut this month at Providence Place. The company, which operates 425 stores in 21 states, sells mid - to higher-priced clothing, footwear and accessories. The Merrimack (NH) Premium Outlets is under construction off Exit 10 of the F.E. Everett Turnpike. The landscape is cleared, and foundations and frames are in place for most of the seven buildings in the project’s first phase. Developers expect to finish blasting next month, and plan to complete the first phase, to include 100 retail stores, by the middle of next year. Nordstrom will open CT’s first Nordstrom Rack next spring in Farmington at the West Farm Shopping Center. The 35,000 s/f store will open in the space formerly occupied by Linens 'N Things. Nordstrom has 214 stores in 29 states, including 95 Nordstrom Rack stores, 116 Nordstrom full-line stores and a small number of affiliated stores...Arsenal Mall in Watertown welcomes Pretzel Twister, Chipotle, Reebok Factory Store, SE Asian Bistro, and Sprint to its mix of tenants. The new stores are scheduled to open this fall...FOCUS Brands, the franchisor and operator of more than 3,300 ice cream stores, bakeries, restaurants and cafes in 47 states and 42 countries, announced an aggressive plan for growth in the Boston market. Plans call for 30 Carvel and 10 Cinnabon locations over the next 2 years throughout Boston and surrounding markets...Wingstop has signed 36 development agreements that will result in 101 new store openings over the next several years. Wingstop has 485 locations open and 175 restaurants in various stages of development across the United States and Mexico.

July Retail Sales Report

Other Financial Indicators for July

Commerce Department Monthly Sales
Retail sales rose 0.5% last month, the best showing since a 0.8% advance in March, the US Commerce Department reported. It revised sales higher in the previous two months. Consumers spent more on autos, furniture and gasoline.
Source: U.S. Department of Commerce - commerce.gov

Treasury Yield Curve




















Consumer Confidence Index
The Conference Board Consumer Confidence Index®, which had declined in June, improved slightly in July. The Index now stands at 59.5 (1985=100), up from 57.6 in June. The Present Situation Index decreased to 35.7 from 36.6. The Expectations Index rose to 75.4 from 71.6 last month.
Source: The Conference Board - www.conference-board.org

Purchasing Managers Index
Manufacturing continued its growth in July as the PMI registered 50.9 percent, a decrease of 4.4 percentage points when compared to June's reading of 55.3 percent. The PMI registered the lowest reading since July 2009, when it registered 49 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

All material in KeyPoints is provided solely for your private information, and we are not soliciting or recommending any action based upon it. This material is based upon information that we consider to be reliable, but we do not represent that such information is accurate or complete, and it should not be relied upon as such. Opinions expressed herein are our current opinions as of the date appearing on this material only, and are subject to change without notice. Copyright KeyPoint Partners, LLC, 2011.

Thursday, July 21, 2011

July Commentary: The Boston ICSC & The Decline of the Document

Here’s a question for you: what is a document? What, in these digital days, constitutes that item we refer to as a document: a letter, a brochure, a contract, a lease exhibit, a newsletter? For example, this newsletter: you received it, and are likely reading it, online. When I started at KeyPoint Partners, this newsletter was largely faxed or mailed. It was designed and laid out according to the traditional parameters of printed pages. Now it’s entirely digital; we print a few hard copies to display in our lobby, but the printed version is modified from the digital version, not vice versa. This is an important difference: we’re no longer delivering a printed piece that has been modified so it can be read online; we’re delivering an online piece that could, if necessary, be printed.

I mention all this because The International Council of Shopping Centers New England Idea Exchange & Deal Making was held this month at the Hynes Convention Center in Boston. We were of course an exhibitor at the show, one of several ICSC events in which we participate. It was a successful show. by the way. The energy was high and the mood positive. Our booth was quite active, with many solid inquiries about investment sales as well as leasing.

Our market aerial portfolio:
documents delivered digitally
As Marketing Manager, it falls to me to determine how we present ourselves at these shows, and for years this meant the coordination of a large amount of paper. Picture me, and others like me, coordinating the printing of 30 to 50 copies of each leasing brochure for a portfolio of between 80 and 90 properties, and making sure they get to New York or Las Vegas. Now picture show attendees picking up one or two copies of each brochure, and then moving on to the next booth with bulging briefcases.

Our industry has for a long time functioned largely through the exchange of a veritable stream of documents. But really what we are doing is exchanging “parcels of information”, so to speak. That’s what a document is: a parcel of information organized for clear, easy consumption. We brought no leasing brochures to the show this year, but we distributed a lot of information. With all the activity at our booth, although we communicated a great deal to a great many people, we handed out essentially no documents.

Why would we? Our leasing “brochures” are instantly accessed through a phone, our detailed market aerial portfolio can be thoroughly toured via tablet, and complete corporate information including our entire portfolio of listings can be handed to you on a USB drive. These tools have made the task of coordinating “parcels of information” for a trade show exponentially easier – and infinitely more complex.

Of course there will always be “old school”. Many exhibitors are still “paper based, and we’re all still creating documents that look like traditional documents, even if they never physically exist. And there is no digital substitute for a phone call from a broker, or a face to face meeting between a property manager and a client. But the way information is exchanged before and after that call or meeting is profoundly different. What we’re moving toward is not a different way of doing the same thing – it’s doing a different thing entirely. When a document is no longer a document, it can be anything; it can take whatever form you like, and be as long it needs to be.
Our ICSC tradeshow booth graphic: traditional tools of the trade and powerful innovations of the digital age
I was working with one of our brokers recently on a property brochure. We went back and forth about what the “cover” should look like and how much information should be on it, how the ‘center spread” should be laid out, all of the usual issues. We were beating our heads against the limitations of the 4-page, 11” x 17” layout we had used as the basis for the document - until I stopped him and asked him how he intended to distribute the piece. If the primary distribution was going to be online, then we wouldn’t be bound by the format. We could have as many pages as we needed, and they could be different sizes and shapes. We could modify the vehicle to communicate what we needed, rather than fitting what we needed to communicate into an existing vehicle. This may seem like an obvious observation, a “d’uh” moment, but at the time it felt relevatory.

This was all in my head as we updated the large pop-up graphic display we use in our tradeshow booth. The concept is an enlarged image of a busy desktop, on which a variety of elements illustrate the breadth and depth of the many services we provide, our ever-widening business territory, and the types and quality of properties and tenants we deal with. If I say so myself, it’s a fairly striking image, especially when viewed at full size, under the lights of an exhibition venue. The image is a mix of old school elements and new school technology, information organized into recognizable documents, but able to become information simply organized. That’s where we all are right now, still defined by the old, poised on the edge of the paperless new.

Where will we all be the next time we re-design our booth?

Chris Cardoni, Marketing Manager
CCardoni@KeyPointPartners.com



Come see our tradeshow booth at the ICSC New York National Conference & Deal Making in December.

Industry News: National

June same-store sales for the ICSC’s index of major retailers rose by 6.9%. Several factors apparently contributed to the unexpectedly strong sales performance in June, according to the ICSC, such as favorable weather and some increased discounting after a weak May. Slightly higher apparel, food and other commodity prices also may be lifting reported sales. All retailer segments showed gains, with Wholesale Clubs leading at 13.1% and Luxury Stores gaining 9.7. Other segments ran as follows: Department Stores 6.2%, Discounters 4.6%, Apparel 5.5%, and Drugstores 4.0%. Among individual retailers, Gap gained 1.0% and Limited gained 12.8%; Costco was up 14.0% and BJs gained 7.3%. Nordstrom and Neiman Marcus gained 7.9% and 12.5% respectively; Target grew by 4.5% and TJX by 5.0%. Macy’s gained 6.7%, Kohl's rose 7.5%; Walgreens was up 4.8%, and Rite Aid rose 1.8%.

Industry News: Accelerating

Bugaboo Creek Steak House is under new ownership by Capitol BC Restaurants LLC, and open for business at 12 locations in Delaware, Maine, Maryland, Massachusetts, New Hampshire, and New York…Private equity firms Leonard Green & Partners and CVC Capital Partners entered into an agreement to purchase BJ’s Wholesale Clubs for $2.8 billion…Ross Stores opened its 1,000th Dress for Less store in North Pleasant Hill, CA…Microsoft plans to open 75 freestanding stores within the next 2 to 3 years. Microsoft has 11 stores across the country…Popeyes has opened its 2,000th restaurant...Yum! Brands has acquired restaurant chain Little Sheep, with 700 locations in China and a few in the US. Yum hopes to build the Little Sheep hot-pot concept into a global brand alongside KFC, Pizza Hut and Taco Bell. Yum has 38,000 outlets worldwide.