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Signs of the Times

BY Katherine Boccaccio

An unlikely byproduct of a troubled economy and soaring vacancy rates is a new advertising vehicle for companies that desire direct access to mall shoppers. And mall developers have been quick to bite.

Using empty storefronts as a canvas for oversized ad messages, national and regional advertisers are hawking their wares to in-mall pedestrians via high-definition vinyl overlays called Mallways, promoting everything from beverages to electronics to apparel. The advertising adds graphic interest while simultaneously camouflaging the vacancies behind the messages.

Three large mall owners—Chicago-based General Growth Properties, Beachwood, Ohio-based Developers Diversified Realty (DDR) and Los Angeles-based Westfield Group—have struck deals with a New York City company called Inwindow Outdoor to host in-mall ad campaigns in 50-plus shopping centers around the country. The developers say they have more to gain than visual interest.

“The ads bring relevant messaging to our shoppers in a creative way,” said Marc Feldman, VP of new business development for DDR. “The medium is very eye-catching and it embraces what advertisers are looking for right now—which is interaction at the point of sale.”

The fact that the medium de-emphasizes dark stores is an attractive side benefit, added Feldman, as is the revenue generated.

According to Steve Birnhak, CEO of Inwindow Outdoor and creator of the Mallways product, advertisers agree to volume purchases. “Mallways are intended to provide blanket coverage,” said Birnhak. “An advertiser can buy five of these at a time and get instant coverage in the mall.” In fact, said Birnhak, with five storefronts in one mall, the advertiser stands to “become the largest retailer in the mall, because you’re the largest brand in the mall.”

Advertisers don’t pay by the foot; instead, the adhesive-backed vinyl overlays—which vary in size according to the dimensions of the empty store-front it will cover, but typically run floor-to-ceiling and about 25 to 30 ft. wide—are sold for a flat rate on a four-week rotation schedule. The advertiser pays Inwindow Outdoor for the space, which in turn compensates the mall owner for the use of the storefronts. Those monthly rates can vary widely, reportedly from $1,000 to $8,000 depending on the ad size, foot traffic and desirability of the mall.

“Mallways have dual benefits for the shopping center,” said Feldman, “as the ads increase the bottom-line revenue as well as improve the aesthetics of the center.”

The one challenge that Inwindow Outdoor, the advertisers and the mall owners face, however, is the obvious: If a store is leased to a new tenant before an advertiser’s four-week rotation on that storefront has been completed, what happens? “We keep an open communication line to Inwindow,” said Feldman, “alerting them at the first sign that a space will be leased. We consider it our responsibility to communicate—and Inwindow’s responsibility to find an alternative for that advertiser.”

Developers Diversified is launching Mallways in seven malls to start. One mall—1000 Van Ness in San Francisco—currently has ads in place, and the other six are coming soon.

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Dillard’s 3Q loss widens

BY CSA STAFF

LITTLE ROCK, Ark. Dillard’s reported a third quarter net loss of $56 million, or 76 cents per share, compared to a net loss of $11.3 million, or 15 cents per share, for the same period last year.

Dillard’s ceo, William Dillard, II, stated, “The oppressive economic environment clearly weighed heavily on our results during the third quarter. We continue to take aggressive action to navigate these challenging times. We announced the closure of 21 under-performing stores during 2008, dramatically reduced capital spending for 2008 and 2009 and are executing appropriate operating expense reduction measures throughout the Company. These efforts are not only designed to position ourselves to weather near-term economic uncertainty but also to position Dillard’s well for the long term.”

Net sales for the quarter were $1.508 billion compared to net sales of $1.633 billion last year. Sales in comparable stores declined 9%.

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Fred’s sees 3Q income growth

BY CSA STAFF

MEMPHIS, Tenn. Fred’s reported net income of $6.1 million, or 15 cents per diluted share for the third quarter 2008, an increase of 32% from net income of $4.6 million or 12 cents per diluted share in the year-earlier quarter.

Fred’s total sales for the third quarter of fiscal 2008 were $418.0 million compared with $419.9 million for the same period last year, with the year-over-year decline of 0.4% reflecting the company’s store-closing program. Excluding stores closed in 2008, total sales from ongoing stores increased 4% over the third quarter of last year. On a comparable-store basis, third quarter sales increased 1.4% versus 1.1% in the year-earlier period.

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