redemptions were being dedicated more toward groceries and
consumer staples than discretionary items.”
In spite of Wal-Mart’s continued success—the company netted an 8.4% year-over-year sales growth for the first quarter—it
also decided to cut back on new locations. Simley credits the
decision, announced late last year, to a capital efficiency issue
more than a reaction to the lull in the economy. But many analysts counter that Wal-Mart in fact took heed of the glaring economic warning signs, moderating its US expansion with 195
new centers for 2008, down 30% from the previous year.
Similarly, JCPenney has shaved 14 stores from its growth
program, a move the Plano, TX-based company says keeps it
in line with customer spending patterns. In a fourth quarter
earnings call this past February, company chairman and CEO
Mike Ullman explained, “With no clear indication that the
consumer environment will improve during 2008, we have
taken a conservative approach to planning our business to
maintain a balance between near-term economic realities and
long-term growth opportunities. To this end, we will remain
focused on improving the customer experience in our stores.
At the same time, we are taking prudent actions to grow our
Richmond, VA-based Circuit City. The
electronics retailer recorded a $2.7-mil-
lion loss during the first quarter, but
intends to press on with 45 to 55 new
stores this year, up from 43 in 2007.
However, those plans could change if
Circuit City is acquired by Blockbuster,
which made an offer for the company
early last month.
Macerich’s Healey observes that publicly traded retailers are looking beyond
the near-term. “The macro economy is
certainly having its effect,” he says, “but
the majority of retailers that we do business with are public companies. They’ve
become long term in nature, so opening
stores is still a primary growth vehicle
for them.”
Healey points to Dallas-based
Neiman Marcus as an example. The luxury department store chain is staying on
track with its growth strategy, opening
an approximately 100,000-sf location in
Macerich’s Broadway Plaza in Walnut
Creek, CA that is set to debut in 2010 or
2011. “The fact that Neiman Marcus is going to open in
Broadway and continue to open stores in general says a lot
about the company,” he says. “They have a plan and while
they are somewhat resilient, they need to look past the next
two or three years.”
As the decade winds down, many retail experts forecast
that the sector will regain its strength as the economy
In the current environment, consumers are shopping more for necessity items rather than making luxury
purchases. Consequently, discounters, such as Wal-Mart, continue to post strong sales growth figures.
“Opening stores is still a
primary growth vehicle for
public companies.”
DOUG HEALEY
MACERICH
“I don’t think that anybody is
in panic mode. There is still a
great deal of optimism.”
SUSAN DETMER
CUSHMAN & WAKEFIELD
competitive market share with 36 new store openings under a
moderated capital expenditure plan.”
With a 7.8% decrease in sales for the first quarter, JCPenney
is among a number of national retailers who recorded less-than-stellar numbers for the first three months of the year. In spite of
lagging sales, these firms, which include Bed, Bath & Beyond,
Target and Best Buy, are forging ahead with new locations. Take
rebounds. Some observers anticipate a return to normalcy
even sooner. “I expect 2009 to be a significantly better year,”
says JLL’s Bemis. “Once the presidential election is over and
a lot of the negative rhetoric dries up, I think we’ll find that
the couple of bumps in the economy are just that. It’s still a
fundamentally sound structure and I expect retail leasing to
begin to pick up again sometime late in the first quarter or
early in the second quarter of 2009. Each down cycle—in the
early 1980s, 1991 and 2000—was followed by fairly significant
booms in retail expansion.”
Howard Davidowitz has a less optimistic view. “There will
be no boom in 2009 because the consumer is in such debt,” he
observes. “We have a broken financial system, so our banks
can’t lend. There are massive write-offs by the credit card companies and the banks. Auto loans and student loans are not
being paid. I see problems as far as the eye can see and I don’t
see any solutions on the horizon. That doesn’t mean that there
won’t be some kind of turnaround, I just don’t see it yet.”
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