Wednesday, January 15, 2014

You Can't Help But Notice!

You can’t help but notice, between Thanksgiving and Christmas for the last several years, 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 largely moving money from one pocket to another, from its brick-and-mortar stores to its 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.

While major store closings such as Circuit City, Linens ‘n Things, and Borders could be viewed as Phase I of a national retail transition, store downsizing may be regarded as Phase II. Some of the many chains that have been shifting toward smaller stores include Best Buy, Kohl’s, Staples, Old Navy, Michael’s, and now even Walmart. To pick up the slack, many retailers are making e-commerce sales a priority, and this has been paying off.

Macy’s, for instance, has a limited number of opportunities to add more stores. In order to boost revenue it has invested in its online services to meet the needs of the new “omni-channel” consumer. The result has been online sales growth of 40% each year since 2010 while total revenue experienced only single-digit gains. The online segment of Macy’s business now accounts for 11% of total revenue.  Best Buy, another retailer now heavily dependent on e-commerce revenue, grew its 3rd Quarter 2013 online sales by 15.1% while total revenue declined 0.2%. This past year the company invested in an upgrade to its website with the expectation of doubling its share of online consumer electronics sales to 18% - equaling its brick-and-mortar share.

As of 3rd Quarter 2013, e-commerce as a percent of total retail sales was 5.9%. In 3rd Quarter 2003 the share was only 1.8%, and by 2017, Forrester Research projects that internet sales will represent 10.3%, or $370 billion of the $3.6 trillion in total retail sales. Omitting auto and gasoline sales, those figures adjust to roughly 9.7% today and 16.1% by 2017. By any standard, these figures are enough to grab any landlord’s attention.

Of course, for those in the industry it is no secret that the impact of e-commerce varies considerably by merchandise category. For instance, Electronics and Appliances share of e-commerce sales ranks highest at 21.9%, while Food and Beverages comprises only 2.2% of online sales.

Another category not quite a hit yet among online shoppers is Health and Personal Care, which makes up only 4.8% of total sales. In the early days of e-commerce, Apparel and Accessories sales were relatively modest - consumers didn’t get to try on and touch the goods before purchasing, and when they didn’t fit or felt cheap, the inconvenient and sometimes costly return policies made it all not worth it. But oh, has that changed! Apparel and Accessories now accounts for 20.2% of online sales, ranking #2 among merchandise lines, evidence that retailers have overcome those impediments.

And although Food and Beverages currently ranks lowest in online market share, it may not be so for long. It used to be that online grocery shopping was a niche business catering to select affluent urban markets and unappealing to the masses as a result of inconvenient delivery, high costs, and limited selection. But growing competition is bringing costs down, speeding up delivery, and offering wider selections. Peapod is one of the pioneers in the business, and now Amazon with AmazonFresh, Walmart with Walmart to Go, and a number of smaller companies are digging in for a share of the market. Even with delivery fees, on-line grocery bills are running closer to those at traditional supermarkets, and in some cases even lower.

Moving forward it appears that no brick-and-mortar retail category will be entirely insulated from the impact of e-commerce. As a result, it is reasonable to expect that, over the long term, retail’s overall physical footprint will continue to contract. Developers and landlords need to understand that today.

Bob Sheehan, Vice President of Research

in the February 2013 issue of KeyPoints.

Company News

New Management and Leasing Business: KeyPoint Partners is the property manager and exclusive leasing agent for Namco Plaza in Seekonk, Massachusetts. Namco Plaza is a 102, 000 square foot retail center on Fall River Avenue (Route 6) in Seekonk. Tenants include Namco, Dollar Tree, Outback Steakhouse and Sherwin Williams. There are several vacancies at the center, including pad space. Vice President of Leasing Don Mace is handling the assignment.

National News

December comparable-store sales posted a year-over-year gain of 3.4% based on the ICSC’s preliminary tally of 12 retail chains. The sales pace was better than November and largely reflected a tough environment for apparel businesses (though not exclusively), according to the ICSC. .. L Brands (Limited) was up 2.0%, Gap was up1.0%, Rite Aid was up 2.9%, Walgreen’s rose 6.1%, and Costco gained 5.0%. See our sales report below...American Realty Capital Properties and Cole Real Estate Investments agreed to a $7.2 billion deal in which American Realty will buy Cole with a mix of cash and stock. The combined company will be one of the largest commercial landlords in the country.
Target says personal information from customers’ credit and debit cards, including phone numbers, email and mailing addresses, was stolen from as many as 110 million customers in its holiday data breach, substantially more than the 40 million first reported. The company had previously disclosed that names, credit and debit card numbers, card expiration dates, debit-card PINs and the embedded codes on magnetic strips had been stolen. Target said it will try to contact customers it has email addresses for to provide tips on how to safeguard against consumer scams, and is offering a year of free credit monitoring and identity theft protection to affected customers. Target now foresees fourth-quarter sales at stores open at least a year will be down about 2.5%, and cautioned that its fourth-quarter financials may include charges related to the data breach. The company has 1,797 US locations. Neiman Marcus announced that it also suffered a major security breach around the same time. In a statement on the company’s Twitter feed, Neiman Marcus wrote that it was “informed by our merchant processor of potentially unauthorized payment card activity that occurred following customer purchases at our stores”. No numbers were revealed. Target and Neiman Marcus recently entered a retail partnership; neither company has confirmed that the data-theft incidents are related.

Accelerating News

Whole Foods Market sees potential to expand to 1,200 US stores. Whole Foods currently operates approximately 365 stores globally. Whole Foods recently acquired six Dominick's stores in Chicago. Safeway which runs Dominick's, announced in October its intended exit from the Chicago market by early 2014, where at one time it operated 72 Dominick's stores. Now approximately 55 remain....Nordstrom plans to open four Nordstrom Rack locations: The Shops at SkyView Center in Queens, NY, Lake Brandson Plaza, Brandon, FL in fall 2014, and Fulton Street Brooklyn, NY in spring 2014 followed by a store at the Gateway Center in Brooklyn in the fall...Marco's Pizza opened 109 new US locations across the country in 2013. Currently, the company has 437 units open in 33 states and the Bahamas. Puerto Rico hopes to open its first store by spring, and by year-end, Marco's will have over 600 restaurants in three countries. With more than 1,500 new franchise deals signed, Marco's is on track to quadruple its store count within five years.

Decelerating News

Discount apparel retailer Loehmann’s has filed for bankruptcy protection for a third time in its 92-year history, and will sell off its assets to a group of liquidators...Macy’s will close five underperforming stores in early spring 2014 and cut 2,500 jobs to sustain profitability. The retailer described the store closings as “normal-course adjustments” to its portfolio of Macy’s and Bloomingdale’s locations nationwide. Stores to be closed are in Mesa, Ariz; Overland Park, Kan; Florissant, Mo; Irondequoit, NY; and Murray, Utah. In organizational changes, the Midwest Region of Macy’s is being combined with the North Region, creating a new North Central Region. Nine existing store districts are being combined with nearby districts, reducing the number of districts to 60 from 69. Some positions in stores will be realigned, combined and reduced. Certain central office, administrative and back-of-the-house expenses will be trimmed...Ruby Tuesday Inc. said it will close 30 of its units over the next quarter. Ruby Tuesday owns and franchises 779 Ruby Tuesday restaurants in 45 states, the District of Columbia, 11 foreign countries, and Guam. Of those units, 703 are company-owned. The company also owns and franchises 29 Lime Fresh restaurants, of which 21 are company-owned.

New England News

Big Y has opened its first fuel center/c-store location in Lee, MA in partnership with local operator F.L. Roberts & Co. The 2,000 s/f Big Y Express Fuel and Convenience store is open 24 hours with eight gas pumps...After 20 years, the Dunkin’ Donuts at 176 Federal Street in Boston’s Financial District has closed. The franchisee who operated the shop said the lease for the 2,000 s/f shop expired and he was unable to come to terms on a renewal...Bain Capital has reached an agreement to buy a majority stake in Bob’s Discount Furniture in the first quarter of 2014 for an undisclosed amount. Bob’s operates 47 furniture stores in the Northeast and Mid-Atlantic with an average size of 30,000 s/f. Bain Capital has a history of local investments in a variety of retail businesses including Michaels Stores, Dunkin’ Brands Group, Bombardier Recreational Products, Outback Steakhouse, Burlington Stores, Dollarama, and Samsonite International...The Tile Shop is launching its third area retail store, a new 15,800 s/f store at 476 Boston Turnpike in Shrewsbury, MA; KeyPoint Partners handled the deal. The other Boston area stores are in Natick and Avon, MA. The Tile Shop has also opened two locations in Connecticut, a 15,120 s/f store in Brookfield, and a 20,740 s/f store in Norwalk....Sherman Plaza, the 75,000 s/f strip mall anchored by Savers, DSW and AutoZone on Route 1 in Saugus, MA, is on the auction block, according to a legal notice. The property's four-acre strip mall and 254 parking spaces at 1160-1170 Broadway will be auctioned this month...Linear Retail Properties LLC  paid $2.4 million to buy a 5,274 s/f retail property in Framingham. Located near the entrance to Jordan’s Furniture on Route 9, the property is fully leased to Stardust Jewelers and the Chinese Mirch restaurant...Burger chain Shake Shack opened in Cambridge’s Harvard Square this month. A Chestnut Hill Shake Shack opened in March. A third location will open soon on Boston’s Newbury Street...Japanese casual clothing retailer Uniqlo confirmed plans to open “ a couple of stores” in the Boston market in the fall. The company wouldn’t disclose exactly when and where. The company typically opens a flagship store in a new market and then expands in close proximity. Uniqlo has 1,300-plus stores in 14 markets worldwide, including 17 in New York, New Jersey, Connecticut and California. This month it said it would open five more US stores this spring and enter the Philadelphia and Los Angeles markets, in addition to Boston, in the fall...Boston commercial real estate firm HFF closed the sale of and arranged financing for Bangor Parkade, a 233,000 s/f Kohl’s-anchored shopping center in Bangor, Maine on behalf of the seller, Retail Properties of America Inc.  GM Realty of Bangor LLC purchased the asset for $26.25 million. ..Stop & Shop is closing its store at 60 Broadway in Malden, MA next month. The Quincy-based chain operates three other stores within a two-mile radius of that location, including a store in Malden, and a fourth store about 3.4 miles away. Stop & Shop operates more than 375 stores in the Northeast, including about 130 in Massachusetts.

December 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

Overall retail sales rose 0.2% last month, the Commerce Department said. Auto sales fell 1.8%. Excluding autos, December sales were up 0.7%. Retail spending figures  were revised down to a 0.5% increase in October and a 0.4% rise in November. Total sales for 2013 were up 4.2% from the prior year.

Source: U.S. Department of Commerce -

Treasury Yields

Treasury Yield Sources:;

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had decreased in November, rebounded in December. The Index now stands at 78.1 (1985=100), up from 72.0 in November. The Present Situation Index increased to 76.2 from 73.5. The Expectations Index increased to 79.4 from 71.1 last month.    

Source: The Conference Board -

Purchasing Managers Index

Manufacturing expanded in December as the PMI™ registered 57 percent, a decrease of 0.3 percentage point when compared to November's reading of 57.3 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 -