Wednesday, December 16, 2015

The Year in KeyPoints: Our Annual Review

The end of another KeyPoints publishing year approaches swiftly. As always, in these pages we’ve explored some of the most important events and trends in the retail real estate industry, and shared our own unique research. Below is a recap of the topics on which we’ve commented in 2015 - stay with us in 2016 to see where these stories go from here:

January: Millennials Shift Fashion Direction
VP of Research Bob Sheehan wrote about the changing fortunes of youth apparel retailers: “It appears fashion-forward teen shoppers have become less label-conscious and more price-conscious. They’ve forsaken Abercrombie’s and Eagles. But they still want cool clothes. The answer is affordable fashion, a trend that complacent mall-based merchants like A&F never saw coming. New-school fashion retailers Forever 21 and H&M have been rolling out stores while offering wide selections of affordable fashion”.

February: Merge Ahead? Staples, Office Depot, and the FTC
Bob commented on the proposed merger of the two major office supply retailers: “This month came the announcement that Staples and Office Depot had entered into a merger agreement. In 1996, Staples made its first attempt at a merger with Office Depot, but was denied by the FTC on the basis that a potential monopoly would dictate office supply pricing. While Staples and Office Depot made the case that competition existed in the form of Wal-Mart, Target, Circuit City and Best Buy, among others, the FTC was not swayed. So will the FTC view the merger any differently this time around?” [NOTE:  for the latest on the deal see the National News section].

March: The Bean Boot Marches Forward
Marketing Manager Chris Cardoni wrote about the ongoing success and accelerated expansion of LL Bean: “One old-school retailer with a classic name is striding confidently into the future on the strength of a 104-year-old boot. L.L.Bean, Inc. has grown from a one-man operation to a global organization with 2014 revenue of $1.61 billion. The signature boots sell out every winter; this past winter, Bean sold approximately 450,000 pairs, a new record, and Bean boots are back-ordered until spring or even summer.”

April: Return to RECON: KeyPoint Partners Goes To Vegas
We noted our return as an exhibitor at the retail industry’s premier trade show: “KeyPoint Partners will be an exhibitor at the International Council of Shopping Centers RECON at the Las Vegas Convention Center, the largest retail real estate trade show in the world, and one of the largest conventions of any kind in Las Vegas, with over 1,000 exhibitors and an expected 34,000 attendees.”

Our May through August issues focused on our annual KeyPoint Reports on retail real estate activity in key New England markets, based on our GRIID™. This year’s reports included an analysis of the restaurant sector. All three reports are available at KeyPointPartners.com: May: Eastern MA Report Preview: “We never want to be the bearers of bad news, but somebody has to do it: vacancy in Eastern MA continues to trend upward. In 2015, the region experienced a rise in the vacancy rate from 8.5% to 8.8%. We continue to see national and regional chains close stores.”
June: Southern New Hampshire Report Preview: “Vacant space in the region declined by more than 200,000 square feet, partially absorbed by replacement tenants and partially by conversion to non-retail uses.. As a result, the vacancy rate in the region declined from 10.4% to 9.6% throughout the year, a sign that the retail environment continues to stabilize.”
July: 10-Year Eastern MA Restaurant Report: “Much of the growth in the number of restaurants resulted from the development of fast casual chains, in addition to the phenomenal growth of Subway to become the largest restaurant chain in the world. Its current global store count exceeds 42,000 locations, an average of two store openings per day since 1965.”
August: Greater Hartford, CT Report Preview: “In today’s environment, limiting new development is a good thing. Much of the existing vacancy needs to be filled or demolished before substantial new retail space can be added, and the region took considerable strides toward accomplishing just that. Total occupancy increased by more than 350,000 square feet in 2015, lowering the vacancy rate in Greater Hartford from 11.0% in 2014 to 10.1% this year.”

September: Are Supermarkets About to Get Sandwiched?
Bob Sheehan shared some thoughts on the impact of online grocery shopping: “At one time it seemed that Grocery was the one retail category that was going to avoid the internet sales onslaught. What happened to music, books, electronics could never happen to groceries- or so one thought. But the buzz lately suggests things are about to change. Would you order your weekly groceries online if they’d show up at your door a couple of hours later for a $3.99 delivery charge? Or would you rather fight the traffic and line up at the check-out?”

October: Happy Hallow-days!
Chris Cardoni shared a number of sales forecasts for Halloween and the Holidays: “It’s become a cliché to note how fast one retail season rolls into another, and here we are again in the usual Halloween-to-Christmas retail whirlwind. Walk into any Michael’s store or CVS seasonal aisle and you’ll see the orange and black right next to the red and green. Total spending on Halloween is expected to reach $6.9 billion, compared to $7.4 billion last year. In general, industry forecasters are looking for only modest increases in holiday retail sales.”

November: Walgreens-Rite Aid Deal: Elimination of 3,000 stores...REALLY?
Bob used GRIID™ to explore the number of store closing forecast as a result of the proposed merger of two major drugstore chains: “One has to wonder how many stores Walgreens will have to close in the face of FTC antitrust scrutiny before the deal is approved. So far, reported estimates of store closings range to as many as 3,000 stores. Walgreens indicated it would consider closing as many as 1,000 units in some combination of the two chains, but expects the real number will be closer to 500 stores. Whether anyone, including Walgreens, believes these estimates is another story.”

Which brings us to 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 Mgr.

COMPANY NEWS

New Leasing Business: 90 West River Road, an 8,000 s/f new construction strip center in Hooksett, NH. VP of Leasing Rob Grady and Sr. Associate Mike Branton are handling leasing. The Investment Sales Team has closed the sales of Walgreens on Route 1 in Saugus, MA for $4,150,000 and Unleashed by Petco in Roslindale, MA for $1,600,000 in all-cash deals. Employee News: Colleen Greiner, in the Cromwell, CT office, has earned the ICSC Certified Shopping Center Manager (CSM) credential. It is estimated that only 10% of retail real estate professionals complete this rigorous examination, demonstrating the highest level of competency.


NATIONAL NEWS

The Commerce Department said sales rose a seasonally adjusted 0.2% in November, the most in four months. Shoppers upped spending at apparel, sporting goods, and electronics stores. Spending at online retailers advanced a healthy 0.6%. General merchandise stores improved, but department stores were flat. The National Retail Federation estimated that spending averaged $300 per person over Thanksgiving weekend, down from $381 last year.  Among retailers reporting monthly comp-store sales, L Brands was up 7%, Gap was down 8.0%, Rite Aid was up 0.9%, and Costco sales were flat. See our sales reports BELOW... The federal government moved to block the merger of Staples and its chief competitor, Office Depot. Regulators at the US Federal Trade Commission filed legal action to kill the deal, saying it could lead to higher prices for office supplies, particularly for business customers, where the merged company would have a dominant 70% share of the market. The FTC’s four-member commission voted unanimously to file the complaint and to seek a preliminary injunction against the merger. Both companies said they plan to contest the agency’s action. Together, the companies contend, they would be stronger and would lower costs for consumers and businesses. They said their competition includes manufacturers selling directly to businesses, as well as companies like Amazon and Walmart.

ACCELERATING NEWS

Conn’s Inc. reached the 100 store mark with the opening of a Conn’s HomePlus store in Las Vegas. Conn’s plans to open 15–18 stores in fiscal 2016, nearly 25 outlets in fiscal 2017, and believes it has the potential to expand to 500 US stores. Conn’s currently operates outlets in 12 states...Dollar General plans to expand its square footage by 7% in 2016. Dollar General operates 12,396 US stores...Saks Fifth Avenue will open its first Saks Off 5th outlet in New York City in March 2016. The opening is part of the company’s plans to open in high-density/high-traffic locations...Lord & Taylor will debut its new off-price concept, Find @ Lord & Taylor, this month in Paramus, NJ. This initial store will be followed by six additional locations next year...Modell’s Sporting Goods is opening two new stores in the NYC metro area. The new locations expand the retailer’s portfolio to 155 stores in 10 states... L.L. Bean Inc. opened a store Columbus, OH, the chain’s first in that area and second store in Ohio, part of the company’s push toward 100 stores by 2020. The company had 18 stores at the start of its retail push and is now up to 33...Liquor Stores NA Ltd., a Canada-based retailer whose US presence has so far been limited to Kentucky and Alaska, will enter three new states, New Jersey, Massachusetts and Connecticut, by mid-2016. Liquor Stores NA currently has 249 stores...The Greene Turtle Sports Bar and Grille opened its 43rd location and second New York site last month. So far in 2015, The Greene Turtle has opened 6 restaurants, including its first in WV, and announced new franchise agreements that will introduce the brand and to the suburbs of  Philadelphia and Virginia’s Shenandoah Valley...The private-equity owners of Petco have reached a $4.6 billion deal to sell the retailer to CVC Capital Partners and the Canadian Pension Plan Investment Board. Petco has 1,400 locations across the US and Mexico... Mattress Firm is acquiring Sleepy’s. The combined company will operate nearly 3,500 stores and 80 distribution centers in 48 states...Ross Stores plans to open 2,500 stores over the long-term. The company operates Ross Dress for Less and dd’s DISCOUNTS. As of October 31, 2015, the Company operates 1,276 Ross locations in 35 states, and 172 dd’s DISCOUNTS stores in 15 states...Shinola, which sells American luxury brands, opened a store in Dallas this month. So far, the chain of 11 stores and maker of watches and leather goods employs 525 people. The company is planning 6 to 10 stores next year and will eventually grow to 70 stores...Tropical Smoothie Cafe plans to open approximately 25 new locations in Maryland over the next 3-5 years, including 10 in Baltimore, and plans to exceed 475 stores nationwide. By 2018, the company plans to have 800 US stores...Dave & Buster’s intends to open a total of 8 to 9 new stores and relocate one existing store. All but one of the new store openings will be in the large-store format...Pedego Electric Bikes opened 5 new stores in FL, CO, OR, and CA, bumping the store count for Pedego-branded locations up to more than 75... As of this writing, the merger between Bridgestone Americas and Pep Boys, which had been threatened by a competing bid from Icahn Enterprises, is on again. Bridgestone matched Icahn’s offer of $15.50 per share, or approximately $863 million, while the Pep Boys board said it no longer considered the Icahn bid a “superior proposal” as defined in the October merger agreement with Bridgestone. If the deal goes through, it will add approximately 800 Pep Boys locations and 7,500 service bays to Bridgestone Retail’s network of 2,200 tire and auto service centers, which operate under the Firestone Complete Auto Care, Tires Plus, Hibdon Tires Plus and Wheel Works banners... New York private equity firm Sycamore Partners has completed its purchase of Charlotte-based department store company Belk. Belk started in 1888 and grew into the largest family-owned department store chain in the US, with nearly 300 locations in 16 Southeastern states.

DECELERATING NEWS

The bankrupt Quaker Steak & Lube restaurant chain expects to be purchased by TravelCenters of America for $25 million. The chain has grown to more than 50 locations in 16 states. TravelCenters operates more than 500 restaurants in 253 travel centers and convenience stores along major highways in 43 states. The deal is subject to bankruptcy court approval.

NEW ENGLAND NEWS

The Apple Store in the Mall at Chestnut Hill has taken over two adjacent storefronts. The new store, currently undergoing renovations, will be is three times the size of the old one. Apple operates 11 stores in MA. Its three-story store in Boston is the largest in the US... Wegmans is planning to open a store in Medford at the Meadow Glen Mall. Wegmans has locations in Burlington, Chestnut Hill, Northborough and Westwood...Sweetgreen salad chain opened its 5th Boston-area location this month and plans 2 others in the city. ..Gap plans to close its stores in the Bangor Mall and South Portland’s Maine Mall in January as part of a plan it announced earlier this year to close 175 stores nationwide... Top Chef finalist Tiffani Faison opened her second restaurant, Tiger Mama, in Boston’s Fenway neighborhood, on the same block as her barbecue restaurant, Sweet Cheeks Q....The Ames Plow Tavern in Faneuil Hall is closing at the end of this year. It has been in business at that location for nearly 40 years.


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

Sales at retailers and restaurants rose a seasonally adjusted 0.2% in November from October, the largest increase since July, the Commerce Department said. The rise comes after three months of nearly nonexistent growth, and largely thanks to a 0.4% fall in auto sales.

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 moderately in October, declined further in November. The Index now stands at 90.4 (1985=100), down from 99.1 in October. The Present Situation Index decreased from 114.6 last month to 108.1 in November, while the Expectations Index declined to 78.6 from 88.7 in October.

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

PURCHASING MANAGERS INDEX

Manufacturing contracted in November as the PMI® registered 48.6 percent, a decrease of 1.5 percentage points from the October reading of 50.1 percent, indicating contraction in manufacturing for the first time since November 2012 when the PMI® registered 48.9 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

Friday, November 13, 2015

Walgreens-Rite Aid Deal: Elimination of 3,000 stores…REALLY?

At the end of October, Walgreens surprised many of us with its announcement that it had agreed to purchase Rite Aid in an all-cash deal for $9.4 billion. If the deal is approved, it would potentially increase the chain’s total number of stores by a whopping 50%, giving it a huge size advantage over CVS.

The 7,800-unit CVS announced earlier this year that it was buying approximately 1,700 pharmacies operated by Target. Despite that, CVS will still be at a distinct market share disadvantage against a potential Walgreens-Rite Aid chain of more than 12,000 stores. At the same time, one has to wonder how many stores Walgreens will have to close in the face of FTC antitrust scrutiny before the deal is approved.

So far, reported estimates of store closings range from 400 units (a figure from Credit Suisse) to as many as 3,000 stores (based on a recent Cushman & Wakefield analysis). As part of its due diligence process, Walgreens likely completed a detailed evaluation of Rite Aid trade area overlap with that of its own stores. Walgreens indicated that it would consider closing as many as 1,000 units in some combination of the two drugstore chains, but expects the real number will be closer to 500 stores. Whether anyone, including Walgreens, believes these estimates is another story.

The disparity among estimates compelled us to take a look at both Walgreens and Rite Aid store locations across our proprietary GRIIDTM territory - Eastern Massachusetts, Southern New Hampshire, and Greater Hartford- and examine just how much trade area overlap there is within these regions. The top section of the table below shows the number of Walgreens and Rite Aid stores in each of the regions in our GRIIDTM database, as well as the percentages of each chain’s total regional store count, and compares them with national figures. In order to assess the overall impact, we identified the number of Rite Aid locations in GRIIDTM regions within quarter-mile increments of Walgreens stores, out to 1.0 mile, as shown in the lower section of the table.

Before going further it should be noted that the ratio of Rite Aid stores to Walgreens is significantly higher in KeyPoint Partners’ GRIIDTM regions than it is nationally. There are 142 Rite Aid stores within GRIIDTM territory compared to 171 Walgreens locations, with Rite Aid representing 45% of the combined total. Nationally, there are 4,570 Rite Aid units compared to 8,051 Walgreens stores, equating to a Rite Aid share of 36% of the total count. Therefore it’s likely that we’d see greater trade area overlap between Rite Aid and Walgreens in these selected New England regions than these chains experience nationally. We adjusted for this difference when extrapolating our data to a national level.

In New England, only 13% of Rite Aid locations are located within a 0.25 mile of a Walgreens unit; but this percentage jumps to 26% at 0.5 mile and 49% within 1.0 mile. To adjust for the difference in national Rite Aid store concentration, a factor of 80% was appplied to these percentages to arrive at national percentage estimates. Aside from urban stores, drugstores generally draw shoppers effectively up to 2.0 miles or more. Although population density, traffic patterns, sales performance, profit levels, site characteristics, and the proximity of CVS locations need to factor into any strategic closing decisions, market areas for Rite Aid stores within a mile of Walgreens will overlap substantially with those of Walgreens. However, if our scaling of the GRIIDTM data to national levels is realistic, it appears that, strategically, there will be a minimum of 500 stores affected by the acquisition. After all, does operating two stores within 1/4 mile make sense?

While 3,000 closings seems grossly overestimated, there will be numerous other reasons to close stores besides proximity. Marginally performing stores, physically poor stores, lease expirations, and the like will all cause the number to rise. And when the FTC review of “monopolistic power” and the potential ability to raise prices is completed…well, who knows where the number will go? But if Walgreens really thinks they can set their cap at 1,000 store closings, they may have to think again.

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


Company News

New Leasing Business: 501 Newton Street, a shopping center on Route 116 in South Hadley, MA. Don Mace is handling the assignment. New Employees: Sarah Adler joined the Ashburn, VA office at One Loudoun as a Property Operations Assistant. Sarah Burke joined the Plymouth, MA office at Colony Place as a Property Manager. Leng Ung joined the Burlington, MA office as an Assistant Property Manager. Kim Perry has been promoted from Assistant Property Manager to Property Manager in the Burlington, MA office.

National Retail News

Research firm Retail Metrics reported that US same-store sales in October declined by 0.2%, the seventh time in the last eight months that expectations have been missed. Retail Metrics had forecast a modest gain of 0.2% for the month. In September retail same-store sales rose 0.5%. The Commerce Dept. said sales rose 0.1%. Among retailers reporting monthly comp-store sales, L Brands was up 5%, Gap was down 3.0%, Rite Aid was up 1%, and Costco was up 1%. See our sales reports below.

Accelerating Retail News

Rooms to Go cut the ribbon last month on the largest retail furniture store in the Southeastern US. The newly built facility in Dunn, NC comprises app. 1,450,000 s/f on 120 acres and houses a state-of-the-art Rooms to Go, a Rooms to Go Kids/Teens, a Rooms to Go Outlet Center, and a distribution center...Nordstrom Rack plans to have 300 locations open by 2020. There are currently 188 Nordstrom Rack stores...Dick’s Sporting Goods Inc.  opened 5 new stores in IL, IA, WI, WA, and CT. These stores expand Dick’s store base in the US to 640... Wegmans plans to build a store in Lancaster, PA, the chain’s 87th store, in The Crossings at Conestoga Creek, a planned mixed-use project development. Wegmans currently operates 86 stores nationwide... ALDI plans to open 45 grocery stores in Southern CA by July 2016, as part of a five-year plan to open 650 new stores nationwide by the end of 2018. ALDI operates more than 1,400 stores in 32 states...Hudson’s Bay Company is launching an off-price spin-off of the Lord & Taylor department store called Find @ Lord & Taylor. The first store will open this month in a 35,000 s/f former Loehmann’s space in Paramus, NJ. HBC is hoping to expand on its success with its other off-price concept, Saks Off Fifth...Bridgestone Corp. agreed to buy the Pep Boys retail chain for about $835 million. The acquisition is slated to close at the beginning of next year. Bridgestone operates more than 2,200 tire and automotive centers across the US, and Pep Boys has more than 800 shops. The merger will create the world’s largest chain of its kind...Century 21 Department Store will open an approximately 70,000 s/f, two-level store at Green Acres Mall in Valley Stream, New York, on Long Island. Century 21 operates 9 stores in the New York region and 1 in Philadelphia... Key Food Stores confirmed its successful acquisition of 23 stores in the A&P bankruptcy auction, and said it will operate 2 units as corporate stores. The new stores will grow Key Food to 212 units... Walgreens Boots Alliance is in advanced talks to acquire Rite Aid in a deal that could be worth as much as $10 billion. The deal would bring together the No. 1 and No. 3 retail pharmacy operations under one roof, with more than 12,786 stores and more than $67.1 billion in pharmacy revenue. WBA is willing to unload up to 1,000 stores in order to win regulatory approval, about 8% of the combined company’s 12,700 US stores; however, the company may potentially have to close many more locations (as noted in our Commentary)...Kohl’s plans to open 5 - 10 new stores in a smaller 35,000 s/f prototype, aimed at underserved areas. Kohl’s also plans to open 10 - 15 stores dedicated to its proprietary Fila brand in outlet malls across the country. Additionally, the retailer will open two more Off-Aisle by Kohl’s locations in 2016...O’Reilly Automotive plans to open 210 new stores next year. The company is also on track to open 205 new stores by the end of 2015. O’Reilly Automotive, Inc. operates 4,523 stores in 43 states...Starbucks intends to open 1,800 new stores globally during fiscal 2016, with licensing driving a large portion of the growth. This includes 700 stores in the Americas (half licensed)... When Dollar Tree acquired Family Dollar earlier this year, the company agreed to divest 330 Family Dollar stores to satisfy federal regulators. The acquiring company is a newly created portfolio company of the private equity firm Sycamore Partners which will operate those 330 stores as Dollar Express stores. Sycamore Partners’ portfolio includes Aeropostale, Coldwater Creek, Hot Topic, the Kasper Group, Nine West, Talbots, and Torrid. The combination of Dollar Tree and Family Dollar created a retailer with nearly 14,000 locations nationwide... Bob’s Discount Furniture is planning a big push into the Chicago market. Bob’s will open stores in Skokie, Burbank, Orland Park, Villa Park and Aurora in February 2016. CT-based Bob’s has 64 stores in the Northeast and mid-Atlantic....Amazon’s first permanent physical store has opened in Seattle. The store integrates offline and online book shopping...Victoria’s Secret will open a 64,000 s/f store next fall on the corner of Fifth Avenue and 51st St. in NYC, in a space formerly occupied by Forever 21...Shareholders of the Charlotte-based department store chain Belk approved the $3 billion sale of the company to private equity firm Sycamore Partners. Belk is the nation’s largest family-owned-and-operated department store, with $4 billion in annual sales at almost 300 locations in 16 Southern states....Tommy Bahama opened a three-level, 19,200 s/f  flagship in Waikiki, the brand’s eighth location in Hawaii... Jamba Juice Inc. has launched its 2016 multi-unit development packages in existing and new markets in Philadelphia, Maryland, Washington, D.C., Virginia, and Florida, part of a plan to add 500 new stores by 2019. Jamba Juice has 601 franchised stores and 206 company-owned stores... Texas Roadhouse plans to open 25 to 30 locations, including 5 of its Bubba’s 33 restaurants, 1in 2016... Macy’s and Luxottica signed a deal to open up to 500 LensCrafters optical retail centers inside Macy’s. Macy’s and Luxottica already have a deal which put 670 Sunglass Hut’s in Macy’s stores. The first LensCrafters will open at a Macy’s location by April, with 100 slated to open by the end of the year... Cabela’s expects to open 7 stores next year and no more than that in 2017. Cabela’sis on track to open 13 stores and had announced or identified 11 stores for 2016 and 6 for 2017. It has been reported that Bass Pro Shops is eyeing Cabela’s for acquisition.

Decelerating Retail News

Fresh & Easy filed for Chapter 11 bankruptcy protection, its second filing in two years. The company closed 50 of 167 stores in March another 14 in July... Target will close 13 stores in the West, Midwest, and South in January, 2016.

New England Retail News

The site of the former Salem NH Liquor & Wine Outlet at in Salem, NH was sold for $3.9 million in a sealed bid sale coordinated by Nautilus Realty Group. The winning bidder was Emmett Horgan, owner of Rockingham Toyota of Salem. .. Tesla Motors plans to open its first store in Boston, at Prudential Center, the third MA retail location for the firm. Tesla has stores in Natick and Dedham, and a service center in Watertown. Tesla operates 159 sales and service centers worldwide... WS Development is buying the remaining 12.5 acres of the Seaport area, known as Seaport Square, for $359 million in a deal that is likely to accelerate completion of the new district, one of the biggest development areas in the city. WS plans to build offices, housing, and shops...Five Guys will open a new restaurant at the former site of Kelly’s Roast Beef in the middle of Allston. Five Guys currently has 1,300 locations worldwide, and 24 locations in Greater Boston... Jordan’s Furniture is building a 192,500 s/f store in New Haven, CT, its first in the state, that will feature a massive indoor rope course. The New Haven store, scheduled to open this December, will feature the largest entertainment area of any Jordan’s stores to date. The retailer currently operates five stores....The Golub Corp. opened its first Market 32 in Sutton, MA last month, the first supermarket in that community. The store is the fourth Market 32 to open since the company’s November 2014 announcement that it plans to develop the new brand across the majority of its 130-plus stores over the next 7-10 years. The first 3 were converted from Price Choppers and opened over the summer... Linear Retail Properties, LLC has acquired 745 South St. in Roslindale Village., a 4,600 s/f single-story property leased to Unleashed, Petco’s urban store concept...Saladworks has exited Ch. 11 bankruptcy and plans to expand along the I-95 corridor in MA, including up to a dozen new stores in Boston. The chain has 108 locations...Grass Fed, a burger-and-milkshake restaurant in Jamaica Plain, will open its 2nd location on Washington St. across from Forest Hills station. Grass Fed current location opened in 2012.

October Retail Sales




























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

Commerce Department

Sales at retail stores and restaurants rose just 0.1% from the prior month to a seasonally adjusted $447.3 billion in October, following two months of flat sales, the Commerce Department said. Retail sales were unchanged in September, down from an initially reported 0.1% gain.

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 moderately in September, declined in October. The Index now stands at 97.6 (1985=100), down from 102.6 in September. The Present Situation Index decreased from 120.3 last month to 112.1 in October, while the Expectations Index edged down to 88.0 from 90.8 in September.

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

Purchasing Managers Index

Manufacturing expanded in October as the PMI® registered 50.1 percent, a decrease of 0.1 percentage point from the September reading of 50.2 percent, indicating growth in manufacturing for the 34th consecutive month. The October PMI is the lowest reading since May 2013, when the PMI also registered 50.1 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

Wednesday, October 14, 2015

Happy Hallow-days!

In my family we have a yearly joke about having to start Christmas shopping in August, because it’s almost “The Embers” (you know: September, Oct...ember, November, December), and The Embers go by very quickly. It’s become a cliché to note how fast one retail season rolls into another, and here we are again in the usual Halloween-to-Christmas retail whirlwind. Walk into any Michael’s store or CVS seasonal aisle and you’ll see the orange and black right next to the red and green. In that spirit, we offer you a few seasonal statistics and forecasts:


Halloween: Halloween falls on a Saturday this year, which quite likely means an increase in day-before and day-of Halloween parties. More than 157 million Americans plan to celebrate Halloween this year, according to the National Retail Federation’s Halloween Consumer Spending Survey conducted by Prosper Insights & Analytics. The average person celebrating will spend $74.34, compared with $77.52 last year. Total spending on Halloween is expected to reach $6.9 billion, compared to $7.4 billion last year. According to the International Council of Shopping Centers Halloween Consumer Spending Survey, 8 in 10 households expect to make Halloween-related purchases this holiday season, and they plan to make those purchases mainly in brick-and-mortar stores: nearly 99% plan to make an in-store purchase this year, while just over 36 % plan to have an online purchase shipped to their home, and 22% say they will buy online and pick up in-store.

Among this year’s “buzzworthy” costumes: Sexy Donald Trump (really?!); The Internet Dress (what color(s) are/is it?); Pizza Rat; Caitlyn Jenner; Lion-Hunter Dentist; Minions of all sizes; and Left-Shark, breakout star of last year’s Superbowl half-time show. Another Halloween economic note: this year’s pumpkin crop is significantly decreased due to heavy floods, causing a nationwide shortage. Libby's, the canned-food company known for its pumpkin-pie filling, reports that supplies are down by a third this year.

The Holidays: Not everyone objects to the “ever-earlier holiday push”, according to CNBC: “a slew of consumers having already started, and in rare cases, already finished, purchasing their holiday gifts. [A] study conducted by CreditCards.com over Labor Day weekend found that roughly one in seven, or 32 million Americans, have already begun buying for the holidays. The study also found that 2% of all consumers - about 4.6 million people - have already crossed everything off their list.”  For those of us who have yet to even think about making a list, that’s impressive.

In general, industry forecasters are looking for only modest increases in holiday retail sales. AlixPartners predicts holiday sales will rise between 2.8 and 3.4%, compared to 4.4% growth last year. Deloitte's holiday forecast calls for a sales increase of between 3.5 and 4%, below last year's 5.2% gain. ShopperTrak expects sales to rise 2.4%. Last year, ShopperTrak said holiday sales increased 4.6%, topping its forecast for 3.8% growth and representing the biggest gain since 2005, when sales registered 5.2% growth. The National Retail Federation projects that total holiday sales will increase 3.7%, and that holiday online sales will increase between 6% and 8%.

CNBC points to “ a tightening labor market, rising home values and seasonal gas prices that have hit an 11-year low. On the other end is an uncertain stock market, slowing global growth, and a consumer base that is shelling out more on rent. The end result... is a holiday season that shouldn't cause retailers to hit the panic button - but also doesn't signal robust growth”

Stay tuned to these pages to see how accurate these prognostications turn out to be. In the meantime, we wish you and all our friends in the retail world HappyMerryHallowHolidays.

Chris Cardoni, Marketing Manager
CCardoni@KeyPointPartners.com

KeyPoint Partners Company News

New Leasing Business: 2371 Cranberry Highway, a ~1.8 acre site in West Wareham, MA. VP of Leasing Rob Grady is handling; 16 Post Road, a big-box site in Westerly, RI and 470 Pawtucket Ave., Pawtucket, RI, handled by Senior Associate Michael Branton. The Investment Sales team closed four transaction in two weeks, including two single tenant properties - a Petco in Roslindale, MA and a CVS in Torrington, CT - and two multi-tenant properties - Wintonbury Mall in Bloomfield, CT and Midway Plaza in Uncasville, CT... New Employee: Nick Schaejbe joined the Burlington, MA office as an Assistant Property Manager. Nick is a graduate of the Entrepreneurship Real Estate program at Suffolk University, and has prior experience at BayState Property Management. Former team member Kris Dalen has returned to the Burlington, MA office as a Property Manager.

National Retail News

September retail sales rose a modest 0.1% on a year-over-year basis, according to the Commerce Department. Among retailers reporting monthly comp-store sales, L Brands was up 9%, Gap was down 1.0%, Rite Aid was up 1.5%, and Costco was up 3%. See our sales reports below...Whole Foods Market will cut 1,500 jobs from its workforce over the next two months. The layoffs will affect 1.6% of the chain's employees. Whole Foods said the layoffs will allow the company to "invest in technology upgrades" and keep its prices in check...Only a fraction of US payment card issuers have sent chip-embedded cards to customers, and only a fraction of merchants have installed chip-enabled payment systems as of the October 1st deadline, after which liability for in-store fraud shifts to card issuers and merchants. The EMV Migration Forum (Europay, MasterCard and Visa, the three companies that created the chip card standard) estimates 200 million-plus chip-enabled cards have been issued out of 1.2 billion cards in the marketplace. For US merchants, only about 40% of payment terminals have been upgraded to accept the cards, according to the National Retail Federation.

Accelerating Retail News

The Running Group, a division of The Finish Line, operates 76 specialty running stores under some 15 individual banners, including JackRabbit, The Running Company, Run On!, Blue Mile, and Boulder Running Company. The company will rebrand all the stores as JackRabbit...With the opening of a 50,000 s/f store in Augusta, its first in Georgia, and a 46,000 s/f store near Denver, its 7th in Colorado, Conn’s will have 100 stores next month...Ross Stores Inc. is continuing an aggressive growth strategy for its Ross Dress for Less and DD’s Discount banners. The new store openings are part of the retailer’s 2015 expansion program, totaling approximately 70 new locations during the year. Ross Dress for Less will open four new stores and DD’s Discounts will open two new stores this month. Together, Ross Dress for Less and DD’s Discounts currently operate more than 1,400 off-price apparel and home fashion stores...La Colombe is adding multiple locations. The Philadelphia coffee-roasting company plans cafés in Washington, D.C., New York, Florida, Massachusetts and California...Smart & Final, operator of 266 warehouse style stores, has plans to open 100 new stores in the Western US during the next four years...Wingstop Inc. opened its 800th restaurant this month in Hillsborough, NJ. Wingstop plans to add 120 to 130 new franchise stores in 2015...Microsoft will open its Manhattan flagship this month on Fifth Avenue and 53rd Street. The five-floor, 22,269 s/f store will showcase its latest technology...The Macerich Co. has formed joint ventures to which the company will contribute interests in 8 regionals malls totaling roughly $2.3 billion. GIC will have a 40% interest in five of the assets, and Heitman will have a 49% interest in the remaining 3 assets. The transactions are expected to close in phases starting in October 2015 and concluding in the first quarter of 2016. The assets are in Arizona, California, Texas, Oregon, Colorado, and New Jersey...Fallas will open its newest location this month in NC, the third in that state. Fallas is part of National Stores Inc., a family-owned discount retailer that operates more than 300 retail stores nationwide under the names Fallas, Fallas Discount, Fallas Paredes, Factory 2-U, Conway, CW Price and FALAS in Puerto Rico. The company is aggressively expanding its footprint into the eastern US. It is in the process of opening 8 new stores in the Carolinas, recently opened 5 stores in Atlanta, and is opening another 9 in Florida...In the next 12 months, Costco will build 32 new stores, 13 outside the US, including its first store in France and a second in Spain. Costco expects to have more than 100 stores in Canada in the next several years, up from over 80 currently...Toys "R" Us will open a three-story, 55,000 s/f store at the American Dream project under construction in the Meadowlands, NJ. American Dream has begun announcing confirmed tenants for the project, including anchors Saks Fifth Avenue and Lord & Taylor. The project also will have more than 300 retail stores, 21 restaurants, 45 specialty food tenants, 20 food court tenants, an amusement park, a water park, an indoor ski slope, a 300-foot-tall Ferris wheel and other entertainment properties...GrandVision NV, the largest global operator in optical retail, will enter the US market via the acquisition of the For Eyes Optical chain. For Eyes Optical operates 116 stores. GrandVision has over 5,800 stores in 43 countries...CVS Health is opening Hearing Centers in 7 CVS/pharmacy stores in the Dallas and Cleveland markets and will be providing optical services at CVS/pharmacy in 5 store locations around the Baltimore/Washington, D.C. market...Tanger Factory Outlet Centers Inc. has closed on the sale of 5 outlet centers to an undisclosed buyer for a total cash sales price of $150.7 million in two separate transactions. The properties are located in Barstow, CA.; Kittery, ME (two properties); Tuscola, IL; and West Branch, MI. Tanger is a publicly traded REIT that operates or has an ownership interest in a portfolio of 42 outlet centers in 21 states and Canada...Sprouts Farmers Market Inc. will open 12 new locations across the US  in 2016.

Decelerating Retail News

Great Atlantic & Pacific Tea Co. is selling 11 A&P, Pathmark and Waldbaums stores in NY and PA and one A&P store in CT to Wakefern Food Corp. for $40 million, subject to higher bids at auction...A Delaware bankruptcy judge said he will give final approval to the reorganization plan of electronics retailer RadioShack, which sought bankruptcy protection in February, having struggled for years and been unable to turn a profit since 2011. The reorganization plan is centered around acquisition of more than 1,740 RadioShack stores by General Wireless, which also bought RadioShack's intellectual property, including trademarks and customer data...Dunkin' Donuts franchisee Speedway, a gas station and convenience store chain, plans to close 100 Dunkin' Donuts locations in its US stores...American Apparel has filed for bankruptcy. As part of a prearranged Chapter 11 restructuring, more than $200 million of bonds will be exchanged for stock in the reorganized company and the clothing retailer will have access to financing after its restructuring. At the end of March, American Apparel had 249 stores in 20 countries.

New England News

Free People opened its first Boston-area large-format store in Chestnut Hill Square. The 5,090 s/f store is the company’s largest store in the state since Free People opened its first retail location in The Shops at Prudential Center 10 years ago...CarMax, Inc. has new stores opening in Norwood and Danvers in December. These two stores will be the first in the Boston area, with a third scheduled to open in Westborough during summer 2016. The first CarMax in Massachusetts opened in 2011 in North Attleboro...Roche Bros.’ lease for its Sudbury Farms store in Randolph, MA, has expired and the company will close the location in January. The closing will leave Randolph with a single major supermarket, Shaw’s. Following the closing, Roche Bros. will have 18 stores, including two other Sudbury Farms locations...The third Boston-area Wahlburgers opened this month at 132 Brookline Avenue, just three blocks away from Fenway Park. The Fenway restaurant joins Wahlburgers in Hingham and Lynnfield, with another scheduled to open later this year in Terminal C at Logan Airport...City Sports filed for Chapter 11 bankruptcy and plans to shutter 8 of its 26 locations before selling or liquidating the rest. City Sports, which opened its first store on Massachusetts Avenue in Boston in 1983, has yet to announce which stores will be eliminated and when those closures will take place...Saks Fifth Avenue signed a lease for its 3rd location in Greenwich, CT adding an additional 14,000 s/f of space. The new lease is directly across from the store’s original Greenwich location....Japanese retailer Uniqlo opened its new 12,000 s/f, two-level flagship Boston store at Faneuil Hall Marketplace, the 5th in Massachusetts. Uniqlo opened its first MA stores in Natick and Chestnut Hill last year, and will open a second Boston store, on Newbury Street, in late 2016.

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

Consumers tempered purchases at retailers in September. Commerce Department figures showed a 0.1% gain. Seven of 13 major categories showed declines, led by a 3.2% plunge at service stations as fuel costs retreated.

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, improved moderately in September. The Index now stands at 103.0 (1985=100), up from 101.3 in August.

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

Purchasing Managers Index

Manufacturing expanded in September as the PMI® registered 50.2%, a decrease of 0.9 percentage point from the August reading of 51.1%, indicating growth in manufacturing for the 33rd consecutive month. The September PMI is the lowest reading since May 2013 when the PMI registered 50.1%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

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


Wednesday, September 23, 2015

Are Supermarkets About to Get Sandwiched?

The pressure seems to be coming from all sides: online groceries, non-traditional formats, home delivery, and other trends are pushing traditional supermarket chains to work a lot harder to hold on to market share - and it’s not going to get any easier.

At one time it seemed that Grocery was the one retail category that was going to avoid the internet sales onslaught. Supermarkets were supposed to be insulated from the proliferation of online retailers that were diverting sales from other brick-and-mortar retailers.

After all, the concept of groceries arriving by mail seemed preposterous. When we consumers shop for food, we’re searching for instant gratification. When the cupboard is bare, we simply jump in car and hit the market, right? What happened to music and books and electronics could never happen to the grocery business - or so one thought.

But the buzz lately suggests things are about to change. In just the past month, several announcements have been made indicating that a number of formidable companies are getting into the grocery delivery business.

Would you order your weekly groceries online if they’d show up at your door a couple of hours later for a $3.99 delivery charge? Or would you rather fight the traffic and then line up at the supermarket check-out? Well that’s the choice Target is offering shoppers in select markets right now via Instacart.com.

And it’s no shock that Amazon should show up wanting a share of food dollars. It’s reported that the mega-online retailer is constructing an 11,700 square foot test location in Sunnyvale, California that will allow grocery shoppers to order online and pick up at the new facility’s drive-thru lane. After a review of the pilot program, Amazon intends on opening additional locations in Silicon Valley.

Later this year tech giant Google will be testing fresh food and grocery delivery in San Francisco and another U.S. city, going head to head with Amazon and Instacart. This will be in conjunction with Google Express, a current service that already delivers merchandise, including dry food, to online consumers.

A recent survey conducted by 72 Point Inc. indicates that more grocery shoppers are increasing their online shopping. Over the past year, online shoppers have increased grocery spending by 29%, and they now do approximately 19% of all grocery shopping online. Those are telling statistics; momentum is building in online food shopping.

However, the data indicates reluctance toward purchasing fresh produce online, with 23% of online grocery shoppers avoiding fresh produce purchases all together. A majority of those that have purchased produce online in the past year indicated that they’ve been disappointed at least once in quality and freshness. It’s apparent that online grocery shopping needs some fine-tuning as it moves forward.

Unlike some sectors of brick-and-mortar retail that have been severely impacted by internet sales, it’s evident that grocery is still a different breed, and should remain one of the most viable components among physical stores. At the same time, online grocery shopping is gaining in popularity. For an aging population, and for urban dwellers who opt for life in the city without a car, online grocery shopping certainly offers an attractive alternative to traditional supermarket grocery shopping.

For a long time, the small corner market was about as competitive as it got for the traditional supermarkets. But in the past 25 years, the explosion of wholesale clubs, dollar stores, and supercenters, and now the intrusion of lower-price foreign chains such as Aldi and Lidl, have all been fighting for “at home” food expenditures, resulting in the continual erosion of market share from the guys we knew best. Now, with Instacart and other initiatives, it appears that things are about to get even tougher for the traditional supermarket.

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

The 2015 KeyPoint Reports for Eastern Massachusetts/Greater Boston and Southern New Hampshire are available now at KeyPointPartners.com. Click on Research Reports. 
The KeyPoint Report for Greater Hartford, CT will be available within the next few weeks.



Company News

New Leasing Business: Bristol Farms Plaza, a 150,000 s/f center in Bristol, CT anchored by Big Lots and a new Hobby Lobby; Charter Oak Mall, a 225,400 s/f center in East Hartford, CT; and Dexter Place, a 16,000 s/f in Central Falls, RI anchored by Dollar Tree. All have multiple leasing opportunities, and all are being handled by VP of Leasing Don Mace. New Employee: Eddie Miller joined the One Loudoun office in Ashburn, VA as Site Engineer. Eddie has extensive facilities management experience, most recently at Stoladi Property Group in Alexandria, VA.

National News

August retail sales rose by 0.2%, according to the US Commerce department. Among retailers reporting monthly comp-store sales, L Brands was up 6%, Gap was down 2.0%, Rite Aid was up 1.6%, and Costco was up 1%. See our sales reports below...Macy's will offer same-day delivery in 8 new cities, including Boston. Macy's is teaming with Deliv to offer the service beginning this month in an effort to compete with e-commerce retailers like Amazon. The company tested out same-day delivery in 8 markets last fall.

Accelerating News

Arooga's Grille House & Sports Bar is headed to Florida and Georgia with 50 restaurants, which will more than double Arooga's national footprint. Arooga's currently has 10 corporate locations in Pennsylvania, and it opened its first franchise location in Uncasville, CT, adjacent to the Mohegan Sun Resort...Stein Mart plans to open 9 new stores in the third quarter, as well as 6 new stores in spring 2016 and at least 6 new stores in fall 2016...Kirkland’s plans approximately 40 new stores, and 10-15 store closings, for the fiscal year. Kirkland's has over 320 US stores in 35 states...Online footwear retailer Sole Society on opened its first brick-and-mortar store in Santa Monica. CA...Macy’s unveiled its new off-price banner, Macy’s Backstage, with the opening of 3 NYC-area stores, with locations in Brooklyn, Queens and Long Island. Three additional area stores are slated to open by year end...Online retailer ThinkGeek is partnering with its new owner, GameStop, to open a new store format focused entirely on collectibles. The first ThinkGeek store will open in the Florida Mall in Orlando in September, and additional stores are planned...Dick’s plans to open 5 new stores in September, 2 in Alabama, 2 in Ohio, and 1 in Arizona. Dick’s will have 630 stores across the US with these opening...Ulta expects to open 100 stores in 2015...Burlington Stores Inc. plans to open a net of 25 new stores by the end of the fiscal year, including 22 store openings and 1 closing in the third quarter....Arhaus plans 13 new stores by the end of 2016. The company has 57 stores across 23 states nationwide...Five Below Inc. plans to open a total of 70 net new stores during fiscal 2015, including 16 net new stores in the third quarter. If the company hits its growth target, by year end it will have 436 stores, with a longer term plan for 2,000 locations...Boston-based fitness retailer City Sports is set to open a new location in Virginia this month. City Sports Mosaic will be the 26th City Sports location and the first in the state. City Sports already has stores in Washington, DC and Maryland...Best Buy will set up outlets in 10 Macy's stores in November on a test basis. The Best Buy shops will occupy about 300 s/f and will be staffed by Best Buy employees...Dave & Buster's revised its FY15 store count guidance upwards to add 8 to 9 new stores, up from a projected 7 to 8 new stores, with a goal of 200 stores across North America....Robert Redford’s Sundance Catalog is expanding its retail footprint. The company will open a store in Edina, Minnesota this month, one of 2 locations to open east of the Rocky Mountains in 2015. The company plans to continue its growth over the next several years with additional stores targeted across various locations nationwide. The company currently has 3 locations...Taco Bell  is opening its new Taco Bell Cantina urban concept in Chicago and San Francisco this month. The concept will serve alcohol and attempt to capture Millennials in downtown areas. The move is part of the 6,000-unit chain’s commitment made in 2012 to add 2,000 units to its portfolio by 2022. The new urban locations are slightly smaller and don’t have a drive-thru...Buona, The Original Italian Beef, which has 16 stores in the Chicago area, to sell its first franchises at the end of 2016. There are also plans to open 4-5 company-owned stores each year for the next five years...Verizon Wireless is rolling out Verizon Experience stores at 250 Best Buys around the country. Rival AT&T, meanwhile, is opening its own dedicated stores at 250 Best Buy locations, many of them the same ones where Verizon is setting up shop.Verizon has already begun rolling out the Verizon Experience stores at Best Buy and said it plans to have nearly 100 locations by the end of the month. The company expects that number to increase to 250 locations by the end of 2015.

Decelerating News

The Great Atlantic & Pacific Tea Co. (A&P) is seeking to dispose of its remaining 153 locations, in addition to its original plans to close 25 stores and sell 118. The properties consist of Food Emporium locations in Manhattan; A&Ps in Connecticut, New York and New Jersey; Food Basics in New Jersey, New York and Pennsylvania; Pathmarks in Delaware, New Jersey, New York and Pennsylvania; Superfresh locations in Delaware, Maryland and Pennsylvania; Waldbaum's stores in New York; and Best Cellars/Wines & Spirits in Connecticut, New Jersey and New York...Stage Stores plans to close 90 stores. Houston-based Stage Stores runs 850 department stores in 40 states under the Bealls, Goody’s, Palais Royal, Peebles and Stage names...Hudson Trail Outfitters Ltd., one of Washington’s oldest retailers, is closing its remaining 4 stores, blaming the changing retail landscape...Sears Hometown & Outlet Stores Inc. plans to close 40-50 underperforming stores by the end of the year, on top of 63 underperforming locations closed in the first half of 2015...Surf and skateboarding shop Quiksilver, which operates some 700 retail stores, is seeking bankruptcy protection...Haggen, the Washington-based grocer which not long ago acquired 146 stores being divested by Albertsons, is seeking bankruptcy protection...Macy's plans to shut as many as 40 more stores in early 2016, picking up the pace of its closings. The chain has yet to identify the stores it will shutter. Over the past 5 years combined, the company has closed 52 stores and opened 12 new ones. It also plans to open 6 new Macy's Backstage locations to sell discounted merchandise, sometimes in the locations of stores it closed.

New England News

Denali opened its newest store at Westfield Trumbull, CT. Denali, along with the Trailblazer stores, forms a family of independent outdoor retail destinations in southern CT and RI. Denali’s addition to Westfield Trumbull marks Trailblazer and Denali’s 6th location, with stores in Branford, Uncasville, 2 locations in New Haven, and in Wakefield, RI...Popular Irish pub James’s Gate in Jamaica Plain has closed this month after 19 years...Ahold USA, parent of Stop & Shop, opened Bfresh, a small-format store, this month in a former Staples on Harvard St. in Allston. The 10,000 s/f store is a pilot for Ahold, although no additional stores are planned at this time...H&M is bringing its edgier, more modern and higher-end COS clothing chain to Boston’s Back Bay. A 2,960 s/f COS store will open this month on Newbury St., with two levels of women’s and men’s fashions, the third US store for the brand...The Dedham Institution for Savings has asked regulators to allow it to establish a branch in South Boston at a former Bank of America location, a move that would give the 184-year-old institution its first branch in the city. Currently the bank has 3 branches in Dedham and 5 in the city's southern and western suburbs. The bank is working with architects and contractors to design the space, and hopes to open in the next 6- 12 months..Athletic-wear firm Yogasmoga plans to open its first Boston-area retail store at the Prudential Center by December. The brand will also open stores in Westchester, NY; Short Hills, NJ; and Corte Madera and Walnut Creek, CA. The brand will operate 12 stores by year-end and projects opening 25 stores in 2016...Forever 21 has leased about 20,000 s/f across three floors at 449 Washington St. in Boston’s Downtown Crossing. Forever 21 operates more than 730 stores worldwide.

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

Retail sales rose 0.2% last month, according to the Commerce Department. Excluding automobiles, gasoline, building materials and food services, sales increased 0.4%. Strong gains in auto sales were offset by a drop in the value of sales at service stations due to declining gasoline prices.

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 declined in July, rebounded in August. The Index now stands at 101.5 (1985=100), up from 91.0 in July. The Present Situation Index increased from 104.0 last month to 115.1 in August, while the Expectations Index improved to 92.5 from 82.3 in July.

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

Purchasing Managers Index

Manufacturing expanded in August as the PMI® registered 51.1%, a decrease of 1.6 percentage points from the July reading of 52.7%, indicating growth in manufacturing for the 32nd consecutive month. The August PMI reading is the lowest since May 2013 when the PMI registered 50.1%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

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

Wednesday, August 19, 2015

Greater Hartford, CT Retail Report Preview

With the releases of The KeyPoint Reports on Eastern Massachusetts /Greater Boston and Southern New Hampshire behind us, it’s time to move on to 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 2015 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 only 17,000 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 any substantial new retail space can be added to the region, and the region took considerable strides this year toward accomplishing just that. Total occupancy increased by more than 350,000 square feet in 2015, lowering the vacancy rate in Greater Hartford from 11.0% in 2014 to 10.1% this year.

Size Classifications: Although the market experienced a substantial decline in vacancy last year, it was one size classification in particular that deserves most of the credit. The 25,000-49,999 square foot bracket dropped from 12.2% all the way down to 6.7%, one of the largest declines ever reported. Grossman’s Bargain Outlet now occupies part of a vacant Big Y in East Hartford, Harbor Freight replaced a portion of a former A&P space in Berlin, and Goodwill took part of a space previously occupied by TJ Maxx in Avon, all of which contributed to the improvement in this size classification. In addition, Edge Fitness will be opening in the former Border’s space in Manchester and Hartford Health Care will replace a vacant A&P in Vernon, both expected to open this fall. The 50,000-99,999 square foot classification also showed significant improvement, lowering its vacancy rate from 7.9% to 6.8%. The primary contributor was Ocean State Job Lot, which now occupies most of the space left behind by the A&P at Webster Square in Berlin. Ocean State closed its smaller store in the same shopping center. The only category to end the year with higher vacancy was the 5,000-9,999 square foot store segment, with some of the fallout coming from closings of Pier 1 in Manchester, Salvation Army in Vernon, Family Dollar in New Britain, and True Value Hardware in Avon.

Town Rankings: The top ten among Greater Hartford towns, based on square feet of retail space supply, remained the same as in 2014, with only one shift in the rankings: Farmington inched ahead of East Hartford into sixth place this year. It should be no surprise that the top three towns are Manchester, West Hartford, and Enfield, all regional retail hubs serving Greater Hartford. Manchester dominates the region with 5.4 million square feet of retail space; West Hartford comes in a distant second with 2.9 million square feet. However, it should be noted that the 1.3 million square foot Westfarms regional mall, which straddles the West Hartford/Farmington line, has a Farmington address but is very much rooted in the West Hartford retail hub. Consequently, West Hartford is effectively a 4.0 million square foot market. In terms of vacancy rates, lowest vacancy was found in West Hartford, Rocky Hill, and Newington, all under 5.0%. Last year only Rocky Hill was under that threshold. Farmington and Plainville complete the top five. Among towns with the highest vacancy rates, three towns remain above the 20% level, including East Windsor, East Hartford, and New Britain. Berlin was also above 20% last year but improved to 17.1%, but is still ranked fourth, followed by South Windsor.

Retailer Activity: Fallas, a family-owned clothing retailer, acquired Conway Stores last year and as a result now operates the former CW Price store in Wethersfield. This 39,280 square foot unit represents the most retail space added to the region by any retailer. Dave & Buster’s opened last year in Manchester and is ranked second. Close behind is Grossman’s Bargain Outlet in East Hartford, which now shares a former Big Y unit with Cardio Express. With respect to store additions, there was not much to get excited about in Greater Hartford. The leader in the region was Subway, opening only four new locations. A couple of retailers added two stores, including Menchie’s Yogurt and AT&T Wireless.

Conversely, the aforementioned Fallas acquisition resulted in CW Price leading all retailers in space contraction. Mill Stores followed, closing its only store in the region in Manchester. Digiplex Cinemas sold its one unit to Carmike, ending the year in third place. Only three retailers closed two or more stores in the region. Radio Shack led the way with six units, followed by Verizon Wireless with three stores and OneMain Financial with two branches.

The KeyPoint Report examines the retail real estate marketplace for Greater Hartford, Connecticut, with a focus on changes between August 2014 and July 2015. 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. 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.

KeyPoint Company News

New Leasing Business: 38 Shops at 5 Way, Plymouth, MA, and 18,044 s/f space adjacent to The Grove at Plymouth. VP of Leasing Rob Grady and Sr. Associate Michael Branton are handling the assignment. New Employee: Gaudy Hernandez has joined the Boston Office as an Assistant Property Manager. Gaudy has property management experience at SHP Management Co. in Boston.

National Retail News

Retail sales rose 0.6% in July month, according to the US Commerce Department. Excluding sales of automobiles, sales were up 0.4%. Eleven of 13 major categories showed increases. One of the best performing categories was non-store retailers, which includes online merchants, where sales rose 1.5%. Sales rose 0.9% at sporting goods stores; 0.8% at home and furniture stores; 0.7% at building materials stores; and 0.4% at apparel stores. At restaurants, sales were up 0.7%. Department stores and general-merchandise retailers did not fare so well, both registering a 0.5% decline. Electronics and appliance sales fell 1.2%. The Commerce Department also revised June's 0.3% decline in retail sales to an unchanged reading. Among retailers reporting monthly comp-store sales, L Brands was up 3%, Gap was down 3.0%, Rite Aid was up 2.4%, and Costco was up 3%. See our sales reports below...Macy's will offer same-day delivery in 8 new cities, including Boston. Macy's is teaming with Deliv to offer the service beginning this month in an effort to compete with e-commerce retailers like Amazon. The company tested out same-day delivery in 8 markets last fall.

Accelerating Retail News

Cabela’s plans to open 4 stores in the third quarter of fiscal 2015 and 2 stores in the fourth quarter. In addition, Cabela’s expects construction on an 82,000 s/f store in Summerville, South Carolina to begin in 2015, and anticipates a fall 2016 opening....The Limited Too brand is about to be revived. Bluestar Alliance has purchased the trademarks for the tween girl retail brand from Sun Capital Partners, the private-equity firm that owns The Limited. Limited Too was once part of L Brands, then was spun out under the name Tween Brands. In 2008, Tween Brands dumped the Limited Too name and rebranded the stores with its Justice name. The new brand will be sold in a mixed-distribution model, in department stores, in shops-within-shops, in stand-alone retail locations and online...Bluemercury Inc. is getting ready to open three new Washington-area stores this fall, part of a planned national expansion. Bluemercury will also open a location in the Brentwood section of Los Angeles this month, bringing the number of stores to 67, with a planned 79 by the end of the year...Whole Foods Market will debut its new value-driven format, 365 by Whole Foods Market, in the second half of next year, with the first store opening Los Angles. It plans to open up to five 365 stores (all in the second half of next year), with the expectation of doubling the number of openings in 2017. Stores will average about 30,000 s/f. Whole Foods currently has 424 stores. It expects to cross the 500-store mark in fiscal 2017. Longer term, the company sees demand for more than 1,200 Whole Foods Market stores in the US...Rita’s Italian Ice will enter the convenience and gas channel nationwide with area development agreements awarded to M&M ARC Inc. for the West and to Ice & Go LLC for the Midwest, South, and Northeast. Together, the two agreements call for 60 units by 2025. Rita’s has been aggressively expanding across the US...H&M is expanding its higher-end brand, COS (Collection of Style). The retailer plans to open 4 stores in the US in 2015. COS is also expanding into Canada, with stores set to open in Montreal and Toronto. COS entered the US last year with 2 locations (in Los Angeles and New York City).  COS has 125 stores in 26 countries...Lowe’s will open a 30,000 s/f store on the corner of Broadway and 68th Street. The location is a quarter the size of its suburban stores and is the company’s first Manhattan store...Domino's Pizza opened its 12,000th store in the world this month, in Oklahoma City...L.L.Bean is opening its first Kansas store in November of 2015, its 26th full retail store outside of Maine...Lumber Liquidators, struggling with possible legal action stemming from the sale of Chinese hardwood flooring that allegedly contained excessive levels of formaldehyde, still anticipates opening 20- 25 new stores in the expanded showroom format, and remodeling 10-15 existing stores in the expanded showroom format, by the end of the fiscal year...Chick-fil-A will open its largest location to date in in New York City, a three-story, 5,000 s/f restaurant. The new Chick-fil-A will be one of the few quick-service restaurants in New York City built to LEED standards with water and energy efficiency features, air quality control and waste diversion efforts, among other initiatives...Aldi plans to open more than 600 stores and create 10,000 new jobs by the end of 2018. The grocery chain is accelerating expansion, with plans to open 130 new locations a year, up from 80, and a  goal of nearly 2,000 US stores...DSW is opening 22 stores, including six locations in new markets, nationwide from August to November. DSW operates 449 stores in 42 states. ..Stein Mart will open 9 stores this fall, and at least 12 new locations in 2016. Stein Mart operates 269 stores...Party City will open 30 new stores for 2015 and complete 50-60 remodels and relocations...Dick’s Sporting Goods Inc. plans to open 44 new Dick’s Sporting Goods stores and 9 new Field & Stream stores, as well as relocate five Dick’s Sporting Goods stores and one Golf Galaxy store, during fiscal 2015...Japanese fast-casual dining chain Jinya Ramen Bar expects to add an additional nine US franchise locations in key cities. Currently, there are 14 locations throughout Japan, the US, Canada and Indonesia.

Decelerating Retail News

Fresh & Easy will close 14 stores in southern CA and other areas as it continues to downsize. This follows the closing of 55 Fresh & Easy stores in 3 states earlier in 2015...Barnes & Noble Inc. has completed the separation of its retail store and college businesses. Barnes & Noble Education Inc. is now an independent public company and the parent of Barnes & Noble College...Advance Auto will be closing 50 stores before the end of the year in markets across the US. The company operates 5,369 stores across the US and Canada, of which about 1,060 still operate under the Carquest brand name.

New England Retail News

Hannaford’s first new small store concept will open this month in North Berwick, Maine. The 20,000 s/f store is less than half the size of a typical Hannaford...Japanese clothing retailer Uniqlo will open a new, permanent store at Boston’s Faneuil Hall Marketplace this October. The 12,000 s/f store will span two levels. The retailer has been operating a pop-up store at Faneuil Hall since last year. ..Bed Bath & Beyond, Michaels, and DSW have all agreed to sign leases for between 15,000 and 20,000 s/f spaces at the new Guilford (CT) Commons, scheduled to open this fall. They join Fresh Market, which had already been announced as an anchor...Smoothie King plans to expand in Greater Boston by opening up to 53 locations in the next six years. Smoothie King has an existing location on Newbury St., but would like to expand in Boston, Brookline, Cambridge, Somerville, Medford, Waltham, Newton and Brighton.. Smoothie King was founded in 1973 and has grown to 735 locations in 33 states and worldwide. Smoothie King is on pace to open up to 100 locations this year...Simon announced plans for a major renovation to the retail portion of Boston’s Copley Place to begin in September and include interior and exterior enhancements. Simon will add a number of luxury retailers to the property. The majority of the project will be completed by the summer of 2016 with Copley Place remaining open throughout the renovation..Redstone American Grill opened in the 3rd Avenue retail market district in Burlington, MA, the eighth in the chain and the first in Massachusetts...H&M will open a new location at the Natick Mall in the fall. The company opened 379 stores in 2014 and intends to open 400 more this year. It has 11 MA stores.

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

Retail sales rose 0.6% in July month, according to the US Commerce Department. Excluding sales of automobiles, sales were up 0.4%. Eleven of 13 major categories showed increases. The Commerce Department also revised June's 0.3% decline in retail sales to an unchanged reading.

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, declined in July. The Index now stands at 90.9 (1985=100), down from 99.8 in June. The Present Situation Index decreased moderately from 110.3 last month to 107.4 in July, while the Expectations Index declined sharply to 79.9 from 92.8 in June.

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

Purchasing Managers Index

Manufacturing expanded in July as the PMI® registered 52.7 percent, a decrease of 0.8 percentage point below the June reading of 53.5 percent, indicating growth in manufacturing for the 31st 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

Wednesday, July 22, 2015

10-Year Eastern Massachusetts Restaurant Report

In the past ten years a number of restaurant chains have come and gone but the absolute number of restaurants has trended up. In 2005, KeyPoint data showed that 6,179 restaurants operated within Eastern Massachusetts. By 2010, even after withstanding the Great Recession, that number climbed to 6,391 units.

In the past five years the restaurant count in the region has rocketed to 6,946 locations, more than doubling the pace of new openings from the first half of the decade.

Much of the growth in the number of restaurants resulted from the development of fast casual chains, in addition to the phenomenal growth of Subway, which passed McDonald’s by the end of 2010 to become the largest restaurant chain in the world. Its current global store count exceeds 42,000 locations, an average of two store openings per day since 1965. In Eastern Massachusetts, Subway has added 71 locations in the ten years since 2005.

While Subway is in a class all by itself, in the next tier are fast casual chains Chipotle, Panera Bread, and Five Guys, which combined for more than 100 new locations since 2005. Neither Chipotle nor Five Guys operated stores in the region until 2007 and 2008, respectively.
Other chains showing notable growth since 2005 include Boloco, Qdoba, and b. good.  Figure 1, below, illustrates the change in store counts during the past ten years among restaurant chains with 10 or more locations in the region:


Friendly’s, D’Angelo, McDonald’s and KFC lead all restaurant chains in the region for the most closings between 2005 and 2010 in Eastern Massachusetts. Other chains losing significant market share include Applebee’s, Boston Market, Burger King and Uno. Although operational problems caused some of the fallout at these chains, the more salient issue may lie in the fact that they were not quick to adapt to consumer trends toward better eating habits and healthier lifestyles.

Looking down the road, without significant menu changes toward healthier fare, we can expect continued erosion of market share and store closings in the fast food segment.

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

Company News

New Business: Leasing: Putnam Parkade, a 57,257 s/f center on Providence Pike in Putnam, CT. VP of Leasing Don Mace is handling the assignment...New Employees: Tony Russo joined the Burlington, MA office as Systems Administrator. Tony has over 20 years IT experience, including 9 years as IT Director at New England College of Optometry in Boston. Greg Kuksin joined the Burlington, MA office as a Property Manager. Greg had been most recently at Jamestown Properties.

National Industry News

Retail sales unexpectedly dropped in June, Commerce Department figures showed. Among retailers reporting monthly comp-store sales, L Brands was up 5%, Gap was down 1.0%, Rite Aid was up 2.1%, and Costco was up 2%. See our sales report on Page 4... Dollar Tree has completed its acquisition of Family Dollar Stores, opening the doors to a $19 billion company with more than 13,000 stores....Albertsons Cos. filed for an initial public offering. The number of shares set to hit the trading floor has not been disclosed. The IPO will bring an end to its ownership by the investor group led by Cerberus Capital Management, which purchased Albertsons and other grocery chains from Supervalu for approximately $3.3 billion in early 2013. Albertsons plans to use the IPO monies to pay down debt and fund other corporate initiatives. It also plans to open 8 new and replacement stores in 2015 and remodel a total of 115 existing stores across most of its operating divisions.

Accelerating Industry News

Ahold and Delhaize intend to combine their businesses. The combined company will be known as Ahold Delhaize with a base of more than 6,500 stores. In the US, Ahold operates the Stop & Shop, Giant, and Giant/Martin’s banners primarily in the Northeast, as well as online shopping service Peapod. Delhaize operates the Food Lion and Hannaford banners in the Southeast and Northeast...Johnny Rockets plans to open 25 new domestic stores during 2015 and 100 new domestic stores by 2017 via franchise expansion. Johnny Rockets operates more than 330 restaurants across the globe...Pirch plans to roll out three locations a year. In 2016, it will open a three-level, 32,000 s/f store in Manhattan. Pirch has 8 US locations. Pirch lets shoppers test the products in its stores, and greets them with fresh coffee and complimentary food while they browse...Nordstrom plans to open a Nordstrom Rack at Woodmore Towne Center in Glenarden, MD in spring 2017, the fifth Nordstrom Rack in Maryland...Apple opened a store on July 11, in the Queens Center mall in Queens, NYC, giving it a total of 8 locations in the city...Furniture and appliance retailer Conn’s opened 4 new stores this month in Texas, North Carolina and Tennessee. Conn’s has more than 90 stores in 12 states. The latest expansion is part of larger strategy of opening 15-18 stores through the end of its fiscal year...Indoor cycling franchise CycleBar inked franchise deals  for more than 100 studios across the country...Marbles: The Brain Store opened a new store in Washington D.C., its second location in the area and its third to open this summer, with new stores debuting in Times Square and Myrtle Beach, South Carolina. The games retailer plans to open over 50 additional locations in the next three years. Currently, it operates 31 stores...Dunkin’ Donuts has signed multi-unit store development agreements with seven franchise groups to develop 51 new restaurants in Virginia and West Virginia during the next several years...J. Crew opened its first J. Crew Mercantile store in Dallas later this month, and plans to open more nationwide. The retailer developed the lower-priced Mercantile brand to house products that are specifically designed and manufactured for its outlet stores...The world’s second smallest Target store, a 16,000 s/f TargetExpress, opened in Highland Park, St. Paul, MN this month...Ollie’s Bargain Outlet raised $143 million in an initial public stock offering that positions the company for expansion of its 181 unit chain. The company has identified 950 suitable store locations and the company will maintain a measured pace of expansion. Growth this year will be driven by the addition of 25 new stores, an increase from 22 units opened in 2014 and 23 units opened in 2013. Between fiscal year 2010 and fiscal year 2014, Ollie’s grew its store base from 96 stores to 176 stores...Starbucks plans to open stores in 15 diverse, low-to-median-income urban communities across the US by 2018, starting with at least 5 stores in 2016. The plans include a store near the heart of last summer’s racial unrest in Ferguson, MI....Ross Stores is opening 19 Ross Dress for Less and 8 dd's Discounts stores across 15 different states in July, part of the off-price retailer's plans to add approximately 90 stores during 2015, including 70 Ross and 20 dd's Discounts. Ultimately, the retailer believes Ross Dress for Less can grow to 2,000 locations and dd's Discounts can become a chain of 500 stores...fast-casual brand MAD Greens began its national expansion last month with its first openings outside of its home state of Colorado in Tempe and Scottsdale, Arizona. The chain currently has 15 locations and will finish 2015 with 21 locations...C. Wonder, which shuttered all its stores and filed Chapter 11 early this year, has entered into a definitive agreement for Xcel Brands to acquire the C. Wonder brand from Burch Acquisition LLC. The deal gives Xcel the rights to C. Wonder trademarks, related designs and other intellectual property rights. Xcel owns the Isaac Mizrahi, Judith Ripka, H by Halston and H Halston brands and designs and manages the Liz Claiborne New York brand.