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Big Builders

BY Connie Robbins Gentry

The annual Big Builders Survey represents retailers with measurable construction activity in the 2008 and 2009 calendar years. Although not intended to be an all-inclusive ranking of retail construction activity, the report highlights many of the biggest builders in select sectors: drug stores, food stores, discount stores, specialty hardlines, specialty softlines and do-it-yourself concepts.

There is no getting around the dramatic impact the economic downturn has had on retail construction: Organic growth slowed in 2008, and in 2009 it ground to a halt at many retail companies.

Flat-line growth or worse became the new norm. In fact, many retail organizations spent more capital closing stores and canceling planned store openings than expanding their portfolio’s footprint.

In October, for instance, The Home Depot announced it had closed 15 stores in the last quarter and also removed 50 planned stores from the company’s future-growth pipeline. New-store openings for the home improvement retailer plummeted from 62 in 2008 to only eight this year.

Office Depot, which plans to open 15 stores this year compared with 66 in 2008, is also closing 118 stores in 2009.

Methodology Behind the Rankings

Information and rankings included in this report were compiled from direct contact with retail corporate offices as well as research of the retailers’ company reports, most recent SEC filings and published statements.

Rankings: This compilation is representative of retailers with measureable construction activity in the 2008-2009 timeframe. However, this report is not intended to be all-inclusive or to be a ranking of all retailers opening new stores.

Timing: The research represents construction activity during the 2008 and 2009 calendar years. The majority of retail companies surveyed operate on fiscal years ending on or near the last week of December, January or February. In a few instances, fiscal years ended with the last week of August or September.

New Stores Opened: In financial statements, retailers typically report their total net stores at the end of a given period: Net stores being the number opened less the number of stores closed. The Chain Store Age report measures construction activity; therefore the “new-store” numbers reflect the actual number of new stores opened, including relocated stores. It does not include acquisitions activity, nor does it reflect store closings.

Square Footage: As with the new-store totals, the square footage in this report reflects square footage added from construction, including new-store openings, relocations of existing stores and expansions. Whenever possible, the amount cited is the actual number reported by the retailer. In some cases, square footage is an estimate based on the retailer’s typical store footprint. When the retailer has not reported actual square footage or when there are multiple formats and no exact indication of which format opened, it would be too speculative to estimate a square-footage total.

Capital Expenditures: These are the capital expenditures reported by the retail companies as actual in 2008 and projected in 2009. When the retailer defined specifically the amount of capital expenditure dedicated exclusively to opening new stores, relocations and expansions, that total has been used. In other cases, the retailer’s total capital expenditure is quoted. Therefore, capital expenditures should not be viewed as a comparative analysis between retail organizations.

Even Walgreens, which led the industry in new-store openings in both 2008 and 2009, announced it had “reduced organic drug store growth from 9% to a long-term target of 5%” per year.

Capital Expenditures
(000 omitted)

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Wal-Mart Stores $ 11,500,000 $ 13,000,000
2 Lowe’s 3,600,000 2,500,000
3 Kroger 2,100,000 2,100,000
4 Target Corp. 2,600,000 2,000,000
5 Walgreens 1,900,000 1,800,000
6 Costco 1,600,000 1,700,000
7 CVS 1,300,000 1,600,000
8 Safeway 1,595,700 1,000,000
9 Delhaize America 1,000,000 906,000
10 Kohl’s 1,000,000 800,000
11 Supervalu 1,200,000 750,000
12 Publix 1,289,700 665,000
13 J.C. Penney 1,000,000 600,000
14 Macy’s 897,000 450,000
15 TJX 583,000 450,000
16 Whole Foods Market 358,000 350,000
17 Dollar General 205,500 275,000
18 AutoZone 243,600 272,200
19 O’Reilly Automotive 195,000 210,000
20 BJ’s Wholesale Club 138,000 200,000
Total   $34,305,500 $31,628,200

The annual “Big Builders” survey conducted by Chain Store Age revealed continued, albeit diminished, construction activity across many retail sectors.

However, it also uncovered some optimism in the fact that, for some retailers, digging out of the economic crisis does not mean burying the shovel. Instead, the current economy separates the fertile ground from the wasted fields, enabling retailers to shutter underperforming assets, improve existing locations and focus on prime opportunities as they take advantage of the weak commercial real estate market.

Not surprisingly given the economic climate, retailers in sectors focusing on needs-based and consumable merchandise have more resilient construction pipelines than those in the specialty categories, which explains why the food and drug store segments have maintained, and, in some instances increased, their construction activity.

VALUE RETAILERS

But the retailers that have the biggest expansion programs in 2009 have one thing in common: value—and the more extreme the better. Led by the fast-growing Dollar General, Dollar Tree and Family Dollar, all of which have ambitious growth plans in place for 2010, extreme-value retailers have benefited immeasurably from the U.S. consumer’s new frugal mind-set.

Tawn Miller, senior director of corporate communications at Dollar General, told Chain Store Age the company would open 500 new locations this year plus relocate or remodel another 450 stores. Thayer Morgan (Century 21 Commonwealth Commercial) ranks Dollar General as one of the fastest growing retailers in terms of new-store openings in 2009 through 2011, second only to Walgreens.

New Square Footage Opened

*Dollar Tree total is through Q3 2009** Sam’s Club is also included in Wal-Mart Stores’ totalSource: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Wal-Mart Stores** 44,000,000 38,000,000
2 Target Corp. 16,274,000 10,830,000
3 Walgreens 8,642,000 7,830,000
4 Lowe’s 11,845,000 6,592,000
5 Dollar General 1,863,000 4,500,000
6 Kohl’s 6,400,000 4,470,000
7 CVS 4,596,500 4,350,000
8 Costco 5,000,000 4,000,000
9 Dollar Tree 3,223,900 3,530,500*
10 Kroger 2,082,500 2,940,000
11 Publix 3,950,000 2,200,000
12 TJX 3,484,000 1,960,000
13 Family Dollar 1,845,000 1,620,000
14 Ross Dress for Less 2,242,000 1,569,400
15 PetSmart 2,500,000 1,400,000
16 Bed Bath & Beyond 1,900,000 1,400,000
17 Aldi 1,700,000 1,360,000
18 Tractor Supply 1,564,000 1,360,000
19 Big Lots 625,800 1,341,000
20 Dick’s Sporting Goods 2,790,000 1,215,000
Total   126,527,700 102,467,900

New Stores Opened

*Dollar Tree total is through Q3 2009Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Walgreens 596 540
2 Dollar General 207 500
3 Dollar Tree 313 307*
4 CVS 317 300
5 AutoZone 185 180
6 Family Dollar 205 180
7 Wal-Mart Stores 197 180
8 O’Reilly Automotive 150 150
9 Advance Auto 137 105
10 Best Buy 319 83
11 Aldi 100 80
12 Target Corp. 114 76
13 Tractor Supply 92 75
14 Genesco 102 72
15 TJX 123 71
16 Hibbett Sporting Goods 88 70
17 Lowe’s 115 64
18 PetSmart 112 62
19 Kohl’s 75 56
20 Brown Shoe 120 54
21 Ross Dress for Less 77 54
22 Bed Bath & Beyond 67 50
23 Limited Brands 145 50
24 Rite Aid 92 50
25 Kroger 35 49
26 Staples 92 47
27 Big Lots 21 45
28 Publix 79 44
29 Delhaize America 37 40
Total   4,312 3,327

Convenience store giant 7-Eleven (not included in the charts that accompany the story) also sees the downturn as opportunity to open doors, and will open some 200 U.S. stores in 2009. Its new-store investment is budgeted at $50 million for this year, and at $60 million in 2010. It reportedly plans to add 550 stores during the next three years.

DRUG STORES

In the drug store category, leaders Walgreens and CVS held strong, with Walgreens opening 540 stores in 2009 versus 596 in 2008, and CVS at 300 this year versus 317 last year. Walgreens and CVS also maintained aggressive capital commitments to growth. Capital expenditures in 2009 were projected to be $1.8 billion at Walgreens, down from $1.9 billion in 2008, and $1.6 billion at CVS, up from $1.3 billion.

According to CoStar Group, a commercial real estate company, drug stores have not only managed to continue to resonate with U.S. consumers during the recession, but commercial property investors have showed continued interest in the retail property type, as well. Also of note, the company said in an October report that the investment sales market for drug store properties has kept up much better than the retail investment sales market has as a whole during this recession. And the expansion opportunities for drug stores remain significant, given the aging of the population and the increased emphasis on health care.

Drug Stores
Capital Expenditures (000 omitted)

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Walgreens $ 1,900,000 $ 1,800,000
2 CVS 1,300,000 1,600,000
3 Rite Aid 185,000 100,000
Total   $3,385,000 $3,500,000

Drug Stores
New Square Footage

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Walgreens 8,642,000 7,830,000
2 CVS 4,596,500 4,350,000
3 Rite Aid 1,112,500 625,000
4 Duane Reade 101,460 68,000
Total   14,452,460 12,873,000

Drug Stores
New Stores Opened

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Walgreens 596 540
2 CVS 317 300
3 Rite Aid 92 50
4 Duane Reade 15 10
Total   1,020 900

GROCERY

Similar to the drug segment, capital investments in the grocery sector remained fairly consistent, and remodeling existing stores has become a core focus at several food retailers. Both A&P and Winn-Dixie have committed their capital expenditures to store remodels. A&P budgeted $100 million for store remodels in 2009 and Winn-Dixie, which spent $150 million on remodels in 2008, has allocated another $130 million to store remodels this year.

Food Stores
Capital Expenditures (000 omitted)

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Kroger $ 2,100,000 $2,100,000
2 Safeway 1,595,700 1,000,000
3 Delhaize America 1,000,000 906,000
4 Supervalu 1,200,000 700,000
5 Publix 1,289,700 665,000
6 Whole Foods Market 358,000 350,000
Total   $7,543,400 $5,721,000

Food Stores
New Square Footage

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Kroger 2,082,500 2,940,000
2 Publix 3,950,000 2,200,000
3 Aldi 1,700,000 1,360,000
4 Harris Teeter 636,505 931,494
5 Whole Foods Market 1,060,700 801,800
6 Safeway 1,375,000 550,000
7 Fresh & Easy 900,000 320,000
8 Supervalu 1,001,000 214,500
9 The Fresh Market 220,000 160,000
Total   12,925,705 9,477,794

Food Stores
New Stores Opened

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Aldi 100 80
2 Supervalu 39 53
3 Kroger 35 49
4 Publix 79 44
5 Delhaize America 37 40
6 Fresh & Easy 90 32
7 Harris Teeter 13 18
8 Whole Foods Market 20 15
9 Safeway 25 10
10 The Fresh Market 11 8
Total   449 349

DIY/Auto Stores
Capital Expenditures (000 omitted)

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Lowe’s $3,600,000 $2,500,000
2 AutoZone 243,600 272,200
3 O’Reilly Automotive 195,000 210,000
4 Advance Auto 185,000 180,000
5 The Home Depot 810,000 105,000
Total   $5,033,600 $3,267,200

In terms of new-store growth, extreme-value grocer Aldi is the leader of the pack, with 80 stores on tap. Also, Supervalu has committed to expanding its no-frills grocery brand, Save-A-Lot, big time. It plans to double the size of the discount chain to about 2,400 stores in five years.

Kroger is opening 49 stores in 2009 versus 35 last year; Delhaize America will open 40 this year compared with 37 last year; and regional player Harris Teeter increased to 18 openings in 2009 following 13 new stores in 2008.

DIY/Auto Stores
New Square Footage

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Lowe’s 11,845,000 6,592,000
2 AutoZone 1,190,845 1,163,520
3 O’Reilly Automotive 1,050,000 1,050,000
4 The Home Depot 7,998,000 1,032,000
5 Advance Auto 890,500 682,500
Total   22,974,345 10,520,020

DIY/Auto Stores
New Stores Opened

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 AutoZone 185 180
2 O’Reilly Automotive 150 150
3 Advance Auto 137 105
4 Lowe’s 115 64
5 The Home Depot 62 8
Total   649 507

Discount Stores
Capital Expenditures (000 omitted)

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Wal-Mart Stores $ 11,500,000 $13,000,000
2 Target Corp. 2,600,000 2,000,000
3 Costco 1,600,000 1,700,000
4 Kohl’s 1,000,000 800,000
5 TJX 583,000 450,000
6 Dollar General 205,500 275,000
7 BJ’s Wholesale Club 138,000 200,000
8 Ross Dress for Less 105,000 190,000
9 Family Dollar 167,900 155,400
10 Big Lots 21,000 45,000
Total   $17,920,400 $18,815,400

Discount Stores
New Stores Opened

*Dollar Tree total is through 3Q 2009** Sam’s Club also included in Wal-Mart StoresSource: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Dollar General 207 500
2 Dollar Tree 313 307*
3 Family Dollar 205 180
4 Wal-Mart Stores 197 180
5 Target Corp. 114 76
6 TJX 123 71
7 Kohl’s 75 56
8 Ross Dress for Less 77 54
9 Big Lots 21 45
10 Costco 35 28
11 Sam’s Club** 11 15
12 BJ’s Wholesale Club 4 7
Total   1382 1212

DISCOUNT

Overall, discount stores are holding strong as well, and the dollar stores and extreme-value players, as already noted, in particular have maintained aggressive agendas for opening new stores.

Wal-Mart Stores continues to outpace the industry on capital expenditures, projecting $13 billion for 2009 up from $11.5 billion last year—although the company dropped new-store openings from 197 in 2008 to 180 in 2009.

Discount Stores
New Square Footage

*Dollar Tree total through 3Q 2009** Sam’s Club also included in Wal-Mart StoresSource: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Wal-Mart Stores 44,000,000 38,000,000
2 Target Corp. 16,274,000 10,830,000
3 Dollar General 1,863,000 4,500,000
4 Kohl’s 6,400,000 4,470,000
5 Costco 5,000,000 4,000,000
6 Dollar Tree 3,223,900 3,530,500*
7 TJX 3,484,000 1,960,000
8 Family Dollar 1,845,000 1,620,000
9 Ross Dress for Less 2,242,000 1,569,400
10 Big Lots 625,800 1,341,000
11 Sam’s Club** 2,000,000 1,000,000
12 BJ’s Wholesale Club 452,000 791,000
Total   87,409,700 70,081,400

TJX, which slowed new-store openings from 123 units in 2008 to 71 new stores in 2009, announced in October that the company had “increased expectations for square-footage growth in fiscal years 2010-2013 to the 4%-to-5%-range.”

For Big Lots, 2009 was the first time in the last five years that the company experienced a net gain in its store base, adding 45 new stores while closing only 40 stores.

SOFTLINES

Conversely, specialty softlines retailers, which include department stores, fashion apparel and shoe stores, saw the most dramatic decline in new-store openings from 2008 to 2009. For instance, Limited Brands dropped from 145 new-store openings in 2008 to 50 in 2009; Gap fell from 101 to 36; Abercrombie & Fitch from 97 to 17; and J.C. Penney from 35 to 17 new stores.

HARDLINES

Similarly, several specialty hardlines retailers decreased new-store openings by 50% or more from 2008 to 2009. Best Buy went from 319 new stores in 2008 to 83 this year; PetSmart cut back from 112 to 62; Staples dropped from 92 to 47; Michaels Stores went from 63 to 25; Barnes & Noble from 35 to 15; and Office Depot from 66 to 15.

Specialty Hardlines
New Stores Opened

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Best Buy 319 83
2 Tractor Supply 92 75
3 Hibbett Sporting Goods 88 70
4 PetSmart 112 62
5 Bed Bath & Beyond 67 50
6 Staples 92 47
7 Michaels Stores 63 25
8 Dick’s Sporting Goods 54 21
9 Jo-Ann Fabric & Craft Stores 21 20
10 Barnes & Noble 35 15
11 Office Depot 66 15
12 OfficeMax 60 13
13 Cabela’s 2 1
Total   1,071 497

Specialty Softlines
Capital Expenditures (000 omitted)

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 J.C. Penney $1,000,000 $600,000
2 Macy’s 897,000 450,000
3 Limited Brands 479,000 200,000
4 Abercrombie & Fitch 286,400 130,000
5 Genesco 80,700 49,400
Total   $2,743,100 $1,429,400

Specialty Hardlines
Capital Expenditures (000 omitted)

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Office Depot $ 330,000 $150,000
2 Staples 378,000 150,000
3 Barnes & Noble 192,200 130,000
4 PetSmart 127,000 100,000
5 Tractor Supply 91,800 80,000
6 Dick’s Sporting Goods 115,000 60,000
7 Cabela’s 91,000 50,000
8 OfficeMax 112,100 40,000
9 Jo-Ann Fabric & Craft Stores 63,600 32,000
10 Michaels Stores 65,000 25,000
11 Borders 79,900 15,000
12 Hibbett Sporting Goods 13,800 12,078
Total   $1,659,400 $844,078

Specialty Hardlines
New Square Footage

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Bed Bath & Beyond 1,900,000 1,400,000
2 PetSmart 2,500,000 1,400,000
3 Tractor Supply 1,564,000 1,360,000
4 Dick’s Sporting Goods 2,790,000 1,215,000
5 Staples 1,778,334 708,461
6 Jo-Ann Fabric & Craft Stores 543,000 522,300
7 Barnes & Noble 1,190,000 510,000
8 Michaels Stores 1,246,000 500,000
9 Hibbett Sporting Goods 440,000 350,000
10 Cabela’s 209,000 80,000
Total   14,160,334 8,045,761

Specialty Softlines
New Stores Opened

Source: Company reports/Chain Store Age research
Rank Company 2008 2009
1 Genesco 102 72
2 Brown Shoe 120 54
3 Limited Brands 145 50
4 Gap 101 36
5 Foot Locker 64 26
6 Abercrombie & Fitch 97 17
7 J.C. Penney 35 17
8 Macy’s 11 8
Total   675 280

On the bright side, there is still demand for new stores. In a letter to share holders, Lowe’s CEO Robert A. Niblock stated: “Significant opportunity remains for new Lowe’s stores, but in some markets we can, and should, wait for economic recovery to ensure solid returns for our investment.”

Lowe’s opened 115 stores in 2008 and 64 in 2009.

Also within the do-it-yourself sector, automotive-parts retailers are experiencing sustained growth. AutoZone opened 185 stores in 2008 and 180 in 2009; O’Reilly Automotive added 150 new stores both years; and Advance Auto built 137 stores in 2008, followed by 105 this year.

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