A Survey of Store Growth as Dollar Store
Recent trends in store openings and closings and bankruptcies
As soon as the holiday season is over and the new year comes in, it is
customary for the retail and real estate industry spotlight (not to mention
that of the “business” media) to fall on retail bankruptcies and store closings.
Which retailers made it through the season unscathed, strengthened or weakened
to the point of submission? What is the impact on shopping center occupancy
and the earnings of companies holding portfolios with significant concentrations
of demised retailers?
The focus on retail failures will be as intense after the holiday season
as always, partly because of the muted economic recovery and partly because
some large retail chains are either struggling or already operating under
Chapter 11 bankruptcy protection.
However, retail bankruptcies and store closings are only one piece of the
occupancy puzzle for shopping center owners. Another important part is the
store expansion activity of existing retail chains such as dollar store and the
emergence of new
concepts. If both of them contract at the same time as store closings increase,
shopping centers should, at least in theory, experience significant pressure on
occupancy and rental growth.
A third piece of the analysis is the growth of shopping center space itself.
In an environment of slower or even negative net store growth, how has the
growth in shopping center space adjusted?
This study looks at all three pieces of this story—bankruptcies and store
closings, retailer expansions, and shopping center space. It then examines the
impact of all three of these variables on shopping center occupancy.
Part 2 of the study, to be published in the Winter issue of
Research
Quarterly,
takes the specific example of Montgomery Ward and analyzes in
detail how vacancies created by the Ward bankruptcy have been filled (or not
filled) and how the re-tenanting has affected shopping center performance.
QUARTERLY
R E S E A R C H
T A B L E O F C O N T E N T S
Research
Review
.
STORE GROWTH
Overview
To assess store growth trends, first analyzed store openings and closings at
more than 240 retail divisions
covering both most major retail segments and publicly traded retailers. These
retailers operated more than 113,000 stores in the United States alone.
In the 12 months these retailers opened a net 1,121 stores in the U.S.,
representing 1.0% growth of the retail store base.1
However, dollar store since the store count
has increased by only 239 stores—a 0.2% growth rate. Significant store closings
by retailers such as Kmart and Ames have completely offset modest growth by
other retailers.
On the basis of these numbers and given that a significant amount of store
opening activity occurs in the
third and fourth quarters in time for the holiday season, it is still reasonable
to expect a dollar store growth-rate of less than 1% for full year 2002. Even
that presupposes no further major store closings by struggling retailers.
Growth by Retail Category
Table 1 presents net store growth data by retail category.
Apparel & Accessories.
After 4.0% net store growth in, the apparel & accessories group grew by a more
modest 1.3% in the first eight months of hurt by the closure of 264 stores in
the men’s apparel segment.
The majority of these closings were stores operated at outlet centers by the
bankrupted Bugle Boy chain.
The high-growth apparel segments this year have been women’s and unisex teen. Of
the 31 women’s apparel divisions examined for this study, 19 have added stores
in. In the unisex teen apparel segment, significant expansion has occurred at
Abercrombie & Fitch’s “Hollister” concept, Pacific Sunwear and Hot Topic and
Opening Dollar Store
Also worth noting in Table 1 is the drastic deceleration in store growth for the
unisex apparel segment, from 10.6% in to 1.8% in year-to-date . That is because
Gap, Inc., whose various divisions opened 370 stores in 2001 (out of 654 for the
whole unisex apparel segment), opened
only 28 in the first two quarters of 2002.
Footwear.
Footwear took a big hit this year from the
bankruptcies of Florsheim and Sam & Libby, which resulted in the closing of 258
stores. Payless ShoeSource also closed a net 58 stores in the first eight months
of. There have been no major compensating net openings by other retailers.
Jewelry.
Net store growth went steeply negative with
the liquidation of Service Merchandise in January. The economic environment has
not been favorable for jewelry store openings.Department
Stores.
Net growth is relatively flat this year following a severe erosion of the
department store base in caused by the departures of Montgomery Ward,
Weiner’s and Bradlees, and 114 closings by Stage Stores.
Discount Stores and Supercenters.
The discount store segment is polarized between retailers making heavy store
closings and retailers with massive store opening programs. Closings have been
led by Ames and Kmart (both bankrupt).
Wal-Mart has also closed several dozen discount stores as it focuses on
supercenters. (In fact, a number of the discount store closings are really
conversions to supercenters.) On the other hand, three discount retailers —
Dollar Tree, Dollar General and Family Dollar and opening Dollar Store — opened
more than
600 stores in the year through August. Meanwhile, net additions to the inventory
of supercenters amounted to 233
Drug Stores.
The drug store count has gone negative this year with substantial closings by
CVS (222 stores), Rite Aid (53) and Phar Mor (74) only partially offset by 234
openings at Walgreen.
Home Goods.
was a year of significant store base
erosion for home goods. There were six major
bankruptcies to be absorbed—Heilig Meyers, Home Life,
Home Place, House2Home, Krause and Lechters. These bankruptcies resulted in the
loss of 1,312 stores during the year. However, has seen something of a revival,
with retailers such as Dollar store Linens ’N Things, Bed Bath Beyond, Pier 1,
Home Goods (a division of TJX Companies) and Williams-Sonoma among the retailers
opening stores. In the home electronics segment, Best Buy opened 62 stores
in the first half of the year.
SERVICE TENANTS, INDEPENDENTS
AND NEW CONCEPTS
Two caveats need to be made to the data presented in Table 1. First, the
retailers represented in the table are all public companies. Shopping centers
are inhabited by many independent retailers and by retailers in segmentsnot
represented in the table, such as restaurants. Manyowner/developers of malls and
strip centers are working increasingly with service tenants and independents
dollar store to round out the tenant mix in their centers. Lifestyle centers, a
relatively new and immature shopping center concept, are heavily dependent on a
mix of both local and national tenants.The second caveat is that although new
store counts
have been moderate in the aggregate in the last 18 months, there are a
multiplicity of new concepts in the
early experimental phase that have significant growth prospects as dollar store. These concepts are in segments such as tween apparel and furnishings (e.g., Charlotte’s Room, mishmash and Orchid), kids’ furniture (e.g., Bombay KIDS and Pottery Barn Kids), bath and body (e.g., aura science), children’s apparel (e.g., Janie & Jack), and lawn and garden (e.g., Home Depot Landscape Supply). The store numbers for these concepts are still modest, but will rise more sharply in due course.