The Apple of Landlords’ Eyes
My husband loves Apple. In fact, I cannot remember one single trip to Mall of Louisiana (Baton Rouge) that hasn’t included a stop-in at the Apple store. There, he plays with the gadgets — iPhones, iPads, MacBooks, iMacs, iPods — and wanders the store, as content to browse the high-tech aisles as I am to shop the designer shoe department at Dillard’s.
And when he points out that I already have more than 50 pairs of designer shoes in my closet, I am quick to remind him that he owns most of Apple’s products as well. That doesn’t make looking any less fun.
Mall owners are rapidly realizing that Apple is pulling in as much traffic, or more, than department store anchors. In fact, a recent article in Wall Street Journal went as far as to say that Apple is “challenging the dominance of department stores,” expanding its presence in malls around the country and, say some, likely to start asking landlords to strike the kinds of rent deals currently reserved for anchor status.
When you look at per-sq.-ft. sales, Apple is indeed challenging the department store anchors. Apple generated $34.1 million in sales per retail store in its most recent annual reportings. By comparison, Macy’s per-store average was $29 million last year and J.C. Penney’s was $16.1 million. Think of the size difference between Apple and these two anchor giants!
But, while Macy’s and Penney, along with their department store peers, pay peanuts per sq. ft. as part of an accepted, and expected, landlord practice of securing that all-important mall anchor tenant, Apple — according to ISI Group estimates — pays $50 to $80 a sq. ft. in annual retail rent.
But, counter other experts, the tech retailer is making more real estate inroads than many might think.
“From day one, Apple has been incredibly savvy with their lease terms,” Mitchel S. Friedman, senior VP of NYC-based RCS Real Estate Advisors, told me. “They’re actually getting a better deal than the department stores in some cases. With most leases, the retailer pays a base rent plus a percentage of sales above an agreed-upon amount. Apple doesn’t give landlords a percentage of their sales. For example, if Apple is paying $100 per square foot for a 5,000-sq.-ft. store, their rent is $500,000. If their average sales are $34 million per store, that $500,000 is only 1.5% of their sales. Most department stores are paying, on average, 3%-4% of their sales.
“I heard that Apple is actually looking to increase their store size and if that happens, they will continue to get good deals because landlords will likely be willing to negotiate below market rents for the traffic Apple can bring in,” said Friedman.
In other words, the phenomenon that is Apple still has more fruits to enjoy ahead.
Dollar General optimizes pricing services with DemandTec
SAN MATEO, Calif. — DemandTec announced that Dollar General will use DemandTec’s markdown optimization, everyday price optimization, and everyday price management software services. According to DemandTec, these three services are designed to enable retailersto optimize and strategically manage pricing for the entire store, including new items, regular retails, promoted items, and clearance items.
"Using DemandTec, Dollar General will leverage the most advanced science and most comprehensive solution in the industry to optimize pricing decisions across all their stores," said Dan Fishback, President and Chief Executive Officer of DemandTec. "We have built our business on the basis of long-term partnerships with our customers and we look forward to bringing that level of service to Dollar General and supporting their strategic merchandising objectives."
Supreme Court blocks massive job discrimination suit against Wal-Mart
Washington, D.C. — In a ruling that may mean new limits on class-action suits, the Supreme Court on Monday ruled for Wal-Mart Stores in the largest sex-discrimination lawsuit in history as it put the brakes on a massive job discrimination lawsuit against the chain.
In a ruling that was not unexpected, the justices overturned a U.S. appeals court ruling that more than a million female employees nationwide could join in the lawsuit, which accused Wal-Mart of paying women less and giving them fewer promotions. The Supreme Court agreed with Wal-Mart that the class-action certification violated federal rules for such lawsuits. It accepted Wal-Mart’s main argument that the female employees in different jobs at 3,400 different stores nationwide and with different supervisors do not have enough in common to be lumped together in a single class-action lawsuit.
The justices said the lawyers arguing the case failed to point to a common corporate policy that led to gender discrimination against workers at thousands of Wal-Mart and Sam’s Club stores across the country. The court ruled unanimously on some aspects of the case and divided on others.
With billions of dollars at stake, the ruling was big victory for Wal-Mart, the nation’s largest private employer.
The case was one of the most closely watched Supreme Court business disputes in some time, in part because the justices hadn’t looked at the standards for certifying a class-action suit in more than 10 years.
The Supreme Court only decided whether the 10-year-old lawsuit can proceed to trial as a group, not the merits of the sex-discrimination allegations at the heart of the case.
Commenting on the ruling, Seyfarth Shaw LLP posted on its Workplace Class Action blog: "The new roadmap is decidedly more favorable to employers than before. Employers should be upbeat in terms of the Supreme Court’s articulation of the required showings plaintiffs must make in the future to certify an employment discrimination class action. In short, the bar has been raised."
To read the full posting, go to workplaceclassaction.com.
In a statement, Walmart said it was pleased with the decision, and noted it has had strong policies against discrimination for many years.
“The court today unanimously rejected class certification and, as the majority made clear, the plaintiffs’ claims were worlds away from showing a companywide discriminatory pay and promotion policy,” said Gisel Ruiz, executive VP, people, Walmart U.S.
Click here to read our guest analysis on the case.