While it’s true that airports aren’t immune to recession, some airport retailers are managing for the most part to fly above the turmoil and land reasonable operating results.
Hudson Group, the East Rutherford, N.J.-based operator of the transportation retail national newsstand brand and concept Hudson News, generated $666 million in 2007 from about 50,000 sq. ft. of selling space. 2008 sales, says the company, are expected to keep pace with the prior-year results despite the economic downturn.
In late 2008, Hudson merged with Swiss duty-free giant Dufry AG. “With Dufry, our joint footprint is 1,000-plus stores in 137 airports across 41 countries,” said Laura Samuels, VP corporate communications for Hudson. “Dufry has no newsstand brand, so the game plan is a global rollout of the Hudson News brand, which will be exciting and challenging for us.”
Perhaps most challenging is the airport real estate process, which leaves little, if any, control in the hands of the tenant.
“It is the airport’s call as to which spaces they are putting into the Request For Proposal—how many square feet, frontage, adjacencies,” explained Samuels. The only real control Hudson has is to decide whether or not to place a bid on available space.
“If we really do not like the terms and don’t feel we could make money in a given set of parameters, we usually simply decline to participate and hope for better things later,” she said.
The bid process is all over the place. Samuels said she has seen some RFPs issued in one year and not awarded until a year later—or not at all. “Normally, though, we have about two to three months to reply to an RFP, and then the airport takes another couple of months to pick a winner and have their selection approved by the appropriate political body, such as the county commission, the city department of aviation or the airline.”
Lease terms aren’t that different from those of traditional retailers. Generally, Samuels said, leases are seven years in length, but some can be as long as 10 years, or five or seven years with one- or two-year options.
Headquarters: East Rutherford, N.J.2007 revenues: $666 millionLocations: 540 stores in 70 airports and bus/train terminals in the United States and Canada
While traditional retailers measure site desirability by trade area density, demographics and traffic statistics, airport retailers evaluate enplanements—the number of passengers boarding an airplane.
According to the Department of Transportation’s Bureau of Transportation Statistics, the top U.S. airline ranked by 2008 scheduled enplanements was Southwest, followed by American, Delta and United. The top airport was Atlanta’s Hartsfield, followed by Chicago O’Hare, Dallas and Denver.
Those statistics rank high among the lease deal-breakers for Hudson Group. “When we decide not to go after a piece of business, it is seldom, if ever, because of lease terms,” Samuels said. “It is because we may believe that the location is a poor one within the terminal, or that the concourse is over-retailed, or enplanements are too low to ensure a reasonable return on investment.”
Hudson’s top-performing airports are some of the busiest—LAX, Las Vegas, JFK, Seattle, Chicago O’Hare—and success is tracked not on a store-by-store basis, but by program.
“The program in Chicago O’Hare, for example, involves 26 newsstands located throughout the terminals for the convenience of travelers.”
OfficeMax Q1 profit drops 79%
Naperville, Ill. OfficeMax announced its first quarter 2009 results on Thursday, which included a steep profit decline of 79%, from $62.4 million in first quarter 2008 to $13.1 million in first quarter 2009.
Total sales decreased 17% in the first quarter to $1.9 billion, compared with first quarter 2008.
“Although our financial results declined in the first quarter vs. the prior-year period, we continued to make improvements to our business and to contain costs,” Sam Duncan, chairman and CEO of OfficeMax, said. “We improved retail segment operating expenses as a percentage of sales compared to the first quarter of 2008 as a result of reorganizing our management, more efficient execution, and tighter cost controls.”
OfficeMax’s same-store sales decreased 12.7%, and sales declined across all major product categories primarily due to weaker small-business and consumer spending.
OfficeMax ended first quarter 2009 with a total of 1,020 retail stores, consisting of 939 retail stores in the United States and 81 retail stores in Mexico. During first quarter 2009, OfficeMax opened six retail stores in the United States and closed two stores in Mexico and six in the United States.
For the full year 2009, OfficeMax said it expects to open as many as 12 retail stores, and shutter between 15 and 25 retail stores.
Big Lots tries something new in Columbus
COLUMBUS, Ohio Big Lots has moved in a different direction with the opening of a store in an affluent area of Columbus, Ohio.
Dow Jones reported that the store now occupying a former Linens ‘N Things offers similar merchandise to othe Big Lots stores, but is differentiated by better in-store presentations and wider aisles.
“We’re offering a higher standard of presentation here,” said Tim Johnson, VP strategic planning, in an interview with Dow Jones. “We understand that this is a different type of customer that wants to be communicated with differently.”
According to Dow Jones, Big Lots is looking to change its image as a bargain-basement, rummage-sale store, to something a little more sophisticated.