Tuesday, December 16, 2014

December Review: The Year in KeyPoints


















As we do at the end of every year, here’s  a brief look at our observations and pronouncements from 2014:

January: You Can't Help But Notice!
Bob Sheehan wrote about internet sales reporting related to total retail sales - and the continuing rise of e-commerce:
“You can’t help but notice, between Thanksgiving and Christmas, the divergence between reported internet sales and total retail sales. Mid-double digits vs. low-single digits have been the norm. For many retailers, it’s moving money from one pocket to another, from brick-and-mortar stores to online business, with possibly some synergistic benefit. For retail landlords, however, it has become an increasing concern that retail stores are downsizing as the internet absorbs market share.”  UPDATE: “Cyber Monday” online sales jumped 8.5% over last year.

February: It's More Than the Weather!
Bob wrote about the tendency to blame poor retail performance on the weather:
Watching Q4 retail sales roll in this year was less than impressive, to say the least, and January wasn’t any better. “It’s the weather”, everyone says. Of course, living in New England this winter has been a tough row to hoe, and Mother Nature has been even tougher on other regions of the country. There’s no question that bad weather impacts retail sales...but the next time you hear about bad weather adversely impacting retail sales, it doesn’t hurt to be a little skeptical. People are digging out from a lot more than just snow these days.” UPDATE: From a Bloomberg article last month: “After blaming the Polar Vortex’s chill for sluggish results last winter, U.S. retailers now say warm temperatures in October hurt sales of boots and sweaters.

March: Prophecies Fulfilled?
In our March article, Marketing Manager Chris Cardoni  wrote about dire “prophecies” for Radio Shack and Staples:
Despite the title of this article, we don’t claim to be fortune-tellers. However, we are dedicated to research, and we know that our readers rely on us to provide detailed industry knowledge, as well as practical insights. We’ve made it our business to keep track not only of what is happening with key retailers, but also what might happen. A few of the companies we’ve written about in this regard include Sears, JCPenney, Circuit City, Borders, and others. We’ve seen several of our presentiments borne out. It didn’t take a fortune-teller to foresee the difficulties faced by both Radio Shack and Staples, and their product categories, in today’s environment.” UPDATE: A Bloomberg headline from a few days before this writing: “RadioShack Posts 11th Straight Quarterly Loss.” A Nasdaq headline the day of this writing: “3 Reasons Staples Stock Could Fall.”

April: Family Dollar: Holiday Woes or Something Deeper?
In April, Bob commented on the announced closings of several Family Dollar stores, and CEO Howard Levine’s stated reasons for those closings:
“Family Dollar’s net income increased 52% since 2009, but net income at Dollar Tree went up  86% while net income at Dollar General increased an eye-popping 202%! As a result, profit margins at Family Dollar have remained relatively flat during that period and are substantially below that of the competition. The Family Dollar profit margin last year was only 4.3%, reflecting modest improvement since 2009. Profit margins at Dollar Tree and Dollar General were 7.6% and 5.9%, respectively. While internal operations may have contributed somewhat to this wide deviation, it appears that Mr. Levine, after looking at net income and profit margins, is finally realizing the need to unload a substantial number of bad apples.” UPDATE: As is well-known, Family Dollar is an acquisition target for both major competitors.

May: Regional Malls: Days of Future Past?
Bob wrote about the fate of lower-tier malls in light of major anchor store closings:
“An article in Yahoo! Finance examined how those B and C malls suffer when long-time major tenants such as Sears and JCPenney race to close stores. Nearly half of the 1,050 indoor and open-air malls in the U.S. have both of those struggling chains as anchor tenants, according to real-estate research firm Green Street Advisors. As the overall retail industry continues to change at a more and more rapid pace, as the Sears and Penney closures proceed and likely accelerate, and as we await the next major-tenant-multiple-store-closing shoe to drop, the fate of even that small percentage of marginal malls that have a chance at redevelopment remains very much to be seen.”

Our June through September issues were all about the release of our annual KeyPoint Reports on retail real estate activity in key New England markets. This year’s reports included a special report on dramatic changes in grocery real estate landscape since 2004. As you know, the complete  reports are available at KeyPointPartners.com.
June: Preview: KeyPoint Report for Eastern Massachusetts
“What’s that they say…two steps forward, one step back? With respect to vacancy, that’s exactly what happened during the past year. The vacancy rate in Eastern Massachusetts jumped up to 8.5% from 7.8% last year.”
July: Preview: Ten-Year Eastern Massachusetts Grocery Report
“The last decade has seen significant changes in grocery shopping options and the grocery real estate landscape. The proliferation of dollar stores and their reallocations of space toward grocery items have made these value retailers an increasingly popular alternative to traditional grocers.”
August: Preview: KeyPoint Report for Southern New Hampshire
“The region continued its upward trend in retail inventory, reaching a level of 30.0 million square feet by the end of the year. This represents a gain of 283,500 square feet, or 1.0%, thanks in large part to Seabrook Commons, DDR’s first ground up development in New England.”
September: Preview: KeyPoint Report for Greater Hartford, CT
“The Greater Hartford retail market traveled further down the road to stability. Total retail space in Greater Hartford currently totals 37.2 million square feet, a nominal increase of 70,000 square feet from last year. In today’s environment, limiting new development should be regarded as a good thing. Much of the existing vacancy needs to be filled or demolished before considerable retail space can be added to the region.”

October: Bring on the Holiday Cheer!
In October, Bob noted that early projections for a modest improvement in retail sales this coming holiday season may be accurate:
“It’s always about this time of year that prognosticators toss out the holiday sales forecasts and retailers announce seasonal hirings. But there is something different in the air this year that smells…well…pretty good! All in all, I’m conservatively optimistic that we will better the 4% overall
holiday sales target this year. It just a matter of which retail pocket it ends up in.”

November: While Sears Holdings Self Destructs, Who Benefits?
Bob’s article about Sears focused on a history of steadily declining revenue:
“The declining comp store sales trend tells the whole story - this chain is dying a slow death. Just take a look at net income from continuing operations during the last three years, which show consecutive losses of $1.4 billion, $930 million, and $3.1 billion.” UPDATE: see the Decelerating News section on Page 3 for news of additional Sears store closings.

ALL OF WHICH brings us to our current issue, and the close of another action-packed retail year. We thank you for your readership and your support, and we wish you Happy Holidays and a peaceful, profitable New Year.


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

Company News

New Business: Leasing assignment: 21 East Street, Hanover, MA, a 28,000+ s/f former fitness facility, handled by VP of Leasing Don Mace. Employee News: Brian Herlihy joined the Burlington, MA Office as a Property Manager. Brian has extensive property management experience, most recently at McKinney Corporation.

National News

November comparable-store sales posted a year-over-year gain of 5.0% based on the ICSC’s final tally of 11 retail chains that report monthly sales. According to the ICSC, “November sales showed relatively steady industry-wide performance, with improvement among the apparel segment”. L Brands was up 6.0%, Gap was flat, Rite Aid was up 5.1%, Walgreen’s rose 1.7%, and Costco gained 6.0%. See our sales report on Page 4.

Accelerating News

Aldi plans to open 650 new US stores, including expanding to Southern California, bringing its total number of US stores to nearly 2,000 by the end of 2018...Stein Mart is opening a total of 10 new US stores in the next several months, which will bring the total number of locations to 270 nationwide...Martha Stewart plans to open a coffee shop in Manhattan’s Chelsea neighborhood, in the same building where Martha Stewart Living Omnimedia Inc. is based...While the outcome of Dollar General Corp.'s plan to acquire Family Dollar Stores remains unsettled, the company remains committed to growth. Dollar General plans to ramp up its expansion in 2015, and enter new markets. The company expects to open approximately 730 new stores, including its first-ever locations in Maine, Rhode Island and Oregon. In addition, the discounter plans to relocate or remodel approximately 875 stores...McAlister's Deli has signed development agreements with 3 new franchise groups to open 20 locations throughout Rochester, NY, Northwest Indiana, and Chicago over the next several years. McAlister's has more than 330 restaurants in 24 states...Starbucks opened its first-ever Starbucks Reserve  Roastery and Tasting Room, a 15,000 s/f flagship that will serve as the launchpad for a planned chain of 100 stores, with initial locations opening in Chicago, Los Angeles, New York, San Francisco and Washington, DC...Simon Premium Outlets will open four new outlet centers in 2015: Vancouver Designer Outlet, Gloucester Premium Outlets, Tucson Premium Outlets, and Tampa Premium Outlets. Also in 2015, Simon is slated to begin construction on five new Premium Outlets, including Columbus, OH, Norfolk, VA, Clarksburg, MD, Tulsa, OK, and Denver, CO...Cabela’s plans to continue its rapid expansion with 3 new stores and a new distribution center. The outdoor outfitter plans locations in Farmington, Utah; Gainesville, Virginia, Cabela’s third in that state, opening in spring 2017; and in Ottawa, Ontario, opening spring 2016, the second location in the Canadian province. Cabela’s will build a 600,000-square-foot distribution center in Tooele, Utah, to open in summer 2015...Blackstone Group LP agreed to sell a majority stake in 39 US shopping centers to joint-venture partner Kimco Realty Corp. for $512.3 million in a deal that will almost double the firm’s equity investment. Kimco will buy Blackstone’s two-thirds interest in the properties, which total 5.6 million s/f and are in New York, Virginia, Texas, Florida, California and Maryland...PetSmart Inc. has agreed to be bought by a group led by BC Partners Inc. for more than $8.2 billion. The group agreed to pay $83 a share for the pet-supply retailer. Besides BC Partners, the group includes some of the buyout firm’s investors and Longview Asset Management LLC, which controls about a 9% stake in PetSmart and plans to hold on to one-third of that.

Decelerating News

All 198 Alco Stores are shutting down. The company was founded 113 years ago and had evolved into a discount retailer that served smaller communities. In recent years, it had faced increasing competition from other discount retailers, such as dollar stores...Delia’s Inc. plans to liquidate operations as it prepares to file Chapter 11 bankruptcy protection. Delia’s will seek the court’s approval to close all existing stores and distribution centers and to conduct store closing and going out of business sales, with the sales starting as early as this month...Deb Stores Holding LLC, owner of Deb Shops, has filed for Chapter 11 bankruptcy protection, with plans to close stores and sell inventory if it can’t find a buyer for the business. The retailer operates 295 stores...Sears disclosed that it plans to close a total of 235 underperforming stores in 2014, nearly double the projection of 130 made in August. Sears said last month it might sell up to 300 stores to a real estate investment trust (REIT), which would then lease the properties back to Sears. If completed, the move would leave it with 400 to 500 owned stores and 1,300 to 1,400 leased stores...Aeropostale will close 75 stores in the fourth quarter, which will take the company's total US and Canada closures to about 120 stores in 2014, well ahead of its guidance of 40 to 50 closures this year. It is also considering closing another 50 to 75 Aeropostale stores in 2015, as well as 126 mall-based P.S. from Aeropostale stores by the end of January...Troubles keep mounting for teen retailer Wet Seal Inc., which reported a wider loss for the third quarter amid lower revenues.  Wet Seal, which previously reported it has engaged outside advisors to seek strategic alternatives, indicated it may consider filing for bankruptcy to recapitalize or restructure its debt and obligations. In addition, the company plans to close 60 stores in the fourth quarter of fiscal 2014 as lease term expires. As of November 1, the company operated 528 stores.

New England News

Carters Diamonds & Fine Jewelers opened at 3rd Ave Burlington last month...Whole Foods will unveil its first-ever spa inside its new 50,000 s/f flagship market opening in the South End’s Ink Block on the former site of the Boston Herald in 2015...National Wholesale Liquidators opened its second MA store in the old Building #19 location at 140 Main St. (Route 18), Weymouth...New shops opened in downtown New Haven, CT include 5 boutiques and 2 restaurants: Barbour, Emporium DNA, Extra Virgin Olive Oil, Harvest Wine Bar and Restaurant, Kiko Milano, Lou Lou, and Mario Batali’s Tarry Lodge...Wahlburgers will open 27 additional locations. Plans are already in the works to open two Boston-area locations, including one in Lynnfield and one in the Fenway neighborhood. The first of 20 forthcoming Florida Wahlburgers locations will likely be a franchise location in the Orlando area. The Wahlberg brothers say eventually there could be up to 300 across the country...Bangor-based J.L. Coombs, which says it is the oldest shoe store still in operation in the country, is going out of business after 184 years. The company has stores in Portland; Freeport; Portsmouth, New Hampshire; and Newburyport, Massachusetts...Online fashion brand Nic & Zoe opened its first brick-and-mortar store in Boston’s Shops at Prudential Center...Aldi opened a store in Derby, CT this month...Arthur T. Demoulas and family members who support him have regained full control of the Market Basket grocery chain, bringing an end to a battle that engulfed family members for years and led to the shuttering of stores this summer. The deal that in principle led to the Aug. 28 reopening of stores was finalized this month. Terms were not disclosed. Market Basket now has 73 stores — most of them in Massachusetts.

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

T he Commerce Department said retail sales excluding automobiles, gasoline, building materials and food services, increased 0.6 percent last month after rising 0.5 percent in October.

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

Treasury Yields


















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had rebounded in October, declined in November. The Index now stands at 88.7 (1985=100), down from 94.1 in October. The Present Situation Index declined from 94.4 to 91.3, while the Expectations Index decreased sharply to 87.0 from 93.8 in October.

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

Purchasing Managers Index

Manufacturing expanded in November as the PMI® registered 58.7 percent, a decrease of 0.3 percentage point when compared to October’s reading of 59 percent, indicating growth in manufacturing for the 18th consecutive month. 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

Friday, November 21, 2014

While Sears Holdings Self Destructs, Who Benefits?

Limb by limb, Eddie Lampert continues to tear his company apart. This year, it’s been the spin-off of Lands End, a proposed 200-300 store REIT, and a rights offering of up to 40,000,000 common shares of Sears Canada. It’s getting hard to decipher whether Sears Holdings is in the retail business or the banking business. But even as Mr. Lampert attempts to “save” his company, the bleeding hasn’t let up.

Imagine: when Sears and Kmart merged in 2005, the companies created the third largest retail firm in the country.  At the time, the two retailers operated 3,500 stores. It was the epitome of two bad retail operators creating one bigger bad retail company. Who among us doesn’t remember hearing that announcement and wondering WHY? To prove the point, I compiled historical sales information from the first full merger year forward.

If I can tweak a movie phrase used by Harry Doyle (Bob Uecker) in the movie Major League, it’s easy to see that annual revenue figures have been trending “juuust a bit down.” In 2006, Sears Holdings reported total revenue of $ 53.0 billion - and that figure has been declining every year since. The chart below shows that in 2013, the stripped-down version of the company generated $36.2 billion.

Now, some contrarians might say that the company is generating that revenue with a much smaller store count. Actually, the vast majority of the store reduction came via the Sears Hardware spin-off in 2012, affecting 1,238 units. But does it really matter anyway? The declining comp store sales trend tells the whole story - this chain is dying a slow death. Just take a look at net income from continuing operations during the last three years, which show consecutive losses of $1.4 billion, $930 million, and $3.1 billion.

A number of Sears Holdings competitors can’t have the self-destruction come fast enough. Both hardline and softline retailers have benefitted from the meltdown. For example, Sears still remains America’s top appliance seller (believe it or not) a position it has held for decades. According to a recent Bloomberg article, Sears had 28% of the major appliance market in the U.S. last year. However, that could drop to 10% as stores continue to close and shoppers continue to look elsewhere. Gary Balter, an analyst at Credit Suisse Group AG in New York, recently noted that if Lowe’s picks up just one quarter of the share Sears loses, it would be the top appliance seller by the end of 2016. Home Depot and Best Buy are also benefiting from the shift in shopper loyalty. Softline retailers that have taken market share largely include Kohl’s, Target, and Wal-Mart. All three retailers have faced the same economic turmoil that Sears and Kmart have experienced in recent years, but have found ways to grow earnings despite the road blocks.

In February 2014, in his annual letter to stockholders, Mr. Lampert states: “While our financial results remain challenged, 2013 may have been the year that justifies why so many people across Sears Holdings have been working for several years on our transformation from a traditional, store-based retailer to a membership company that serves its members across an integrated retail platform. Furthermore, if the way the entire American retail industry ended 2013 is any indication, I believe 2014 may well be a year in which Sears Holdings begins to clearly demonstrate the advantages of this transformation.”

Sears Holdings first half results through August 2, 2014 show an operating loss of $889 million, compared to the 26-week loss of $298 million last year. I can only imagine what Mr. Lampert will say in his next letter to shareholders!

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com

Company News

New Business: Leasing assignments: Route 1 Marketplace, Peabody, MA - Don Mace is handling the leasing; Uxbridge Shopping Center, Uxbridge, MA, and a restaurant space at the Enterprise Center, a new mixed-use development in Brockton, MA - Michael Branton is handling these. Employee News: Sarah Frisone joined the Burlington, MA office as an Assistant Property Manager. Don MacPhee joined the Burlington, MA office as a Property Manager. Dean Hickey joined the Brookline, MA office as a Property Manager. Noah Hano joined the Burlington, MA office as Vice President of Investment Sales. Noah had been doing acquisitions for KS Partners, and before that performed a similar function for The Beal Company.


National News

October comparable-store sales posted a year-over-year gain of 4.1% based on the ICSC’s final tally of 11 retail chains that report monthly sales. L Brands was up 6.0%, Gap was flat, Rite Aid was up 5.1%, Walgreen’s rose 1.7%, and Costco gained 6.0%. See our sales report below...Simon Property Group Inc., the biggest US mall owner, has accumulated a 3.6% stake in rival Macerich Co. Simon bought 5.71 million shares of Macerich this year and may request that Macerich waive its excess share provision, which restricts stock ownership to 5%...Walgreen laid off about 16 in-house real estate managers in a cost-cutting move, bringing in Texas brokerage SRS Real Estate Partners to handle the company's growing store portfolio.

Accelerating News

Cabela’s Inc. plans to open 13-15 stores per year for the next several years, with two specific openings planned in Texas and Kentucky...Lowe's will open two smaller-footprint Manhattan locations in the second half of 2015. Both stores will be approximately 30,000 s/f...IHOP expects to develop between 55 and 60 new franchised US restaurants in 2015... Applebee’s expects to develop between 33 and 38 new franchised US restaurants in 2015..RedBrick Pizza plans to expand by more than 50 locations in 4 states over the next 3 years. The first five locations initially will be corporate-owned, but will be available for sale to franchise prospects.  RedBrick Pizza currently operates 13 franchised locations primarily in California and Florida...TBC Corp. says its Midas subsidiary is on pace to open 25 locations in 2014. The brand, which has 1,300 North American locations, plans to have 1,400 locations throughout North America by 2018...Starbucks plans 1,650 net new store openings in 2015...Fresh to Order, a 15-unit “fast fine” restaurant chain,  plans to grow by eight to 10 stores in 2015. Beyond that, the goal is to average 12 new stores a year, reaching about 70 stores in 5 years. Targeted territories include Texas and the Washington, DC area. Fresh to Order’s mission is to provide” incredible food and service” in less than 10 minutes for around $10...Nordstrom plans to open a 35,250 s/f store Nordstrom Rack at Crossroads at Eatontown in Eatontown, NJ in fall 2015, the fifth Nordstrom Rack in the state...The new Walmart Neighborhood Market that opened this month in Greenbrier, AR is the 5,000th Walmart store in the US...Edens acquired publicly traded development firm AmREIT for $763 million. AmREIT owns and manages 28 shopping centers, totaling some 1.7 million square feet, in affluent urban areas of the South. Top tenants in the portfolio include CVS, H-E-B, Kroger, Publix and Safeway...Wendy’s remains on track to “reimage” 200 Company-operated restaurants and expects 175 to 200 franchise-operated restaurants to open in 2014...Whole Foods Market plans to open 38 to 42 stores, including five to six relocations, in fiscal 2015. The company currently has 401 stores and expects to cross the 500-store mark in fiscal 2017. Longer term, the company sees potential for 1,200 stores in the US...Delhaize Group will sell Bottom Dollar Food's 66 store locations and associated lease liabilities to Aldi Inc., thereby exiting the US food retail discount segment. The deal is expected to close in the first quarter of 2015 subject to customary closing conditions.  Aldi plans to open 650 new US stores, bringing its total to almost 2,000 by the end of 2018...With the opening of a new store in Mexico City, Skechers hit the 1,000 store mark...Westfield Corp. has signed leases with 14 gourmet food stores and grab-and-go spots at the new World Trade Center in NYC. Westfield has a total 350,000 s/f for retail and food uses at various locations in the Oculus, the base levels of 3 and 4 WTC, and in the underground concourses that connect them. Vendors include Eataly, a spinoff of gourmet market Epicerie Boulud, Lore Wine & Spirits, Japanese confectionary K Minamoto, brew specialist Beer Table, coffee concept Nobletree, Nunu Chocolates, Swedish cafe Fika, Philadelphia coffee seller La Colombe, Devon & Blakely, Pret a Manger, Wasabi Sushi and Bento, Joe Coffee, and Treat House...Bob’s Discount Furniture will open its first 2 stores in the Baltimore market next year, expanding from a base of stores in the greater Washington, DC area

Decelerating News

Target will close 11 stores as of February, 2015, citing performance issues. The stores include 3 locations in Michigan, 2 in Illinois, and single stores in Georgia, Iowa, Indiana, Kansas, Minnesota, and Texas...Staples plans to shut an additional 30 stores this year, accelerating its ongoing efforts to slash costs. These store closures are in addition to the 140 already announced.

New England News

Market Basket has opened its Revere store, which had long been finished but sat dormant during the battle for control of the company among the Demoulas family. The next scheduled opening is a small supermarket in Littleton, MA in early November, followed by a 90,000 s/f Market Basket in Waltham, MA in December. Market Basket’s Attleboro store is opening the first week of January.  The supermarket off Route 1A has remained finished but vacant since last spring due to the corporate standoff....RadioShack's Fix It Here same-day mobile repair service is now available in 31 Boston stores. Fix It Here is available in more than 550 RadioShack stores across the nation, and RadioShack plans a rollout to 750 locations by the end of the year.  Fix It Here offers same-day repairs for the most popular smartphones and tablets...Crumbs is back in Boston's Financial District. The one-time purveyor of cupcakes that closed abruptly in July  reopened with a substantially expanded menu under new ownership that includes CNBC star Marcus Lemonis and Fischer Enterprises...Price Chopper will change its name to Market 32 and modernize its stores beginning this month and continuing over the next five years. The supermarket chain has 135 stores in New York, Massachusetts, Vermont, Connecticut, Pennsylvania, and New Hampshire...Bangor, Maine’s Big Lots store will close its doors in January. The retailer opened its Bangor location in 2009, making it the 7th in the state at the time. The retailer operates more than 1,400 stores nationwide...A brand-new Goodwill store has opened in Somersworth, NH, moved from its original Dover location. Goodwill has more than 2,900 stores worldwide...Berkshire Group, WS Development and Boston Global Investors (BGI) have begun construction on One Seaport Square, a three-acre mixed-use development located within the 23-acre Seaport Square, the largest master-planned project in the city of Boston. Plans for One Seaport Square include two towers, the Benjamin and the VIA. WS Development will develop, own and manage 250,000 s/f of retail space throughout the first three floors of The Benjamin and VIA. Confirmed retailers include Equinox fitness facility, ShowPlace ICON Theatre, and Kings Bowl. The project includes Courthouse Square, a 17,000 s/f, retail-lined open space between the two towers that will serve as a pedestrian link between the buildings, the MBTA Courthouse Station and the Moakley Federal Courthouse...Kings is gearing up to reopen early next year at 3rd Ave Burlington, MA. A fire engulfed Kings Burlington on April 13, just weeks before its scheduled opening, heavily damaging the structure...There are new plans for development in Quincy Center, after a $1.6 billion, 55-acre downtown redevelopment proposal fell apart earlier this year. A new $100 million plan was unveiled by project investor and insurance company Quincy Mutual, Quincy Mayor Thomas Koch, and other officials. The first phase of the plan includes a six-story building with 169 housing units called West of Chestnut, and 12,000 s/f of retail space. A second phase for the project, a building called East of Chestnut, will have 220 additional housing units. The project represents just a small portion, both in terms of size and money, of the once-ambitious, now-failed Street-Works plan.

October Retail Sales Report



























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

Commerce Department Monthly Sales

The Commerce Department said Friday that retail sales rose 0.3 percent last month after falling by the same amount in September. Excluding gas stations, where falling prices lowered spending, sales rose a solid 0.5 percent.

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

Treasury Yields
















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had decreased in September, rebounded in October. The Index now stands at 94.5 (1985=100), up from 89.0 in September. The Present Situation Index edged up from 93.0 to 93.7, while the Expectations Index increased sharply to 95.0 from 86.4 in September.

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

Purchasing Managers Index

Manufacturing expanded in October as the PMI® registered 59%, an increase of 2.4 percentage points when compared to September’s reading of 56.6%. This is the same reading as reported in August 2014, which is the highest reading for the index since March of 2011 when it registered 59.1 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

Monday, October 27, 2014

Bring on the Holiday Cheer!

It’s always about this time of year that prognosticators toss out the holiday sales forecasts and retailers announce seasonal hirings. But there is something different in the air this year that smells…well…pretty good!

In years past, holiday forecasts have been all over the map. As we pointed out in our January 2013 KeyPoints article, Missing the Bull’s Eye: Holiday Sales Forecasts, the actual sales increase during the holiday season turned out to be a paltry 0.7% following predictions ranging from 2.5% up to 4.1%. And these came after Black Friday, when sales results of the most “foretelling” day of the year were already in the books.

Then as the season went along, the real story came out:  weekly results leading up to Christmas started looking pretty modest and retailers reacted with heavy promotional activity at the expense of gross margin in an attempt to drive sales and avoid getting stuck with the goods when the New Year rolls around.

So far, from what I’ve seen, it appears that this year’s projections show a much tighter range, falling between 4% and 5% for the most part. The National Retail Federation was one of the first to announce its forecast: a holiday sales increase of 4.1%. If that holds, it will easily top industry sales results from 2012 and 2013 of 2.9% and 3.1% respectively. The NRF’s 13th annual Holiday Consumer Spending Survey, which was released last week, indicates that per-person holiday spending will rise 5%. (If my math is correct, doesn’t that suggest that the US is losing population? Oh, well.) It’s important to note, however, that this same survey also indicated that 44% of this spending would be done online; that’s not going to help foot traffic in stores now-is it?

Also last week, the International Council of Shopping Centers came out with its own annual estimate, which indicated that holiday sales will increase by 4%. Similar to the NRF report, ICSC pointed to a rebound in the US labor market, decreasing unemployment rates, and year-over-year gains in personal income as likely reasons to expect a solid increase in holiday spending.

A month ago, Deloitte projected a 4.0% to 4.5% holiday sales gain, adding that “debt levels remain at historical lows, and stock market gains coupled with increasing home prices have a wealth effect on consumers, which may encourage increased spending compared with prior years…”.

But the thing I really like seeing is that a number of major retailers are bumping up hiring this holiday season. Kohl’s is increasing its hiring by 17,000 seasonal employees, bringing its total to 67,000 part-time jobs. Wal-Mart is gearing up with 5,000 additional employees for a total count of 60,000 holiday workers. Macy’s will be adding 86,000 part-timers, an increase of 3,000 employees from a year ago, while GameStop is increasing its seasonal count by 8,000 jobs and will be employing 25,000 Christmas helpers this year. Even Target, which continues to be impacted by its data breach since the 2013 holiday season, is maintaining its 2013 seasonal hiring level at 70,000 employees this year.

How does this translate to brick-and-mortar sales performance? Well, I suppose it depends on where those seasonal workers will be reporting to work. Of the new workers Macy’s is hiring, for instance,  10,000 will be based in the company's direct-to-consumer fulfillment centers (compared with 7,000 last year), evidence of the retailer's big push into integrating its online and in-store offerings. Although Kohl's will be increasing its hiring by 34% this year, it will add an average of only 50 workers per store, while  9,300 employees will be assigned to distribution centers to fulfill orders placed on Kohls.com and to oversee stocking at nearly 1,163 stores.

And we can’t forget about brick-and- mortar’s number one nemesis this holiday season: Amazon is hiring 10,000 additional workers this year, bringing its total to 80,000 seasonal hires. But we shouldn’t be surprised about this particular distribution of part-time help. After all, haven’t we seen double-digit increases in online sales for what seems like an eternity? Emarketer is predicting another robust year for ecommerce with a 16.6% gain forecast in online sales while Shop.org, the NRF’s digital division, is looking at a more moderate increase of only 8% to 11% in online sales this holiday season.

All in all, I’m conservatively optimistic that we will better the 4% overall holiday sales target this year. It just a matter of which retail pocket it ends up in.

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com

Company News

New Business: New leasing assignment: a 5,000 s/f space at 62 Main Street, Brockton, MA. Michale Branton is handling the assignment. Employee News: Brent Lydon has joined the Burlington Office as a Property Accountant. Brent’s most recent experience was at Restaurant Accounting Services. Brett Yancey has joined the Brookline, MA Office as an Assistant Property Manager. Brett has prior property management experience at Jones Lang LaSalle. Lauren DeWynGaert has joined the Burlington Office as an Assistant Property Manager. Lauren has prior property management experience with Compass Property Management.

National News

September comparable-store sales posted a year-over-year gain of 5.0% based on the ICSC’s final tally of 11 retail chains that report monthly sales. L Brands was up 6.0%, Gap was flat, Rite Aid was up 5.1%, Walgreen’s rose 1.7%, and Costco gained 6.0%. See our sales report below...Kmart is the latest retailer to be hit by a data breach. The company does not yet know the number of credit and debit card numbers that were stolen. However, it does not believe that debit card PINs, Social Security numbers or email addresses were compromised. Kmart is working closely with federal law enforcement authorities, banking partners and IT security firms in the ongoing investigation.  It also is deploying advanced software to protect customers' information. Staples Inc. is also investigating a possible security breach involving customer credit-card data. Stores in New York, Pennsylvania and New Jersey appear to have been targeted...Sears Holdings Corporation has entered into lease agreements with fashion retailer Primark for seven standalone stores.  Sears will continue to have a significant presence in six of these locations with a streamlined store format of up to 100,000 selling s/f at each store. Primark will lease from Sears a total of approximately 520,000 gross s/f of retail space (400,000 net s/f) in mall-based stores in the Northeastern United States.  The space is expected to be delivered to Primark over the next 12-18 months. The first of these stores will open at King of Prussia Mall in King of Prussia, PA, where Primark will join DICK's Sporting Goods as a subtenant of Sears. Another expected location is in Staten Island, NY, at the Staten Island Mall.  The other locations and projected store openings will be announced by Sears soon. Sears has also announced layoffs and store closings: see the Decelerating section below.

Accelerating News

Toys “R” Us and Claire’s have entered into a partnership to open nearly Claire’s in-store shops in 12 US Toys “R” Us locations, by year-end. The shops will feature an assortment of jewelry, headbands, hair and fashion accessories, jewelry holders, legwear, seasonal items and more...Timberland plans to expand its global retail store presence by adding 130 stores to its current base of approximately 230 stores...Saks Fifth Avenue parent Hudson’s Bay Company has signed a lease to open two stores in downtown Manhattan: an 85,000 s/f Saks Fifth Avenue store in Brookfield Place and a 55,000 s/f Saks Off 5th store at One Liberty Plaza. The new Saks Off 5th reflects the company’s strategy to expand its off-price concept into urban markets...Urban Outfitters Inc. aims to open 25 to 50 Anthropologie stores in the next five years that will be three times larger than current locations, which average about 7,100 s/f. Urban Outfitters will also test the larger format for its namesake and Free People chains...Microsoft will open its first flagship location, on Fifth Avenue in Manhattan. Microsoft also plans to open 10 new stores across the US in time for the 2014 holiday season. Microsoft currently operates 104 stores...Christopher & Banks announced the grand opening of 37 stores that combine its plus-sized CJ Banks brand under the Christopher & Banks banner. With these openings, Christopher & Banks will operate 190 stores with the combined format...Villa Enterprises has opened 34 Villa Italian Kitchen restaurants in General Growth Properties, Inc. regional malls throughout the US. The new locations total over 27,000 s/f of space...Woolrich, the outerwear and lifestyle brand, opened its first-ever freestanding store in North America, in New York’s SoHo neighborhood. The two-level flagship carries men’s and women’s clothing and accessories. The 1,400 s/f ground floor space features antique windows and furniture, recovered from an old hardware store, while the 500 s/f basement level is designed as a contemporary “Woolrich Men’s Club” which will double as event space...Discount Tire/America’s Tire opened 6  stores - 3 in Texas, 2 in California and 1 in Iowa, expanding the dealership’s network to 890 stores in 23 states...CEC Entertainment, Inc. (CEC), which operates 577 Chuck E. Cheese's stores in 47 states and 10 foreign countries, announced that it has acquired Peter Piper Pizza, a pizza and entertainment restaurant chain operating 32 company-owned locations and 115 franchises in the southwestern US and Mexico, from affiliates of private equity firm, ACON Investments, L.L.C. (ACON) for an undisclosed sum...Family Dollar Stores Inc. has set Oct. 30 as the date for stockholders to vote on a proposed merger with Dollar Tree Inc. Family Dollar has not yet set the time or location of the vote. Family Dollar agreed to sell its outstanding shares to Dollar Tree for $74.50 per share, or about $8.5 billion, in August. The retailer rejected a higher offer of $80 per share, or about $9.1 billion, from Dollar General, citing concerns about SEC approval of the deal. Dollar General has extended a hostile buyout offer of $80 per share to Family Dollar shareholders until Oct. 31...Sleepy’s opened its 1,000th store, a showroom in Joliet, Illinois.

Decelerating News

Sears Holdings Corp. is laying off at least 5,457 workers and closing 46 Kmart, Sears and Sears Auto Center locations, many before Christmas. More closures may be added. In August, Sears announced it may close additional stores on top of the 130 closures that were already underway for 2014...Bi-Lo Holdings, parent company of the Bi-Lo, Harveys and Winn-Dixie, has decided to close 23 underperforming stores after a review of all 827 locations in its operating area by Nov. 19. Bi-Lo Holdings acquired Winn-Dixie in March 2012, and later purchased the Harveys, Sweetbay and Reid’s chains from Delhaize Group...113-year-old retailer Alco Stores Inc. and its subsidiary, Alco Holdings Ltd Liability Co. filed for Chapter 11 bankruptcy. Alco, which operates nearly 200 stores, said it hoped to sell its profitable locations and liquidate the others.

New England News

Urstadt Biddle Properties Inc. sold the 328,000 s/f Five Town Plaza Shopping Center in Springfield to an institutional real estate company for $31 million...WS Development has signed a 20-year lease with Kerasotes ShowPlace Theatres for a 41,375 s/f movie theater at One Seaport Square, a new development slated for South Boston’s Seaport District...The Best Buy attached to the Westfield Meriden Mall will close Nov. 1. The closing will leave the mall down two major tenants weeks before peak holiday shopping months: in May, JC Penney closed its under-performing store in the Mall...West Marine opened a new store at the corner of Coogan Boulevard and Maritime Drive in Mystic, CT. The 13,000 s/f store replaces the 8,000 s/f location at the nearby McQuade's Marketplace complex...Best Buy is closing its store at Boston’s Landmark Center, an early step in the new development to come in the Fenway area...Normandy Real Estate Partners and Harbinger Development plan to build a 10-story, 225-room hotel and a two-story glass food pavilion on Parcel 9, between Blackstone Street and the Rose F. Kennedy Greenway, next to the outdoor Haymarket vendors...Panera Bread opened of its newest bakery-cafe in Seabrook Commons, at 700 Lafayette Road, Seabrook, NH...The Presque Isle, ME Sears store at the Aroostook Centre Mall, including the auto center, will close its doors by mid-January. The store will begin a liquidation sale on Oct. 31... Popeyes Louisiana Kitchen is looking to triple its number of Boston area locations. The chain entered Massachusetts in 2005, and now has 8 locations in the Boston metro area. It wants to add another 15- 20 over the next 5 years. In 2013, Popeyes opened 124 US restaurants. The company ended 2013 with 2,225 locations...The Revere, MA Market Basket store has opened. The 80,000 s/f location has been ready for months, as has another in Attleboro. but infighting over the last year kept either store from opening as planned. The conflict also delayed construction on another forthcoming store in Waltham.

September 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 that seasonally adjusted retail sales dropped 0.3% from the previous month. Sales have risen 4.3 %in the past 12 months, slightly below their historical pace. Auto sales fell 0.8% in September, after revving up 10.4%in August.

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

Treasury Yields

















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had increased in August, declined in September. The Index now stands at 86.0 (1985=100), down from 93.4 in August. The Present Situation Index decreased to 89.4 from 93.9, while the Expectations Index dropped to 83.7 from 93.1 in August.

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

Purchasing Managers Index

Manufacturing expanded in September as the PMI® registered 56.6 percent, a decrease of 2.4 percentage points when compared to August’s reading of 59 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

Monday, September 29, 2014

Preview: KeyPoint Report for Greater Hartford, CT

With the releases of The KeyPoint Reports on Eastern Massachusetts/Greater Boston and Southern New Hampshire behind us, it’s time to move onto the report for Greater Hartford, Connecticut, based on our proprietary GRIID™ retail database. As with the other reports, our modus operandi is to share some of the regional highlights while the complete version is still “baking”. In Greater Hartford, the 2014 retail market traveled further down the road to stability.

Retail Inventory and Vacancy: Total retail space in Greater Hartford currently totals 37.2 million square feet, a nominal increase of 70,000 square feet from last year. In today’s environment, limiting new development should be regarded as a good thing. Much of the existing vacancy needs to be filled or demolished before considerable retail space can be added to the region. Consequently, the region experienced its second year in a row of declining vacancy albeit a modest 90,800 square foot reduction in unoccupied space reflected a drop of 2.2%. Currently, the vacancy rate in the region is 11.0%, down from an 11.3% rate in 2013 and 12% in 2012.

Size Classifications: The vacancy rates in all size classifications either stayed even or declined during the year - with one exception. Seven retail tenants in the 10,000-24,999 square foot bracket closed in 2014 and remain vacant, pushing the vacancy rate from 10.1% to 10.4% in this category. Some of the casualties included Nassau’s Furniture, Monster Mini Golf, and Thomasville Furniture. For the second year in a row, smaller sizes continued to show improvement after experiencing several years of an uptrend in vacancy rates. Among the three smallest categories, retailers less than 2,500 square feet showed the largest decline in vacancy rate, going from 19.1% to 18.0%. However, the current vacancy rate in this size classification, the highest in the region, is of greatest concern.

Town Rankings: The top ten among Greater Hartford retail markets (based on square feet of retail space) remained the same as in 2013, with only one change within the rankings: East Hartford inched ahead of Farmington into sixth place this year. Manchester continues to dominate all communities, with 5.4 million square feet of retail space. West Hartford remains a distant second at 2.9 million square feet. Among towns with the highest vacancy rates, the fact that the same four towns as last year remain above the 20% level is disconcerting. These include East Windsor, East Hartford, Berlin, and New Britain. Among towns with the lowest vacancy rate, Wethersfield slipped out of last year’s top spot and was replaced by Rocky Hill, last year’s runner-up. Farmington, Plainville, Enfield, and Newington round out the top five.

Retailer Activity: Dollar General made its entry into Greater Hartford with six new stores, adding 62,000 square feet and taking top spot for incremental space in the region. New York-based Best Market entered the region this year with a 35,300 square foot unit in Newington, a space previously occupied by A&P. Following the acquisition of four iParty stores, Party City ended the year in third place with an additional 36,900 square feet. Closely behind was United Bank, adding 33,300 square feet - and becoming the third largest bank in Connecticut - via its acquisition of Rockville Bank. United and Dollar General also were one-two in the number of new locations with eleven and six, respectively.

As a result of the aforementioned acquisitions, it’s not surprising that Rockville Bank and iParty led the list of retailers by square foot contraction at 39,200 and 36,900 square feet, respectively. Two of the 13 Rockville locations remain vacant. Correspondingly, Rockville Bank contracted by 13 locations, the most in the region. The closing of a 30,600 square foot TJMaxx in Windsor was the third largest space decline in the region.

The KeyPoint Report examines the retail real estate marketplace for Greater Hartford, Connecticut, with a focus on changes between August 2013 and July 2013. This report provides an analysis of changes in the region's retail activity and examines supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories. The Greater Hartford market includes 26 cities and towns and represents more than 835 square miles and approximately 812,200 people, equating to 22.6% of the Connecticut total population. The complete report contains much more detailed information on these categories and more, and will be available soon at KeyPointpartners.com.

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com

KeyPoint Partners’ GRIID™ database maintains detailed information on virtually all retail properties in three key regions: Eastern Massachusetts, Southern New Hampshire and Greater Hartford, Connecticut. These markets encompass approximately 44% of all retail space in New England. GRIID™ has information on nearly 260 million square feet of retail space and approximately 60,000 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.The KeyPoint Report for Eastern Massachusetts/Greater Boston and The KeyPoint Report for Southern New Hampshire have been released, and are available at KeyPointPartners.com.

Company News

New Business: New  combined Leasing/Property Management assignments include Tyngsboro Crossing (formerly TJ Maxx Plaza), a 180,400 s/f center in Tyngsboro, MA; 2100 Washington Street, Hanover, MA, a 20,000 s/f retail/office property; and Merchant’s Row, a 63,700 s/f retail center also in Hanover. VP of Leasing Don Mace is handling these assignments. The Property Management team has taken on Woonsocket Medical Building, a 53,000 s/f office property Woonsocket, RI. Employee News: Sarah Chenault joined the Burlington, MA office as a Property Manager. Sarah has prior property management experience at Jones Lang LaSalle. Brett Yancey joined the Brookline, MA office  as an Assistant Property Manager in the Brookline Office. Brett has prior experience at Jones Lang LaSalle.  Rachel Cormier has been promoted to Senior Property Manager in the Burlington, MA office. Rachel has been with KeyPoint Partners since 2000.

National Retail News

August comparable-store sales posted a year-over-year gain of 4.8% based on the ICSC’s final tally of 11 retail chains. A healthy August back-to-school shopping season seemingly helped apparel sales for some retailers. L Brands was up 5.0%, Gap was down 2.0%, Rite Aid was up 3.9%, Walgreen’s rose 1.4%, and Costco gained 7.0%. See our sales report below...UPS Stores said that a security breach may have led to the theft of customer credit and debit data at 51 UPS stores in the US. ..Duane Reade drugstores in NYC have been re-branded as “Duane Reade by Walgreens”. Walgreen Co. bought Duane Reade for $1.08 billion in 2010. ...CVS Caremark Corp. is changing  its name to CVS Health and has halted sales of tobacco products a month ahead of schedule. CVS Health operates 7,700 drugstores and 900 walk-in clinics...Dave & Buster's Entertainment, Inc.  plans to offer 5.88 million shares at $16 to $18 each in its initial public offering. Dave & Buster's Inc. said its application to trade under the symbol PLAY has been approved, in a filing with the Securities and Exchange Commission...Wal-Mart will rebrand its 21 Wal-Mart Express stores to its Neighborhood Market banner in the next few months. New small stores that open in the future, including 90 scheduled to open by the end of 2014, will be branded Neighborhood Express.

Accelerating Retail News

Burger King has confirmed a deal to buy Tim Hortons with financial assistance from Warren Buffett. The deal, valued at about $11 billion, will allow the burger chain to expand its global presence and possibly cut taxes by moving out of the US. Under the terms of the agreement, Burger King will pay $59.74 in cash and 0.8025 shares of the new company for each Tim Hortons share.  Warren Buffett's Berkshire Hathaway will contribute $3 billion in preferred equity financing for the deal, but won't have any role in management. The deal is subject to approval from the Canadian government. The merged company will be based in Canada, and with 18,000 restaurants worldwide, will become the world's third-largest fast-food company. It’s not yet know whether the new Treasury Department rules to limit tax inversions will affect this merger..Boston’s Restaurant & Sports Bar is planning to open 5 locations in Greater Baltimore. The Dallas-based chain, which specializes in gourmet pizza and pasta, signed a five-unit franchise agreement to develop restaurants in Baltimore, Baltimore County and Harford County.  Boston’s has 32 locations across 22 states...Muscle Maker Grill will open 22 new locations throughout the country, which will raise the number to over 75 units. Recent openings include Las Vegas, NV, Dallas, TX, Hamden, CT, and Staten Island, NY...Destination XL Group Inc. anticipates opening 40 additional 5,000 - 6,000 s/f DXL stores in select smaller markets, for a total of 270-300 new DXL stores. Destination XL will also close approximately 40 Casual Male XL and Rochester Clothing stores...Abercrombie & Fitch anticipates opening 14 international stores throughout the year, including 8 Hollister stores and 5 Abercrombie & Fitch stores. The company also plans to open approximately 8-10 international and US outlet stores,and expects to close approximately 60 US stores, during the fiscal year...1-800-Flowers.com Inc. has entered into an agreement to acquire Harry & David Holdings for $142.5 million in cash.  The deal includes Harry & David’s brands and websites, headquarters, manufacturing and distribution facilities and orchards, warehouse and distribution facilities, and 47 Harry & David retail stores...Peet’s Coffee & Tea is opening 16 stores in the greater Chicago area in a phased rollout across the market this fall, part of Peet’s US expansion effort which will bring its store total to nearly 300 locations nationwide by the end of the year...Neiman Marcus will open its first Manhattan location, 250,000 s/f  three-level store in the new Hudson Yards development, in 2018. Hudson Yards include more than 17 million s/f. of commercial and residential space. As part of its New York expansion, Neiman Marcus will also open a full line store in Roosevelt Field Mall in Garden City in 2016...In December, Starbucks will open its first Starbucks Reserve Roastery and Tasting Room in Seattle. The 15,000 s/f store is designed to be an integrated coffee roasting, education and retail space. Starbucks will grow Starbucks Reserve from 800 to 1,500 stores worldwide by the end of fiscal 2015. Starbucks is on track to bring approximately 1,550 net new stores in fiscal 2014 and 1,600 net new stores in fiscal 2015, with nearly 300 net new company-operated US locations...Mattress Firm  has agreed to acquire Sleep Train in a $425 million deal that will give the company more than 2,000 bedding specialty stores in 40 states. Sleep Train operates about 310 stores. Last month Mattress Firm agreed to buy Bedding Experts in a $60 million deal...Stein Mart is opening 6 new stores in fall 2014 as part of its store expansion plan that calls for 9 new locations in key growth markets, and seven relocations. The openings will bring the company's total US store count to more than 270...Krispy Kreme has signed a franchise agreement for 20 new Krispy Kreme shops in Southern Maryland, Washington, DC , Northern Virginia and nearby counties over the next several years. Krispy Kreme currently has over 260 US shops, of which approximately 160 are franchised...Ulta Beauty announced a five-year strategic plan that includes opening 100 stores annually. Ulta ended the quarter with 715 stores.  ..Home d├ęcor retailer At Home hopes to expand to 600 US locations. It currently operates 75 stores that average of 120,000 s/f...Yum! Brands Inc. debuted Banh Shop, the first of two Vietnamese-inspired sandwich shops in the Dallas area which will serve Vietnamese banh mi sandwiches.

Decelerating Retail News

Staples will close about 140 locations this year, part of a store-closing plan announced earlier. Staples shut 80 outlets in North America in the fiscal second quarter...Sears Holdings Corp. is shutting 130 stores across the country, after already closing 95 stores.

New England Retail News

Market Basket agreed to a deal that will see former CEO Arthur T. Demoulas and his family take complete ownership of the grocery chain. Arthur T. and his family, who own 49.5% of the company, will pay more than $1.5 billion for the 50.5% owned by rival family members, including Arthur S. Demoulas. The deal ended the summer’s standoff over the chain’s future. Market Basket reportedly plans to open at least 4 new stores in MA the near future. Demoulas said Market Basket will consider scaling back new store openings from a planned 4-5 to 2-3 if that will help the company better manage the roughly $500 million in private equity debt which financed its recent purchase. Market Basket currently operates 71 New England stores...The new Whole Foods store in Nashua, NH, the first in the state, also features its first in-store restaurant in the the region.  J.Bartlett’s Public House is a pub-style restaurant that seats 50. The store also has a pizza oven, with a dedicated phone line for orders, and an Ole Hickory smoker for making brisket and other smoked dishes...Crumbs Bake Shop, which closed its doors this past July, will reportedly begin reopening locations in New York, Los Angeles, Chicago, Boston and Washington, D.C. this month under a new ownership team led by Marcus Lemonis and Dippin' Dots owner Fischer Enterprises. Many of the Northeast mall locations will remain closed. Crumbs had three MA shops including a location on Federal Street, the Prudential Center and the Natick Mall...Uniqlo opened its first 2 MA stores this month at the Natick Mall and The Mall at Chestnut Hill. The new stores, 2 of 25 in the US, will be followed by 2 more at the Northshore Mall, Peabody and Legacy Place in Dedham...HFF has closed the sale of Waterbury Plaza, a 141,443 s/f center in Waterbury, CT anchored by Stop & Shop and Raymour & Flanigan. HFF marketed the property on behalf of the seller, Kimco Realty Corporation. Slate Properties, Inc. purchased the asset for $27.15 million...Mill Stores, which sells unfinished furniture, sheds and other woodwork, is closing 9 of its 13 New England stores.

August Retail Sales Report




























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

Commerce Department Monthly Sales

The Commerce Department said retail sales increased 0.6%  last month after an upwardly revised 0.3% gain in July, as Americans stepped up purchases of automobiles and a range of other goods.

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

Treasury Yields


















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had increased in July, improved further in August. The Index now stands at 92.4 (1985=100), up from 90.3 in July. The Present Situation Index increased to 94.6 from 87.9, while the Expectations Index edged down to 90.9 from 91.9 in July.

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

Purchasing Managers Index

Manufacturing expanded in August as the PMI® registered 59 percent, an increase of 1.9 percentage points when compared to July's reading of 57.1 percent. August's PMI® reading of 59 percent is the highest reading since March 2011 when the PMI® registered 59.1 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

Monday, August 18, 2014

Preview: KeyPoint Report for Southern New Hampshire

While the 2014 KeyPoint Report for Southern New Hampshire, based on our proprietary  GRIID™ retail database, is in production, we will again share some of the early results:

Vacancy Rate: The region continued its upward trend in retail inventory, reaching a level of 30.0 million square feet by the end of the year. This represents a gain of 283,500 square feet, or 1.0%, thanks in large part to Seabrook Commons, DDR’s first ground up development in New England. This 380,000-square-foot power center saw its initial tenant openings in June, highlighted by a new 189,567 square foot Walmart Supercenter (a relocation of its traditional format store in Seabrook).

There was a bump in the road, however: a sizeable increase in the vacancy rate during the year from 9.6% to 10.7%. Before you get too discouraged, there is a reasonable explanation for this increase. Stop & Shop’s decision to close all six stores it operated in Southern New Hampshire, creating 411,800 square feet of retail vacancy, reflects the lion’s share of incremental vacancy. While one of these locations was filled by Hannaford, the closing of two Shaw’s stores and a single Building 19 unit exacerbated the vacancy issue in the region. Hypothetically removing this vacant space from the region actually lowers the vacancy rate in Southern New Hampshire to 9.1%. Nevertheless, the reality is that this vacancy does exist and may present a lingering concern in the region for a considerable period. At the same time, given the toll that these vacancies have had on overall occupancy rates, the negative absorption rate in Southern New Hampshire of only 91,400 square feet should be somewhat encouraging.

Size Classifications: In assessing vacancy rates by store size, it was encouraging to see that other than the 50,000-99,999 square foot category, only one other size range experienced an increase vacancy. In fact, among the eight size breakdowns, four showed increased occupancy while two others remained stable. Stores between 5,000 and 24,999 square feet experienced the most improvement, with the vacancy rate of the 5,000-9,999 square foot segment declining by 140 basis points and a nearly 200 basis point decline in the 10,000-24,999 square foot range. The new Seabrook Commons development had much to do with this improvement. However, the 50,000-99,999 square foot category was clobbered by the aforementioned big box store closings, increasing the vacancy rate in that category from 11.4% to 13.3%.

Regional Submarket Rankings: There has been no change in the top ten largest regional markets, although Seabrook jumped ahead of Bedford during the year, also due to the Seabrook Commons effect. Nashua continues to rank first with 6.2 million square feet of inventory. Manchester follows at 5.4 million square feet and Salem is a distant third at 3.9 million square feet. These are the only cities or towns with inventory in excess of 2.0 million square feet, although Seabrook is edging closer to that threshold.

Southern New Hampshire Study Area
Town Rankings:  The year ended with Milford representing the sole newcomer to the top-five list of towns with the highest vacancy rates. A Stop & Shop closing was the cause. Manchester still leads the pack with a 22% vacancy rate. Seabrook, somewhat surprisingly, jumped into second place, largely a result of the vacant Walmart unit left behind by the relocation to Seabrook Commons. Nashua moved up three spots and is now among the five healthiest markets in the region. Bedford remains the top performer, followed now by Salem, Nashua, Amherst, and North Hampton.

Retailer Activity: Walmart is the largest contributor to new retail inventory in Southern New Hampshire this year, adding 98,700 square feet, the net change between its vacant traditional store and its relocated Supercenter store. Hannaford acquired the former Stop & Shop in Exeter, adding 65,200 square feet. Party City ranked third by acquiring four iParty stores, which added 40,000 square feet. Stop & Shop closed all six Southern New Hampshire locations, reducing its footprint by 411,800 square feet. Shaw’s closed stores in Seabrook and Manchester, contracting by 124,300 square feet, while the Building 19 liquidation resulted in the closing of its 72,300 square foot store in Manchester.

The complete report contains much more detailed information on these categories and more, and will be available soon at KeyPointpartners.com.

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com


This KeyPoint Report examines changes in supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories during GRIID™ database maintains detailed information on virtually all retail properties in three key regions: Eastern Massachusetts, Southern New Hampshire and Greater Hartford, Connecticut. These markets encompass approximately 44% of all retail space in New England. GRIID™ has information on nearly 260 million square feet of retail space and approximately 60,000 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.
the period from August, 2013 through July, 2014. The study area includes 39 cities and towns, representing more than 835 square miles and approximately 554,200 people (42% of the state population).  KeyPoint Partners’

Company News

Our Middleboro Office Has Moved: Our satellite office, formerly in Middleboro, MA, has moved to Colony Place in Plymouth, MA
New address: 174 Colony Place, Plymouth, MA  02360; New phone numbers: Tel: 508-747-3533, Fax: 508-747-3933; Our 24 hour emergency line remains the same: 1-800-895-0731

New Business: The Leasing Team has added a new assignment in Connecticut: Crosspointe Plaza is a 94,000 s/f retail center with tenants Family Dollar and Gamestop, among others. VP of Leasing Don Mace is handling the assignment. The Property Management team has been awarded contracts for 16 Boston retail properties by Linear Retail. The properties, which include four Newbury Street locations, total more than 104,000 s/f. KPP currently manages 38 retail properties throughout New England for Linear, ranging from small suburban properties to grocery-anchored shopping centers. With the 16 new assignments, KeyPoint Partners will manage a total of 54 properties for Linear Retail totaling nearly 1,330,000 s/f. Employee News: Christine McNeilly has joined KeyPoint Partners as an Assistant Property Manager in the new Plymouth Office (see above). Christine came to KPP from Saxon Partners, where she was part of the management team at Colony Place.

National News

July comparable-store sales posted a year-over-year gain of 7.1% based on the ICSC’s final tally of 11 retail chains. July is clearance month for summer merchandise and the start of the back to school shopping season (late in the month). Back to school shopping appears to be off to a good start, but the bulk of the shopping will be in August, according to the ICSC. L Brands was up 6.0%, Gap was up 2.0%, Rite Aid was up 4.6%, Walgreen’s rose 1.1%, and Costco gained 5.0%. See our sales report below...Supervalu Inc. has suffered a data breach at many of its stores that may have resulted in theft of customer payment card data from June 22 through July 17, 2014. There is no indication yet that customer data has been used.

Accelerating News

Sherwin-Williams will open 80 to 90 new stores during fiscal 2014...Moe’s Southwest Grill signed 120 new franchise deals in the first six months of 2014, and continues its expansion with new restaurants in Baltimore, Boston, Chicago, Cincinnati, Houston, Pittsburgh, and Salt Lake City. This growth is fueled by existing franchise partners as well as new partnerships...Ross Dress for Less will opened 2 new stores in Kansas City, part of the retailer’s 2014 expansion program, totaling approximately 75 new locations...European discount fashion chain Primark plans to open a store in Boston toward the end of 2015, have 10 stores in the northeast by Easter 2016, and build out from there...Ross Stores  is opening 23 Ross units and seven dd’s Discounts stores in 17 states, part of the plan to open a total of 75 Ross and 20 dd’s this year. With these new stores, Ross has 1,194 Ross  stores in 34 states,  and  144 dd's Discounts locations in 13 states. Ross ultimately plans up to 2,000 Ross and 500 dd’s locations.. Dollar Tree, Inc. and Family Dollar Stores, Inc. have entered into a merger agreement under which Dollar Tree would acquire Family Dollar in a cash and stock transaction.  With the acquisition, Dollar Tree would become a leading discount retailer in North America, with over 13,000 stores in 48 states and five Canadian Provinces, sales of over $18 billion, and more than 145,000 associates. Dollar Tree currently operates 5,080 stores in 48 states and Canada. Family Dollar has 8,200 stores in rural and urban settings across 46 states. However, Dollar General has offered a competing $8.95 billion bid. Dollar General is willing to divest up to 700 of its stores in order to get the necessary approvals for the transaction....Urban Outfitters plans to open between 35 and 40 new stores during the current year, including 12 new Urban Outfitters stores, 15 new Anthropologie stores, and 12 new Free People stores....Wegmans Food Markets plans to add 10 new stores in the Northeast and Mid-Atlantic regions over the next year or two including 4 stores in Virginia, 2 each in Massachusetts and New Jersey, and one each in Pennsylvania and Maryland. The first of the new stores will open this fall in Burlington, MA. Two others are scheduled to open in 2015 in Alexandria, VA and Westwood, MA. Wegmans currently has 84 stores in New York, Pennsylvania, New Jersey, Virginia, Maryland and Massachusetts...Equinox Fitness Clubs has agreed to pay $110 million for a portfolio of properties in Boston and other US cities from an affiliate of Millennium Partners. The transaction marks the completion of a broader deal to transition ownership of health club properties to Equinox from Millennium. The clubs include Sports Club/LA properties in Boston, New York, Miami, San Francisco and Washington DC, as well as the Reebok Sports Club in New York City. With the six newly acquired properties, Equinox will operate 73 clubs nationally...Tumi Holdings, Inc. plans to open 20 to 25 new Tumi stores in 2014...Sprouts Farmers Market will open 14 stores in the third quarter for a total of 24 new stores in 2014...Vitamin Shoppe will open approximately 60 new stores in 2014...Canadian restaurant chain Tim Hortons has signed a franchise agreement to open 25 Tim Hortons restaurants in New Jersey and on Staten Island over the next 10 years. Tim Hortons has 3,630 locations, with 866 shops in the US...The Wet Seal Inc. is launching its new Wet Seal + Plus banner, aimed at plus-sized girls, with 30 new US stores opening this month...Multichannel equestrian products retailer Dover Saddlery is planning to open 4 to 6 retail stores in 2014. Dover currently has 24 US stores...Native Foods Cafe, a vegan-fast-casual restaurant, plans to open its first East Coast store next month in DC. A second location is projected to open in mid-October, and the company has signed two leases in VA. The chain has 20 locations, mostly in California...CST Brands Inc., one of North America’s largest independent retailers of motor fuels and convenience store merchandise, has opened 12 new US stores and two stores in Canada. The company expects to build 30 new stores in the US and eight in Canada during 2014. CST Brands operates 1,900 locations throughout the Southwestern US and Eastern Canada...Burger 21 has executed its first franchise agreement in Michigan, under which a debut restaurant in Ann Arbor will open in summer 2015. Additionally, the company signed two franchise agreements for units in Ocala, Florida, and Raleigh, North Carolina. The new deals are part of the fast-casual concept's growth strategy to expand its presence in new and existing markets nationwide. To date, Burger 21 has 13 open locations and 25 franchised restaurants in development.

Decelerating News

Aaron’s Inc. will close 44 underperforming stores in the third quarter of fiscal 2014. Aaron’s currently has more than 2,130 company-operated and franchised stores in 48 states and Canada...Footwear maker Crocs Inc. will close, or convert to third-party operators, 75 to 100 Crocs-branded retail stores. Crocs has 624 stores worldwide...Office Depot said it will close 165 stores during 2014 — up from the 150 estimated earlier this year — but stuck with a total count of 400 store closures through 2016.

New England News

Eastside Marketplace, an upscale supermarket in Providence, RI has been sold to a subsidiary of Ahold USA. Eastside Marketplace employees and management team will remain in place, running the business as Eastside Marketplace...The building that once housed Filene’s Basement on Needham Street in Newton has three tenants lined up. The building encompasses 36,988 s/f of retail space and a three-story garage at 215-227 Needham Street Jonathan’s Restaurant, which closed last April, will become a Five Guys Burgers and Fries. The space next to that is slated to become a Men’s Wearhouse, and PetSmart is slated to to open in December. All leases were negotiated by KeyPoint Partners, and KPP will sell the property via Auction.com...Kiko Milano, a cosmetics brand from Italy, will open its fourth US location in New Haven's 1 Broadway retail district at York St. and Broadway...The independent members of Market Basket’s board of directors have issued their third statement, asking everyone to come to an agreement to rebuild the chain. The statement echoes many of the sentiments of earlier statements which implored workers to return to the chain’s 71 stores and invited Arthur T. Demoulas to play a non-CEO role in stabilizing Market Basket as he continued negotiations to buy it. Massachusetts and New Hampshire governors Deval Patrick and Maggie Hassan have stepped in to the ongoing negotiations over the long-drawn-out Market Basket dispute that has put a multibillion-dollar company and tens of thousands of jobs at risk in both states, in an attempt to broker a deal between the warring Demoulas family factions. According to a statement, “the governors are encouraged that a resolution may be within reach.”..Legal Sea Foods will close its 8,500 s/f Prudential Center location in January as Boston Properties prepares to expand the Pru complex, although Legal will likely reopen in a new location there once construction is done. Last month, Boston Properties won approval to add 16,000 s/f of retail space to the Shops at Prudential Center.

July Retail Sales Report
























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

Commerce Department Monthly Sales

The Commerce Department said retail sales were virtually unchanged from June, ending five months of increases that have been getting smaller since March. Excluding motor vehicles and parts, retail sales rose 0.1%. Motor vehicles and parts sales fell 0.2%, pulling down the overall results.

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

Treasury Yields














Treasury Yield Sources:  federalreserve.gov; ustreas.gov

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had improved in June, increased in July. The Index now stands at 90.9 (1985=100), up from 86.4 in June. The Present Situation Index increased to 88.3 from 86.3, while the Expectations Index rose to 92.7 from 86.4 in June.

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

Purchasing Managers Index

Manufacturing expanded in July as the PMI® registered 57.1 percent, an increase of 1.8 percentage points when compared to June's reading of 55.3 percent. July's PMI reading of 57.1 is the highest reading since April 2011 when the PMI® registered 58.9 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

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

Thursday, July 17, 2014

Preview: Ten-Year Grocery Real Estate Report

As we noted in last month’s issue, we’ll soon be releasing the 2014 KeyPoint Report for Eastern Massachusetts/Greater Boston, based on our proprietary GRIID™ retail database. This year’s report includes a special historical section which we’ve called A Ten-Year Look at the Grocery Landscape. Here’s a preview of that section:

Overview: The last decade has seen significant changes in grocery shopping options - and in the grocery real estate landscape. The proliferation of dollar stores and their reallocations of floor space toward grocery items have made these value retailers an increasingly popular alternative to traditional grocers. At the other end of the spectrum, wholesale clubs are capturing a greater share of grocery expenditures, due to their pricing advantage on volume purchases, and considerable store growth by home-grown BJ’s.

Other retailers have been diverting food dollars away from traditional supermarkets as well, notably Walmart, which has relocated a significant number of traditional stores to Supercenters, and expanded others. Many Target stores have also added full line grocery departments. Finally, we’ll see an increasing share of grocery dollars allocated toward internet retailers.

Regional Grocers: Among regional grocers, growth came via acquisition. Hannaford took over the Victory chain. Whole Foods acquired five Foodmaster stores. Stop & Shop picked up two Foodmaster units, and remains the dominant supermarket in the region. Shaw’s was a chain that many thought had little long-term viability; however, under new ownership, Shaw’s appears to have stabilized, and maintains its number two position. Market Basket, the third largest chain in the region, added nearly 700,000 square feet in just the past five years (although as noted in recent industry news, not all new stores are open, due to their well-publicized family squabbles).

Dollar Stores: Dollar store growth was dominated by Dollar Tree. Ten years ago Family Dollar was the category leader - Dollar Tree now operates 693,700 square feet compared to Family Dollar’s 587,500 square feet. Dollar General, a newcomer to the region,  is expected to show significant future growth.

Wholesale Clubs: Wholesale clubs include the big three of BJ’s, Costco, and Sam’s Club. Neither Costco nor Sam’s Club has made significant headway in the region, ending the decade with the same store counts with which they began. At the same time, BJ’s has added seven new clubs, and now operates 21 stores. Wholesale club sales growth has been stronger than traditional grocers.

The full Ten-Year Grocery Study includes charts illustrating the relative changes in square footage of grocery retailers, dollar stores, and wholesale clubs in our Eastern Massachusetts study area from 2004 through 2014.

The Eastern Massachusetts KeyPoint Report, with the Ten-Year Grocery Study plus much more information, will be available to view and download later this month at KeyPointPartners.com.

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com

The KeyPoint Reports examine changes in supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories during a 12-month period, and include detailed information on virtually all retail properties in Eastern Massachusetts, Southern  New Hampshire and Greater Hartford, Connecticut. These markets encompass approximately 260 million square feet of retail space - approximately 44% of all retail space in New England - and nearly 60,000 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.