Report debunks ‘retail apocalypse’ as more stores are opening than closing
Yes, some very well-known retailers are closing stores. But that’s not the story — not by a long shot.
According to new research from IHL Group, North American retailers will open 12,663 stores and close 8,828 stores in 2018, for a net increase of 3,835 store locations. The report found that a handful of retailers — 16 companies — represented 66% of the total number of store closings. For restaurants, 16 companies represented 74% of all net closings.
“We can’t emphasize enough that the closings have been driven by a handful of retailers, not the entire market,” IHL stated.
IHL’ Retail’s Radical Transformation/Real Opportunities report reviews 1,485 retail chains with 50 or more locations on net store openings and closings. It found that while physical retail is thriving it is also changing drastically.
“There has been a great deal of negative press about retail in the last two years,” said Greg Buzek, president of IHL Group. “Overall retail is very healthy… But there are vast differences in retail segments with some growing rapidly and others struggling.”
According to the research, grocery stores, drug stores, mass merchants/supercenters, and convenience stores are adding a net 2,694 stores in 2018. The increase is on top of 3,115 net new stores in 2017.
But department stores, specialty softgoods (apparel, shoes), and specialty hardgoods (DIY, electronics, sporting goods, books, furniture) are closing a net 682 stores in 2018. This follows 2,557 net closings in 2017.
“Off-price retailers, dollar stores, grocery and restaurants are seeing great growth,” added Buzek. “It is the apparel and department stores that continue to struggle and the C & D class malls that really need to adjust in this new market to drive traffic. The strong growth is at the high end and the low end side of retail and these are generally A-level malls and off mall locations.”
The report detailed the growing influence of Amazon, noting that 55% are now members of Amazon Prime. To compete in today’s evolving marketplace, retailers need to invest in their people, technology and ambience of their stores.
“There is a reason that Publix, Wegmans, Apple Stores and Chick-fil-A make multiples of net profit more than their competitors,” the report stated. “Their people and their stores are more inviting and customers like to shop there.”
Along with improving their experience, stores need to attack their out-of-stocks. Upwards of 24% of Amazon sales can be attributed to customers who first tried to buy the product at a local store but found it out of stock, according to IHL.
“When consumers had to shop for everything at a bricks and mortar store, retailers could often get away with poor inventory levels and out of stocks,” the report stated. “Not anymore. Amazon is almost always in stock…Walmart’s marketplace is another competitor. The retailers that will survive and thrive will invest in technologies such as RFID and computer vision to right-size their store inventory and eliminate out of stocks.”
IHL’s Retail’s Radical Transformation/Real Opportunities is free for download.
Macy’s to sell historic Chicago property
Macy’s is continuing to leverage its valuable real estate.
The department store giant is putting Chicago’s landmark Medinah Temple building, home to a Bloomingdale’s home furnishings store, on the market, reported the Chicago Tribune. The approximate 130,000-sq.-ft. building is known for its unusual, Moorish Revival architecture.
The Bloomingdale’s home store eventually will move to space within the existing Bloomingdale’s department store at 900 North Michigan Shops center, which is nearby, the report said.
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Build-A-Bear’s Q2 profit takes a hit; details new store openings
Build-A-Bear Workshop on Thursday posted a net loss in its second quarter but sales rose 5% as a promotion drew huge crowds to its stores.
The retailer, which has been upgrading its stores and diversifying its revenue stream and real estate portfolio, said it is continuing its strategy of expanding in high-traffic tourist areas.
Plans include a new stand-alone location at Navy Pier in Chicago, and a store at Fashion Show, in Las Vegas, later this year. It also expects to open an in-store shop inside FAO Schwarz’s store, in New York City’s Rockefeller Center, which is due to in November. Globally, it expects to expand its presence with the addition of a new franchisee in India.
Build-A-Bear reported a net loss of $1.8 million or 12 cents per share in the period ended Aug. 4, compared to net income of $44 thousand, or $0.00 per diluted share, in the year-ago period.
Consolidated revenues rose 5% to $83.2 million in the period, including a 14.4% bump in e-commerce. Revenue rose 8.7% in North America and fell 14.9% in Europe.
The retailer attributed the decrease in Europe to the impact caused by the ongoing uncertainty surrounding Brexit, as well as the May 2018 implementation of new privacy laws, which restricted its ability to directly market to shoppers.
Build-A-Bear’s second quarter included its one-day-only “Pay Your Age” promotion on June 12, which drew such massive crowds to its stores that that the retailer ended the event much earlier than anticipated. The company created the promotion to kick off its “Count Your Candles” program, which lets members of (14 years and under) of its loyalty program to pay their age for a “birthday treat bear” during the month of their birthday.
“To truly understand our second quarter results, it is important to realize that sales in the first nine weeks of the period were below expectations, negatively impacting profit, while the final four weeks, with the introduction of the ‘Pay Your Age’ events, including our ‘Count Your Candles’ birthday program, far surpassed our expectations,” said Sharon Price John, president and CEO. “The surge of interest from the events delivered a meaningful profit, although it was not enough to offset the start of the quarter.”
As of August 4, 2018, Build-A-Bear operated 365 corporately managed locations, including 307 in North America and 58 outside of North America. The company’s international franchisees ended the quarter with 96 stores in 10 countries.