Friday, April 9, 2010

March sales best since recession started

March sales best since recession started
STC - Shopping Centers Today Newsletter

Following several months of modest gains, March brought the most promising retail results since the recession began. Same-stores sales rose 9 percent over last March, the strongest month-on-month increase since March 1999, according to ICSC’s index.

Sales rose in all categories, with the luxury segment leading the parade. The luxury sector overall climbed 14.2 percent, with apparel stores gaining 12.8 percent. Discounters enjoyed a 10.7 percent rise and wholesale clubs (excluding fuel sales) rose 3.5 percent.

Women’s fashion retailer Cato was especially strong: up 24.2 percent over last March, and Kohl’s did nearly as well, with a 22.5 percent increase. Drugstores edged up 1.7 percent.

The apparel stars included Limited (up 15 percent), Ross Stores (14 percent) and Gap (11 percent). Among the department stores, Nordstrom did particularly well, with a 16.9 percent showing, followed by Dillard’s (up 9 percent) and JCPenney (5.4 percent). Discount chain TJX saw sales leap 12 percent, and Target rose 10.3 percent.

The weather was a factor, with March 2010 being the warmest and driest in three years, according to Weather Trends International.

“March sales posted a healthy, albeit inflated, increase,” said Michael P. Niemira, ICSC’s chief economist and director of research. “The earlier Easter — April 4, 2010 versus April 12, 2009 — was a boon to March sales, worth an estimated 4 to 5 percentage points in terms of year-over-year growth. While this calendar shift certainly helped to aggrandize sales, the month’s performance was still very strong, aided in part by seasonally warm weather compared with March of last year.”

ICSC anticipates that April’s year-on-year sales will be flat to negative 3 percent.

Malls at top of life insurers’ shopping lists again

Life insurers will be out shopping in force this year, and retail centers are among the biggest items on their purchasing lists. “We like retail,” said Rick Coppola, head of commercial mortgage investments at TIAA-CREF, whose retail portfolio now stands at $6.5 billion. The firm is looking at major regional malls and grocery-anchored neighborhood shopping centers, Coppola says.

The sentiment is much the same at Prudential Mortgage Capital Co., the real estate investment subsidiary of Prudential Financial. The firm has been looking to finance regional malls and portfolios of cross-collateralized neighborhood shopping centers since last year. “You can do these in fairly large chunks,” said David Twardock, the subsidiary’s president. “Frankly, we were underweighted in malls going into this cycle, because the commercial-mortgage-backed-securities market pushed insurers out of that space, and this was an opportunity get back in and put some high-quality malls on the books.” Prudential Mortgage Capital says it seeks dominant malls with sales figures in excess of $400 per square foot and grocery-anchored shopping centers.

Insurers had the market to themselves through the first six months of last year, but then the equity markets began easing and the competition for REIT deals picked up considerably. “We had some success early last year with the REIT borrowers,” said Rob Little, chief investment officer of Hartford, Conn.–based Cornerstone Real Estate Advisors, real estate investment arm of Massachusetts Mutual Life Insurance. “Then, as the equity markets opened up, the REITs were able to get business elsewhere.” Cornerstone made only a couple of retail center purchases last year but says it is looking for more retail deals this year. “We like the neighborhood shopping centers with consumer-staple stores,” Little said.

“We like regional malls, and we are focused on the top 50 or 75 regional malls in the country,” said Tony Premer, a senior managing director with Pacific Life Insurance Co., Newport Beach, Calif. “These high-quality mall assets will typically be supported by top-notch sponsorship and align nicely with our reputation as a lender that targets loans in excess of $50 million.”

Good times for outlets

Today’s culture of value is having no small effect on outlet centers. Shoppers and retailers that never set foot inside an outlet mall before are doing so now, and faster than one can say “30 percent off.”
Just a decade or so ago, consumers equated outlet malls with a trip to the hinterlands for a hit-or-miss treasure hunt. Today outlets are being built in or near metro areas instead of en route to them, and more full-price retailers and brands are tailoring products to fit into outlet centers, both in the U.S. and abroad.

One of the latest to come to the party is Bloomingdale’s, which announced that it would open four U.S. outlet stores by this fall and still others next year and beyond.

“With growth on the minds of retailers once again, an outlet concept has to be part of the conversation these days,” said Charles Wetzel, president and COO of Fort Worth, Texas–based Buxton, a customer analytics consultant firm. “If you’re not looking at how an outlet store can positively affect your network, you’re not going to be able to effectively optimize your market.”

No surprise, then, that Simon Property Group has paid so much attention to the outlet format. Its purchase of Chelsea Property Group (now Premium Outlets) in 2004, its acquisition of the value-oriented Mills Corp. in 2007 and its pending acquisition of Prime Outlets this spring all provide a buffer against ever-changing consumer spending patterns. Simon’s Premium Outlets properties are outperforming its regional mall portfolio in both occupancy (97.9 percent versus 92.1 percent) and sales per square foot ($500 versus $433). And its Cincinnati Premium Outlets, which opened in August, was one of the few U.S. shopping centers to open last year.

“National retailers are going to continue to look at ways they can diversify their offerings,” said Gregg Goodman, Mills’ president. “The full-price retailers are finding [outlets] to be almost a hedge against economic uncertainty.”

The past few years have seen a gaggle of mainstream retailers go outlet. In February Catherines Plus Sizes said it would open 33 stores at U.S. outlet centers. Lord & Taylor opened its first outlet store that same month, at Jersey Gardens, in Elizabeth, N.J. Talbots opened its first outlet last year and says it sees potential to open as many as 100 more. Woodbury Common Premium Outlets, in Central Valley, N.Y., attracted such newly created outlets as Balenciaga, John Varvatos and Lululemon Athletica, says Michele Rothstein, senior vice president of marketing at Premium Outlets.

Recent openings of brand stores in the Premium Outlet portfolio also include Fa├žonnable, at Jersey Shore Premium Outlets; Marni, at Orlando Premium Outlets; RocketDog, at Camarillo Premium Outlets; and Vera Bradley, at Chicago Premium Outlets.

Over the past three years, outlet store openings of many major retail chains have outnumbered the openings of full-price stores, says Steven Greenberg, head of The Greenberg Group, a real estate advisory firm that has helped several chains and brands develop outlet strategies. The old industry buzzword “sensitivity,” which full-price retailers once used with reference to the potential for a nearby outlet store to cannibalize their sales, “has completely evaporated from industry language,” said Greenberg. “I haven’t heard it in years.”

Five years ago Greenberg’s data showed that 65 percent of shoppers patronized regional malls, 25 percent used outlet centers, and only 10 percent crossed between the two. Today the figures are about 45 percent regional to 35 percent outlet, with a 20 percent crossover.

Texting teens still socialize at malls

That great American teen tradition of hanging out at the mall has taken a backseat to cyber-haunting on Facebook and other social-networking Web sites. So claimed Hot Topic CEO Betsey McLaughlin, at a forum in January. “The place for [teens] to hang out today is the Internet,” McLaughlin said.

Not everyone agrees, however. Chicago-based TRU, a market research firm that studies young people, says the percentage of teens in its surveys who report spending time at malls during any given week stayed fairly consistent between 1996 and 2007. In 2008 TRU stopped inquiring about mall visits specifically, and began asking whether they had gone “shopping for fun” — online or in person — during the week. Last fall 83 percent of respondents said they had, about the same number as the previous fall.

Moreover, teen spending is on the rise again, up 6 to 8 percent year on year, according to NPD Group, a market research firm based in Port Washington, N.Y. Teen retailer Abercrombie & Fitch can attest to that, having ended a 20-month streak of falling sales in January with a same-store sales increase of 8 percent.

Mall owners and marketing officials are well aware of the love affair teens have with the Internet. But rather than perceiving Facebook, Twitter and the like as competition, many are using the Internet as a tool to drive traffic to their properties. They are using these sites in a variety of ways, from tweets about sales, special events or new merchandise, to video postings on the latest prom fashions.

“There is a ton of research that has found that teens really live online, and that’s where we are trying to reach them,” said Bridget Jewell, a public relations coordinator at Mall of America. Jewell says Mall of America boasts the largest lineup of teen-oriented retailers of any mall in the country — 75 of them.

Three Macerich-owned malls in the Los Angeles area — Lakewood Center, Los Cerritos Center and Stonewood Center — are promoting themselves on Facebook through a campaign titled Teen Life of Style. The malls created a Facebook fan page as a resource for their teen shoppers. Among other things, the page provides a forum on which a panel of teen-age “experts” discusses fashion, music, shopping and their favorite retailers. “Ultimately, teens really do want to get to the mall, but they just want to be better prepared,” said Heather Stratz, assistant vice president of digital marketing at Macerich.

Even given teens’ fascination with the Internet, they will always be drawn to malls, experts say, because of their desire for face-to-face contact with peers outside a school setting. Teen-agers are excluded from such social venues as bars and nightclubs, of course, but malls are uniquely positioned to be an alternative.

High-school-age girls will forever be loath to pass up the chance to meet their friends at the mall, says Jennifer Black, who heads her own retail research firm in Lake Oswego, Ore. Said Black, “I can’t imagine that on Saturdays and Sundays, girls are going to stay home in front of their computers.”