Tuesday, December 18, 2012

We Take A Look Back

Seasons Greetings! The end of yet another eventful year approaches, and it’s time for our annual look back at just a few of the observations, predictions, and pronouncements we’ve discussed in this publication in 2012.

In Sears: The Beginning of the End?, in our January issue, Vice President of Research Bob Sheehan reacted to the closings of over 100 Sears stores by observing that the venerable retailer’s “too big to fail persona” seemed precarious at best, but concluded, “With total sales last year of more than $35 billion, a store count above 4,000 units, and an employment base of more than 300,000 workers, it is unreasonable to think that Sears Holdings will follow the path of Circuit City, Borders, and Linens ‘n Things (among many others) by liquidating anytime soon. Sears Holdings remains a top 10 retailer and is surpassed only by Walmart among department store firms. We don’t recall such a top ten retailer ever going out of business. Yet we also believe that the latest wave of store closings, a mere 2% or so of its store count, is far from the last; if the slight bleeding turns into major hemorrhaging, who knows what might happen next?” Note: in October, Sears spun off its Hometown and Outlet stores. Sears announced in February that it would split off the companies as a separate publicly traded entity, Sears Hometown. In November it was reported that net income for the spinoff had risen 29% for the quarter.

Bob Sheehan saw so much to comment on at JC Penney that he wrote about it twice this year, in Ron Johnson’s Next Attempt at Retail Magic: The Transformation of JCPenney in the February issue, and in November’s JCP: Doomsday or New Beginning? Of Johnson’s promotion-free “fair and square” pricing policy, Bob wrote, “No matter how much creativity Johnson can instill, it will all be for naught if the new strategy doesn’t draw substantially more shoppers (particularly younger ones). But it’s a gutsy move, an attempt not merely to improve the company, but reinvent it, which if successful will be no small achievement.”

In November, reacting to a “precipitous fall” in JCP comp sales, Bob wrote, “in my 30-plus years in the retail industry, I can’t recall any other retailer’s sales falling as dramatically in such a short stretch”, but went on to note that “the loss in sales is largely a result of previously loyal shoppers jumping ship for Kohl’s, Macy’s, Dillard’s and Target. Sales at these firms have been generally improving this year for which they can probably give thanks, at least in part, to Penney’s – but that thanks may be short-lived if those shoppers begin to migrate , and Johnson succeeds in drawing in a new, younger shopper. While many people think Ron Johnson’s strategy for JC Penney is way off course, its brethren department stores better hope Johnson doesn’t, eventually, have the last laugh”. Note: Earlier this month JCP listed listed company morale among new “risk factors” surrounding workforce reductions, and concern that customers may not accept new marketing and merchandising strategies, in its Q3 regulatory filing.

Two of our articles this year were based on numbered lists: 10 Keys to A Shopping Center Event (Marketing Manager Chris Cardoni, March) and 4 Key Points About Distressed/Foreclosed Properties (VP of Property & Asset Management Bob Hayes, August). Chris Cardoni shared some of the secrets our Marketing Team’s has learned through staging successful, family and community-oriented promotional events at our client’s shopping centers, noting that “well-thought-out, carefully-executed, community-based events can enhance your property’s relationship with tenants, potential tenants, shoppers, and the surrounding community”. Note: a recent Day of Giving at a Pittsburgh shopping center brought together Santa, live carolers, and non-profit Operation Troop Appreciation, a charity supporting American troops overseas.

Bob Hayes based his insights on managing troubled properties on KeyPoint Partners’ - and Bob’s own - wealth of experience handling troubled assets for special servicers and other clients: “From the first day you take on a distressed or foreclosed property, you’re thinking about the last day you own it. A service company should have that goal in mind, too. An exhaustive takeover checklist (such as the one we use) assures that no detail is overlooked. The checklist is a blueprint for everything you need to know, and to which you have to pay attention. It takes a special set of skills, and a special way of thinking, to handle the distinct challenges of such assets”. Note: if you’d like to see our checklist, or if you have questions about how we can help you with distressed properties, contact Bob Hayes at BHayes@KeyPointPartners.com.

In July’s E-Tail to Retail, Chris Cardoni wrote about rends in online retailing: “It goes without saying that online retailing has evolved from a developing but still somewhat separate phenomenon, warily observed and tentatively sampled by what are still sometimes referred to as “bricks-and-mortar” retailers, to simply one of several ways in which virtually all of those retailers do business, with varying degrees of dedication, innovation, and success - a world of Twitter feeds, tablet wars, showrooming, and QR codes.” Note: a report by comScore says that for the holiday season-to-date, 11 individual days have surpassed $1 billion in online retail sales, surpassing last year's record of 10 such days.

In Mobile Dials It Up (September), Bob Sheehan wrote about the “phenomenal recent growth” in the mobile communications retail category, as tracked in our proprietary GRIIDTM retail database: “Even during the Great Recession, consumers have to run out and buy the latest mobile devices. From juveniles to seniors, mobile phones and tablets have become a basic necessity. That’s a big piece of business, and it makes sense that everyone from discounters to wholesale clubs to office supply stores to online sellers want a share of the sales dollars. The category still has room for growth”. Note: in our article we mentioned Apple, saying,”When the iPhone 5 was released this month, sales reached 2 million units the first day.” After that initial burst, sales of the iPhone 5 stumbled a bit, with a long wait for the next batch and a reported lag in supplies and accessories; then of course there are the ongoing issues related to the infamous Apple Maps app on the iP6.

Visit KeyPoint Partners.com to read the full version of any article above, review our KeyPoint Reports on key retail markets based on our proprietary GRIIDTM, look at our Properties For Lease listings and Tenant Representation assignments, read the KeyPoint Retail RoundUp at Blog.KeyPointPartners.com, or simply find out more about our company and our services. We welcome you to contact us with all your commercial real estate needs. Have a happy holiday season!
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

New Employees: Brian Dell'Erario joined the Burlington Office as a Property Operations Assistant. New Business: The Leasing Team has added 436-438 Southbridge Street, Auburn, MA, a 24,000 s/f space near the Auburn Mall, and 310 Andover St., Peabody, MA, a pad opportunity adjacent to Peabody Place, to its retail leasing portfolio. Vice President of Leasing Don Mace is handling both assignments.

Industry News: National

US chain store comp retail sales for October rose by a light 1.7% over last year as measured by the ICSC's tally of 22 major retail chains. According to the ICSC, November performance was impacted by Hurricane Sandy during the first two weeks of the fiscal month; the strong demand from online sales during the final week of the month, which will be booked in December's fiscal month; and the strength of lay-away purchases that will also be booked in December. Among merchandise categories, Wholesale Clubs led with a gain of 6.0%. Apparel followed with a 3.1% gain. Department Stores dropped 2.4%, Discount Stores were flat and Luxury Stores dipped 1.1%. Drug Stores dropped 5.3%. Among individual retailers, Gap gained 3.0%, and Limited rose 5.0%; Costco rose 6.0%. Nordstrom was down 1.1%; Target fell by 1.0% and TJX rose 3.0%. Macy’s dropped 0.7%, and Kohl’s fell by 5.6%; Rite Aid was down 3.0%. See retail sales results on Page 4...In a reported shakeup at Delhaize America, Beth Newlands Campbell has been named to succeed Cathy Green Burns as president of Food Lion. This follows the recent departure of Ron Hodge as CEO of Delhaize America and an effort to revive the Food Lion banner. Roland Smith took over Delhaize America after Hodge's announced retirement. Newlands Campbell had been president of sister chain Hannaford Supermarkets. Brad Wise, who had been Sr. VP of human resources for Delhaize America, was named president of Hannaford and Sweetbay...Staples Inc. president and COO Michael Miles will leave the company effective Feb. 2. to accept a position with investment firm Berkshire Partners.

Industry News: Accelerating

Urban Outfitters is planning 49 new stores, including 18 Urban Outfitters, 15 Free People, 14 Anthropologie, one BHLDN and one Terrain for fiscal 2013…DSW Inc. plans to open 25 to 30 new stores next year…PGA Tour Superstore opened its first Northeast location, a 57,000 s/f store in Paramus, NJ, the chain’s 15th location…Ulta Beauty will open about 125 stores in 2013. In the third quarter, Ultaopened 49 stores and ended the period with 537 stores…Starbucks will open at least 1,500 US stores in the next 5 years...Fatburger announced the signing of an agreement with The Riese Organization to bring the brand to New York City and surrounding areas. The first Fatburger will open in the Murray Hill neighborhood in the spring of 2013.  Riese will develop and operate multiple Fatburger locations across Manhattan, as well as Queens, Bronx, Brooklyn, Nassau, and Suffolk. Fatburger currently has more than 140 locations across the United States, Canada, Asia, and the Middle East...Dollar General plans to open approximately 635 stores in fiscal 2013, including 20 Dollar General Market stores and 40 Dollar General Plus stores. The company also plans to remodel or relocate approximately 550 stores…Yumz Gourmet Frozen Yogurt has locked in 50 locations in its first year of franchising and will open more than its goal of 100 new stores by 2014. Yumz Gourmet Frozen Yogurt opened its first store in Chicago in 2010...Cinnabon opened its 1,000th bakery. Since opening its first bakery in 1985, Cinnabon has expanded its footprint to cover 48 states and 50 countries this year. Throughout the remainder of 2012 and into 2013, Cinnabon plans 200 new domestic and international openings…Hurricane Grill & Wings announced 18 new restaurant openings in the coming year. The chain finished 2012 with 48 locations in six states...CVS Caremark will accelerate MinuteClinic’s growth, and now plans to operate at least 1,500 clinics by 2017, continuing to enter new markets, including Hawaii and Louisiana next year...Caribou Coffee Company, Inc. and the Joh. A. Benckiser Group announced a definitive merger agreement under which an affiliate of JAB will acquire Caribou for approximately $340 million. Caribou will continue to be operated as an independent company with its own brand, management team and growth strategy. As of September 30, 2012, Caribou Coffee had 610 coffeehouses.

Industry News: Decelerating

GameStop will close 200 stores next year. The video game retailer has more than 6,600 stores in 17 countries…Tesco will likely sell or close its entire US presence, which means that 199 Fresh & Easy stores could be shuttered or sold after 5 unprofitable years.

Industry News: New England

Yogurtland plans 20 greater Boston locations in the next year. Yogurtland currently has more than 190 US locations with more than 50 additional locations scheduled to open over the next 6 months…The British Beer Co. has signed a lease to move into a 5,800 s/f commercial space at 99 Hanover St. in Portsmouth, NH….Citigroup will close 9 of 31 MA branches and lay off about 66 employees. Citigroup plans to close about 44 bank branches nationwide as part of the cost saving plan. Its Massachusetts and Pennsylvania operations would be the hardest hit of its domestic markets…The Tile Shop will open its first MA store in the former Loehmann’s space at Sherwood Plaza in Natick. A second store is slated to open in Avon. The retailer operates more than 60 stores in 20 states…Ulta Beauty will open next summer at Patriot Place in Foxborough, MA. The 10,000 s/f store will be Ulta’s 8th MA location...Federal Realty Investment Trust has reportedly signed a purchase-and-sale agreement to buy the 12-acre Somerville site owned by IKEA at Assembly Row. Federal Realty is the developer of the Assembly Row project, an outlet mall scheduled to open in 2014. IKEA dropped plans to build a 350,000 s/f store there. Federal is now considering a supermarket, residences and offices on the site. The acquisition will expand Assembly Row, which already includes 450 homes, a theater, a retail facility and restaurants…Amazon.com will begin collecting MA sales tax on purchases made by Bay State customers starting next fall, according to Governor Deval Patrick’s office . Under federal law, online retailers do not have to collect sales taxes from buyers unless the company has a physical presence in the state. Officials in the Patrick administration contend that Amazon’s purchase of a North Reading technology firm, Kiva Systems this year, as well as its ongoing efforts to recruit engineers for a new office in Cambridge, establish the kind of physical presence necessary to collect sales tax. Amazon now collects taxes in eight states...Boston-Cambridge natural-foods grocer Harvest Co-Op opened its Forest Hills store near the Arnold Arboretum in Jamaica Plain. Harvest Co-Op recently vacated its Central Square store in Cambridge, due to a rent increase. Its existing store at 57 South Street in Jamaica Plain will remain open..Lam's Restaurant, at 825 Washington St. in Newtonville, MA a popular eatery serving Chinese and Thai cuisine, will close this month after more than 10 years in business. The restaurant's lease expired in September...Market Basket is scheduled to open its first Maine store next fall, redeveloping the former Lowe's at The Shops at Biddeford Crossing, which has been empty since 2011. Market Basket has 69 stores in Massachusetts and New Hampshire.

November Retail Sales Report

































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

Commerce Department Monthly Sales

The Commerce Department Retail said sales rose 0.3% in November, rebounding from a 0.3% decline in October. Excluding automobiles, gasoline and building materials, rose a more healthy 0.5%.

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

Treasury Yields


















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 increased in October, posted a moderate increase in November. The Index now stands at 73.7 (1985=100), up from 73.1 in October. The Present Situation Index was virtually unchanged at 56.6 versus 56.7 last month.

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

Purchasing Managers Index

Manufacturing contracted in November as the PMI™ registered 49.5%, a decrease of 2.2 percentage points compared to October's reading of 51.7%. This is the fourth month in the last six that the PMI™ has contracted, and the index is at its lowest level since July 2009’s 49.2%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

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