Major Changes Coming at JC Penney

by Elaine Misonzhnik January 25th, 2012

When Ron Johnson, the retail executive credited with making Apple stores into the money-making machines they are today, took over the helm at JC Penney last June industry executives expected he would spell major changes for the lagging department store. Today, they got a glimpse of what Johnson has in mind.

At a much-publicized media event this afternoon, Johnson announced that JC Penney would do away with its confusing discounting strategy and will re-design the chain’s stores to resemble a Main Street experience, with anywhere from 80 to 100 stores-within-a-store for customers to choose from.

According to Johnson, during 2011, JC Penney ran 590 different promotions, which were largely ignored by shoppers:

“At some point, you, as a brand, look desperate if you have to market that much.” He will move to monthlong promotions, on which Penney will spend $80 million a month, he said. And instead of mailed fliers, the company will have a 96-page magazinelike circular.

From now on, instead of marketing items as “x percent off full price,” JC Penney will sell merchandise using only three price levels: regular price, month-long value and best price, which will be offered on the first and third Fridays of every month for merchandise that hasn’t cleared at regular or month-long value prices.

In addition, the retailer will vastly expand its store-within-a-store program, with brands including Martha Stewart and l’amour nanette lepore. For full details on the overhaul, click here.

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Starbucks Transitions More Cafes to Wine Bars

by Elaine Misonzhnik January 24th, 2012

In an effort to drum up more sales after the morning coffee rush ends, Starbucks announced plans to sell wine and beer at coffee shops in Chicago, Atlanta and Southern California, according to the New York Post. Up till now, Starbucks has been testing the strategy at five stores in its home market of Seattle.

The chain will now bring the new menu to up to seven Starbucks cafes in Chicago, and to four to six stores in Atlanta and Southern California each.

In addition to offering alcoholic beverages tailored to local tastes and snacks such as food and cheese plates and foccacia with olive oil, the cafes will feature flexible seating to encourage evening parties and social gatherings.

Over the past few years, Starbucks has faced increasing competition for coffee dollars from Dunkin Donuts and McDonalds, so the chain has been putting a lot of effort into reinventing its image.

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Macy’s to Close Nine Company Stores

by Elaine Misonzhnik January 5th, 2012

The first store closing announcements for 2012 are in. On Wednesday, Macy’s announced it will close nine underperforming stores, including five Macy’s locations and four Bloomingdales.

The five Macy’s stores slated for closing are located in the middle of the country, including Ohio, Maryland, Tennessee and Kansas. In their stead, Macy’s will open five new namesake stores in New York, California, Illinois, Utah and Wisconsin.

The five Bloomingdale’s stores scheduled for closing are located in Georgia, Illinois, Maryland and Minnesota. Macy’s has already announced the opening of a new Bloomingdale’s at Glendale Galleria in California and will build a smaller format replacement store for a store in Palo Alto, Calif.

Macy’s will also open five Bloomingdale’s Outlet stores in 2012.

All of the closings will take place in early spring.

The CRE Review has published a breakdown of CMBS exposure to the properties housing the ill-fated stores.

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2011 Holiday Season Winners and Losers

by Elaine Misonzhnik January 3rd, 2012

We might have to wait a day or two for the official December same-store sales results, but Fast Up Front has already published a list of this holiday shopping season’s winners and losers. Unsurprisingly, Walmart (as well as Amazon.com) is on the good list. Also unsurprisingly, Sears is on the losers’ list.

Check out the entire list below:

Retail Holiday Winners & Losers [ infographic ]

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Sears to Close Up to 120 Stores

by Elaine Misonzhnik December 27th, 2011

Even before the holiday season reached its official close, Sears Holdings Corp. is admitting defeat. After posting a 6 percent drop in same-store sales for its Sears division and a 4.4 percent drop in sales for its Kmart stores for the quarter ending Dec. 25, the department store chain decided to close up to 120 underperforming stores.

Even though the 2011 holiday season has delivered decent results for many other retailers, Sears has been struggling with unimpressive sales results and waning brand appeal for years. Even in recent months, Sears’ management has been focusing more on subleasing unprofitable stores and cutting expenses than on turning around the retailer’s core operations. So it will come as no surprise to anyone in the retail universe that Sears Holdings will be closing stores.

The more interesting question will be how much interest those stores will garner from alternate space users. By all accounts, Sears stores tend to be in some of the best locations in the country since the department store has served as a staple mall anchor for so long. Meanwhile, many expanding retailers have complained recently that they can’t find good enough real estate for new stores.

Given where we are in the real estate cycle, how much interest do you think those newly vacant Sears stores will attract and which chains are likely to end up snapping them up?

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2012 Forecast: More of the Same

by Elaine Misonzhnik December 12th, 2011

ChainLinks Retail Advisors, a retail-only real estate services firm, has just released its U.S. National Retail Report 2012 Forecast, which predicts another slow year ahead for the sector.

According to the report, there will be fewer retail bankruptcies in 2012 than there were in 2011 and the national vacancy rate will go down. But many of the retailers that propelled the sector’s growth in the past few years, including chains like TJ Maxx, Marshall’s and Ross Dress For Less, might slow down expansion next year. Most of the growth will come from the dollar stores, fast food restaurants and fast casual chains.

The report’s authors caution that:

Looking forward, we continue to have strong concerns over mid-priced retail chains.

Chains caught in the middle will be where the most contraction occurs and though we don’t expect retail closures to approach last year’s levels, they will continue to mitigate growth across the board. Vacancy will shrink in 2012, but it will be at a slow pace, measured more by basis points than by percentage points.

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Dollar Chains Ahead in Race for Market Dominance

by Elaine Misonzhnik December 8th, 2011

In spite of putting forth their best efforts, drugstores trail dollar stores in the war for U.S. consumers. A report published earlier this week by brokerage firm Colliers International looks in-depth at dollar stores’ rapid expansion over the past few years and finds that they’ve been opening new stores at a faster pace than most of their competitors.

According to a post on Merchandising Services Blog, today there are approximately 21,500 dollar stores operating around the country, while national drugstores number 19,700 locations. Family Dollar, with 6,800 stores, and 99c Only Stores, with 285 units, would seem to pose the biggest threat to the drugstores as they generally take locations in urban environments, the drugstores’ most established turf.

Dollar General, on the other hand, prefers rural communities with fewer than 20,000 residents. The strategy often allows the chain to be the only necessity retailer in the area, eliminating the need to nab the best piece of real estate and pay top dollar to open new stores.

The last of the four major national chains, Dollar Tree, focuses on the suburbs.

Regardless of where the dollar stores are based, landlords love them. In addition to bringing in steady foot traffic, they willingly go into second, third and fourth generation spaces and have limited need for tenant allowances because of their modest buildouts. The Colliers report notes that the dollar stores have been able to close very aggressive deals, commanding some of the lowest retail rents around:

This is occuring even in markets where landlords, especially those with better-performing centers, are beginning to see some pricing power return to them. Depending on the chain, base rents can run as low as the high single digits for a 10-year term. Rent step-ups are rare during the first five years; tenants will consider a 10% bump (2% per year), beginning in year six, for the balance of the term.

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November Same-Store Sales Disappoint

by Elaine Misonzhnik December 1st, 2011

Turns out stellar Black Friday sales really don’t mean a stellar month.

Thomson Reuters had just released a tally of results for 20 retail chains for the month of November, and same-store sales came in at 3.1 percent–a respectable figure, but still below the 5.5 percent increase recorded in November 2010.

Some retailers were able to profit from super early openings and deep discounts over the Black Friday weekend, but analysts worry that come December, that sales momentum will prove unsustainable.

“Our concern is that deep discounting in November pulled forward sales out of December,” said Ken Perkins, president of Retail Metrics.

ICSC also reported that November same-store sales showed the weakest increase since March of this year, at 3.2 percent.

Once again, wholesale clubs were the clear winners, with growth of 9.0 percent, followed by luxury department stores, at 6.5 percent. Same-store sales at apparel stores rose only 0.8 percent. ICSC blamed the poor performance on unseasonably warm weather, as well as tough comparions to same-store sales posted last November. The association included results from 21 retail chains in its roundup.

Same-store sales numbers posted by RetailSails and Kantar Retail were very similar. Both tallied 22 retailers and came up with an increase of 3.3 percent. RetailSails took the lackluster sales growth as another indication that the consumer still feels uncomfortable spending and will only shop for discretionary goods when offered steep discounts.

Kantar Retail offered a somewhat more hopeful take. According to Frank Badillo, senior economist with the firm:

“Retail sales growth into the holidays is reflecting the spending intentions of shoppers. They have pulled back on their spending plans from earlier in the year, but they are loosening the purse strings a bit as the holiday approaches.”

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Black Friday Sets Sales Record

by Elaine Misonzhnik November 28th, 2011

The holiday shopping season is off to a great start as sales for 2011 Black Friday weekend came in at a record-setting $52.4 billion. The National Retail Federation reports that 226 million people visited bricks-and-mortar stores and shopped online in the days after Thanksgiving, spending money on clothes (51.4 percent of shoppers), electronics (39.4 percent of shoppers) and home decor items (21.3 percent of shoppers.)

“Stuffed to the brim from their holiday meals and eager to shop, more consumers than ever turned out for retailers’ Black Friday promotions, a promising sign for the economic recovery,” said NRF President and CEO Matthew Shay. “After an historic holiday weekend, retailers know the holiday season is far from over and will continue to look for ways to excite holiday shoppers and build on the momentum we’ve seen thus far.”

Shopper Trak reports that during Friday alone shoppers spent $11.4 billion–the biggest dollar amount ever. Foot traffic during the day went up 5.1 percent over the traffic recorded last year.

Nevertheless, the blog RetailSails warns that Black Friday sales don’t always serve as an accurate predictor of how the entire holiday shopping season will play out. The blog points to 2008, when shoppers also spent a record amount of money over the Black Friday weekend, then tightened their purse strings for the rest of the year.

What’s more, The Big Picture warns that many of the sales figures were inflated by dubious counting measures. According to The Big Picture:

We actually have no idea just yet as to whether, and exactly how much, sales climbed. The data simply is not in yet. The most you can accurately say is, according to some foot traffic measurements, more people appeared to be in stores on Black Friday 2011 than in 2010.

Certainly, a lot of the sales this year, as during the previous few years, were driven by early openings and super promotions. Walmart, Target, Best Buy and Toys ‘R’ Us stores opened at midnight on Thursday, according to Business Insider, as did Mall of America. About 15,000 people showed up at the mall that night, the largest Black Friday crowd ever. Unseasonably warm weather also helped bring people into stores.

Large crowds and blockbluster deals, however, led to some ugly behavior by shoppers across the country. A woman shopping at a Walmart store in Los Angeles, for instance, used pepper spray to keep others away from the items she wanted to buy. In Michigan, a teenager was trampled on as she got caught in the rush to snag discounted electronics. In Alabama, police had to use a stun gun to subdue an unruly, intoxicated shopper. In yet another incident, a man was shot for refusing to hand over his family’s newly purchased loot to robbers.

The Business Insider has put together a list of videos chronicling multiple Black Friday scuffles.

The question for retail analysts today seems to be if we should pay more attention to the record-breaking sales volume, or to the desperation people are showing in the fight for discounted goods.

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World Trade Center Retail: Everything Old is New Again

by Elaine Misonzhnik November 22nd, 2011

It’s taken more than 10 years, but it looks like a comprehensive, detailed plan for new retail at the World Trade Center site has finally been established. The Architect’s Newspaper reports that three separate hubs, including an existing one at World Financial Center, would combine to form about 635,000 sq. ft. of retail space downtown.

The hubs, including 70,000 sq. ft. of retail at the Fulton Street Transit Station, 365,000 sq. ft. at the new World Trade Center and 200,000 sq. ft. at World Financial Center, will be connected by underground tunnels and pedestrian passageways.

Back in its heyday, the 400,000-sq.-ft. mall underneath the original World Trade Center was among the most profitable in the country. A press release from the Port Authority of New York & New Jersey outlines conditions at the mall in February 2001. At the time, the Port Authority expected sales at the complex to reach $900 per sq. ft. before the end of the year. With the residential renaissance that has taken place in the area in the decade since the terrorist attacks, the new retail hub is likely to be even more successful.

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