REAL ESTATE

Report debunks retail apocalypse: More stores opening than closing

BY Marianne Wilson

Don't believe the hype — physical retail is still growing, particularly in three key segments.

Retailers are opening 4,080 more stores in 2017 than they are closing, according to a new research report from IHL Group, and they plan to open over 5,500 more in 2018. Mass-merchandisers, including off-pricers and value chains, are the fastest-growing retail segment (+1,905 stores), followed by convenience stores (+1,700 stores) and grocery retailers (+674 stores).

The research for the report, “Debunking the Retail Apocalypse,” reviewed more than 1,800 retail chains with more than 50 U.S. stores in 10 retail vertical segments. It found that for every chain with a net closing of stores, 2.7 companies showed a net increase in store locations for 2017.

In one of the report's most interesting findings, just 16 chains account for 48.5% of the total number of stores closing. And five of these 16 retailers (RadioShack, Payless ShoeSource, Rue21, Ascena Retail and Sears Holdings) represent 28.1% of the total closings.

"The negative narrative that has been out there about the death of retail is patently false,” said Greg Buzek, president of IHL Group. “The so-called ‘retail apocalypse’ makes for a great headline, but it’s simply not true. Over 4,000 more stores are opening than closing among big chains, and when smaller retailers are included, the net gain is well over 10,000 new stores."

Highlights of the research include:

The total net increase of stores for 2017 is 4,080, including retail and restaurants. Core retail segments will see a net gain of 1,326 stores, while table-service and fast-food restaurants are adding a net of 2,754 locations. In total, chains are opening a net 14,239 stores and closing 10,123 stores.

42% of retailers have a net increase in stores, only 15% have a net decrease, and 43% report no change.

Specialty apparel retailers are seeing the largest number of closings, with a net loss of 3,137 stores. Yet, for every chain closing stores, 1.3 chains are opening new stores.

“Without question, retail is undergoing some fundamental changes. The days of ‘build it and they will come’ are over,” added Buzek. “However, retailers that are focusing on the customer experience, investing in better training of associates and integrating IT systems across channels will continue to succeed.”

"Debunking the Retail Apocalypse" was underwritten by AT&T, Cayan, Fujitsu, Aptos, Level 10, Adspace, and Veras Retail. The research is available at ihlservices.com.

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R.Bowers says:
Sep-07-2017 03:29 pm

The Hype is, most times wrong, or at least, not the whole story! As your insights and experience have shown us the Retail Industry is an Industry that is tied to the Consumer! We reflect the Needs, Interests, and Trends our Consumers are following and will be wanting! Retail is a reflection of the consumer's dynamic Interests. Those that listen and respond with insight and experience that is founded in Consumer Experience will live to grow, those doing the same thing again and again and think it will still work are left to a spiraling demise! Well said, Chuck!!

S.Raisch says:
Aug-31-2017 02:52 pm

This article needs to be debunked - talk about a misleading headline. You never make yourself look smart by trying to make others look dumb. But this article will nevertheless be mindlessly spread as being news - it is as fake news as any other. This part is right: “Without question, retail is undergoing some fundamental changes. The days of ‘build it and they will come’ are over,” added Buzek. “However, retailers that are focusing on the customer experience, investing in better training of associates and integrating IT systems across channels will continue to succeed.” The rest is misleading. Like Mark Twain said, 'There are three kinds of lies, lies, damn lies, and statistics." The key fact is right there but they choose to ignore it. Restaurants are technically retail, but are not stores. Core retail segments will see a net gain of only 1,326 stores, while table-service and fast-food restaurants are adding a net of 2,754 locations. Specialty apparel alone closed 3,137 - SO FAR. 67.5% are restaurants. Only 32.5% are core retail. Retailers are scurrying to survive, playing the deadly game of opening stores to create volume, while same store sales struggle (which is why they are closing stores at the same time as opening new one). - Fastest growth is in new retail concepts and expansions that are disruptive to others. Aldi's announcement of adding 750 stores is an example of this (and beginning home delivery). A large part of the net gain will be dollar store format, hardly a core retail experience. - The net growth game is an old game coming back to life. It is a veil disguising problem and issues from owners and investors. It allows them to remove the worst underperforming locations, and when also adding new stores still pull out revenue and sales growth. But it doesn't solve the underlying problems. -Many of the new stores are leveraging Omnichannel opportunities. Aldi's is one. Home Depot and Lowe's are also doing this in all their stores and it is the plan in the new locations. - Most chains have not saturated the entire country, having opportunities to open stores in new markets, even thought they will also suffer in those areas. Read deeper and see what else you see.

R.Brittain says:
Aug-31-2017 12:02 pm

Spin, spin, spin. The biggest growth segment includes off-price stores of various kinds, itself a sign that the retail apocalypse is growing. It will only get worse once Sears & Kmart finally go belly-up.

M.Brandley says:
Aug-31-2017 10:50 am

this story is full of b s. Many more retailers are going under this year. Supermarkets are down sizing. many more mom and pop stores are closing , dining establishments are closing from chains to local to mom and pop. Seems the writer of the article left this importand facts out.

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REAL ESTATE

Simon Property Group vs. Starbucks: Precedent setting?

BY Al Urbanski

Simon Property Group raised eyebrows in the real estate and retail communities this week with the filing of a suit that challenged Starbucks’ decision to close 78 Teavana stores in Simon malls. All of the retailer's 379 Teavana shops are slated for closure through next year.

Simon’s suit contends that Starbucks, in closing its stores in Simon malls, would be “shirking its contractual obligations at the expense of Simon’s shopping centers.” It’s a case with the potential to set precedents in how “covenants to operate” are executed and enforced in retail leases, according to one lawyer.

“Simon may be looking for a settlement, or they may be looking to create some good case law: ‘You violated your covenant to operate and you have to operate,’” said Dana Kreis Glencer, a commercial leasing specialist at the firm of Dawda Mann in Bloomfield Hills, Michigan.

Glencer explained that one of the things that a retailer could have done in this situation would have been to approach Simon ahead of its closure announcement and attempt to work out a settlement in advance. Starbucks, she added, might not have done so out of concern that such a move would create a sense of insecurity around the brand in the marketplace.

That appears to be part of the motivation behind Simon’s suit. In announcing the Teavana shutdown, Starbucks CEO Kevin Johnson laid the blame on declining mall traffic, a comment intended to “deflect blame from itself and avoid adverse investor reaction,” said the suit filed on behalf of Simon by the Indianapolis office of the law firm Barnes & Thornburg LLP.

With so many retail chains closing stores, it’s possible Simon used the Teavana shutdown to draw a line in the sand. “Simon is probably taking the approach that, if we don’t take a stance and oppose the closure, other tenants who may have a failing or less than profitable retail store might say, ‘Well, we’re going to close our stores like Teavana did since Simon will not likely enforce our covenant to operate.’”

The suit maintains that Simon is willing and able to deal in a fair manner with store closures, “but only if tenants fulfill their covenants and operate continuously during the term of their leases. Tenants that do not live up to their continuous operation obligations cause great upheaval for both Simon and their fellow tenants.”

National Retail Tenants Association President Paul Kinney called the situation “very unusual.”

“Most leases will have provisions for going dark. You can’t just close the store. If you do, the landlord can go in and pick up all the rent until the end of the term,” Kinney said. “It looks like Starbucks made the decision to do whatever they want to do.”

According to Simon, only two Teavana leases expire in the coming year. The remaining 76 extend out as far as 2027.


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REAL ESTATE

Store closings begin at Perfumania

BY Marianne Wilson

One of the nation's largest fragrance retailers is shrinking its store portfolio.

Perfumania has begun store closing sales at 65 stores. The nationwide sale is being conducted by Gordon Brothers and its joint venture partner, Hilco Global.

Perfumania filed for Chapter 11 bankruptcy protection on Aug. 26 as part of a recapitalization. Once the store closings are completed, Perfumania will still operate over 150 stores.

In a statement on Aug. 26, the retailer said, as previously announced, it has been reducing its retail store portfolio by accelerating the closure of under-performing stores and those stores in locations affected by declining mall traffic, as part of its strategy to maximize sales and improve store productivity and profitability.

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