Retail is one aspect of the economy that tends to be succeptible to a lot of different economic variables ranging from consumer confidence to gas prices and everything in between — which is to say it’s a pretty volatile business that is prone to unnerving mood swings and anxiety provoking fads. The effect of the current real estate, stock and gasoline troubles is certainly causing those in the retail world to pay attention but it seems too soon just yet to draw any conclusions. Some retail sectors seem to be slowing yet surprisingly others seem to be thriving. The good news is that following the completion of our Kent retail market assessment the companies that came out on top of the list for good fit in Kent are growing and they’re coming to our market. The frustrating news is that we keep coming up short on available space so they keep opening new stores in our trade area but just outside our boundary.
Dan Smith, Kent’s Economic Development Director, has been using the Buxton Company retail list of top prospects for Kent as his personal to do list. He’s been calling, writing, emailing and making his pitch to get the attention of the top retailers and I’ve been pleased with his preserverance. It’s a tough business and doors get closed more than they’re opened but thankfully the Buxton data carries clout in the industry and that in itself has helped Dan get in many doors.
Yet one of the things he discovered is that we’re struggling with being an empty storefront short of landing one of the prospects. The Buxton data seems to be right on the mark with the retailers — they’re interested in being in our trade area — yet when they come look they haven’t been able to find quality retail space ready to lease in Kent.
Instead they keep getting bumped into older spaces in the strip malls that are going to need reinvestment yet no reinvestment is planned by the property owners. Which is why when they’ve been approached by developers just outside our borders that have projects under construction they’ve jumped on board. A couple of examples of that are good stores like Panera Bread, Hibbetts Sporting Goods, and Hobby Lobby. They were all on the Buxton list and they’re all coming into our trade area in the next 6 months but none of their stores will be in Kent, they’ll be in Stow and Ravenna where developers have projects underway.
As we start to dig deeper into the retail arena it’s clear that our market demand is there, our challenge is giving that demand the right supply of quality shopping space. Obviously downtown Kent is one of our best resources since downtown shopping is in and malls are out but guess what, most of the downtown space is leased out. We have very little available right now for new stores in downtown.
That explains why Mr. Burbick’s Phoenix Project phase 1 is leased out before he’s even begun construction and space in phase 2 was in such high demand that he’s decided to jump right into phase 2 and maybe even phase 3. Clearly, if you plan to build it they will come to Kent. This gives me great optimism for the Fairmount project in downtown as well.
Here’s a couple of excellent articles on the state of retail right now. In the small world category the first article talks about the success of my last city, Kingsport Tennessee which has done a great job of rebranding their city to the retailers and building new quality retail space. This might not sound terribly impressive from an outsider point of view but Kingsport has struggled for the last couple of decades to pull in new retail and now it’s actually working. Which again, gives me a strong sense that we’re doing exactly what we need to be doing in Kent to get things rolling in our retail corner of the world.
Home Field Advantage
May 2008, Jennifer Popovek, RETAIL TRAFFIC
While most retailers consider places like Cape Girardeau, Mo. and Kingsport, Tenn. below their notice, Hibbett Sports Inc. is happy being the only game in town. The Birmingham, Ala.-based sporting goods retailer prefers playing in secondary and tertiary markets, away from the big box competition.
“Less than 15 percent of our markets would be potential markets for the big-box operators like The Sports Authority and Dick’s Sporting Goods, and if there is a competitor, it’s usually a small local guy who’s been there for years,” says Jeff Gray, director of real estate of Hibbett Sports.
Today, Hibbett has 693 stores in 23 states, the majority of which are located in the southeast, although the stores stretch as far west as Arizona and as far north as Iowa. The company is focused on markets that have shown strong population growth previously and promise future growth, Gray says. It tries to avoid markets where it would compete head-to-head with Dick’s or The Sports Authority.
In 2008, Hibbett will open 75 new stores as part of an aggressive expansion plan that will nearly double its locations to 1,200 by 2013, Gray says. But, the company hasn’t always been on such a fast track. In fact, when he joined the company in 1990, the retailer had just 32 stores — most of them in Alabama.
Hibbett has stores in markets that are as small as 3,000 residents, although the typical store is situated in a market with 40,000 residents and produces $850,000 in sales out of 5,000 square feet. Hibbett went public in 1996, and since 2002, the sporting goods retailer has increased its store count by 15 percent or more. It expects to grow by 11 percent per year moving forward, preferring to expand into markets that have at least 20,000 people within a five-mile ring and retail sales of $300 million in the trade area. The retailer hopes to enter new states in the near future and is currently looking at Colorado, Delaware, Maryland and Wisconsin.
Hibbett’s modest store footprint works in both malls and shopping centers. Currently, the retailer has 223 mall-based stores and 470 neighborhood center stores. It prefers projects that are anchored by Wal-Mart or Target or junior department stores. While Wal-Mart and Target may stock similar merchandise, Gray points out that Hibbett sells brand-name, specialty athletic equipment at higher prices. “The big-box discounters end up bringing more business to us than they take away,” he says. To date, the company has identified close to 400 potential markets in its existing 23-state footprint.
Retailers Post Surprising Sales
Retailers’ fears that their customers would keep their pocketbooks shut proved to be unfounded last month.
Despite falling consumer confidence and gas prices that teetered around $4 a gallon, retailers said Thursday that same-store sales for May were stronger than expected, touching off a stock market rally that lifted the main indexes nearly 2 percent.
Discount retailers like Wal-Mart Stores, Costco Wholesale and TJX fared particularly well as price-conscious customers spent federal income tax rebate checks on groceries, gasoline and off-price clothing.
Analysts said forecasts for May were especially conservative as retailers braced for disappointing news. There was no telling whether consumers would spend or save their tax rebates as housing prices plunged and the economy weakened.
“The rebate checks were going to be a wild card this month, but it certainly looks like they kicked in,” said Ken Perkins, president of the research firm Retail Metrics. “The fear was that high gas prices were going to siphon off most of the stimulus checks into consumers’ gas tanks and, given rising food costs, into their grocery carts.”
The indication that consumers were willing to spend was good news for investors, who reversed a largely sluggish week. The Dow Jones industrial average rose 213.97 points, or 1.7 percent, to 12,604.45. The broader Standard & Poor’s 500-stock index gained 26.85 points, or 1.95 percent, to 1,404.05, while the Nasdaq composite index ended up 46.80 points, or 1.9 percent, at 2,549.94.
Stocks of the retailers helped lead the way. Wal-Mart’s shares jumped 3.7 percent, or $2.12, to $59.80, a four-year high. Shares of Costco, which rose 3.8 percent, to $73.50, and TJX, which rose 2.2 percent, to $32.95, also reached records.
For May, Wal-Mart’s same-store sales rose 3.9 percent, excluding fuel, as demand for groceries, flat-panel TVs and computers remained strong. Sales at the company’s namesake stores rose 4 percent, while sales at Sam’s Club outlets were up 3.6 percent.
The company attributed the results to its low prices and said sales of home furnishings were up for the first time in more than two years, which Mr. Perkins said might be because consumers were “spending their vacation money on their homes.”
Other wholesalers also benefited. Same-store sales at Costco climbed 5 percent, excluding gasoline, compared with an 8 percent increase last May. Comparable sales at BJ’s Wholesale Club rose 6.8 percent, excluding gasoline, in May.
“May came in better than expected,” Michael P. Niemira, chief economist at the International Council of Shopping Centers, a trade group, said in a statement. “It is very clear that consumers are spending in a conservative manner as the lift largely came from an increase in sales in the wholesale, drug store and discount sectors.”
Even so, same-store sales at Target fell 0.7 percent, compared with a 5.8 percent increase last May. Analysts said the retailer’s focus on discretionary items like apparel, jewelry and home furnishings had deterred customers shopping for groceries and medication.
The demand for discount goods has also affected clothing stores. Off-price retailer TJX reported a 2 percent increase in comparable sales, but sales at higher-end clothing stores lagged behind. Saks, for example, reported an 8.7 percent drop in sales, compared with a 4.5 percent increase last year.
The Gap Inc., which owns Banana Republic and Old Navy in addition to its namesake store, said comparable sales tumbled 14 percent. The largest hit came at Old Navy, where sales fell 25 percent.
Limited Brands, whose stores include Express, Victoria’s Secret and Bath & Body Works, said sales fell 6 percent in May, compared with a 2 percent increase last year, as customers cut back on trips to shopping malls.
Mid-tier department stores Kohl’s and J. C. Penney both reported drops in same-store sales. Kohl’s said sales fell 7.2 percent, while Penney attributed its 4.4 percent drop to weakened sales of big-ticket items like fine jewelry and housewares.
Nordstrom, which moved the beginning of its semi-annual sale up from June, said sales rose 10.9 percent in May. But the company expects a drop of 18 percent to 22 percent in June.
The shopping centers council expects a 2.5 percent to 3 percent increase in same-store sales in June as more consumers receive tax rebates. But analysts said the boost in consumer spending will last only as long as the rebate checks do.
“This is a one-time bump that’ll continue into June and maybe July,” Mr. Perkins said. But beyond that, “we just don’t see any near-term stimulus to boost consumer spending anytime soon,” he said.