Monday, March 31, 2008

Tesco delays openings to 'smooth out any wrinkles'

Tesco PLC said it will take a three-month break from opening Fresh & Easy Neighborhood Markets in the United States to "smooth out any wrinkles."

After opening the first 50-plus Fresh & Easy stores, Tesco is "pausing for breath," Simon Uwins, Fresh & Easy chief marketing officer, wrote in his blog last week.

Fresh & Easy recently announced 17 Greater Sacramento locations for the chain and it is seeking more here. The company opened its 50th U.S. store last month as part of a rollout that began in Southern California, Las Vegas and elsewhere in the Southwest.

Fresh & Easy has grown to almost 2,500 employees from 200 in nine months, and will exceed 5,000 staffers in another nine months. The company also has ramped up to 59 stores from none in just over four months, Uwins wrote.

Now, it's time to allow the business "to settle down," he said in his blog. "So we've given ourselves a little bit of time to kick the tires, smooth out any wrinkles and make some improvements that customers have asked for."

Fresh & Easy will take the three-month break from new store openings except for opening a "couple" more in Phoenix, he wrote.

The hiatus will allow the company to accelerate its openings and "restart what's been described as an opening program on steroids."

A Piper Jaffray analyst said mid-month that Fresh & Easy is failing to attract shoppers and has missed its early sales targets by 70 percent.

Tesco had hoped to bring in sales of $100 million over six months, the report said, but had sales of only $30 million in that period, according to the analyst's report, which was based in part on information from suppliers.

Tesco, in published reports, said it was "bewildered" by the revenue assertions and called the report "utterly baseless."

"We are very pleased with customer reaction to Fresh & Easy, which is growing rapidly," a Tesco spokesman told the Guardian newspaper.

Tesco has said there's room for up to 1,000 of the Fresh & Easy stores in the United States.

In November, when the company opened its first Fresh & Easy store, it expected to have 200 stores by the end of this year.

"We're delighted with the openings," Uwins wrote in his blog. "There's always been a line of customers waiting for each store to open."

The average Fresh & Easy is about 10,000 square feet, three times larger than a convenience store but a fraction the size of a supermarket.

Source: BizJournals

Taurus Buys Canadian Retail

BOSTON-Locally based Taurus Investment Holdings spent much of last year buying retail properties in its own back yard, but the real estate investment firm is demonstrating an ability to operate outside the area, as exemplified via the $42.9 million purchase of a 160,000 sf shopping center in suburban Ontario. Affiliate Taurus Canada Investments Ltd. secured the Cookstown Outlet Mall in Innisfil, completing its second Ontario acquisition in the past four months.

“We are really committed to the Canadian market,” Taurus president and CEO Peter Merrigan tells GlobeSt.com. “It's doing better than the US right now and we think conditions are going to remain fairly stable.” Taurus has been in Canada since 2000 and now has nine projects in its portfolio. The firm is mulling fresh opportunities throughout the country, says Merrigan, but all investments made to date are in Ontario, including 111 Peter St., a 250,000-sf office building purchased in late 2007.

Located one hour north of Toronto at the confluence of Highways 89 and 400, Cookstown Outlet Mall is comprised of an enclosed shopping center and 125 undeveloped acres that can accommodate additional density. Cookstown is one of the highest profile and most successful outlet centers in Ontario, reports Taurus, a distinction enabled by the roster of top retailers such as Adidas, Levis, Liz Claiborne, Nine West, Samsonite and Tommy Hilfiger.

Despite Cookstown’s solid performance to date, Merrigan expresses hope returns can be improved through construction of another 160,000 sf on the vacant land and physical improvements to the existing space, plus a focused property management strategy.

Taurus made news in Boston last year by aggressively pursuing commercial properties in the Back Bay, especially on tony Newbury Street. Teamed primarily with Anglo Irish Bank Corp., Taurus now owns 21 buildings on the street, and Merrigan says the firm is eager to increase its inventory. “We’ll look at anything that comes available,” he says of the bid to create a critical mass on the internationally known shopping strip, which last year eclipsed $200 million of commercial sales. “It’s going well,” Merrigan says of the campaign to upgrade the Newbury Street assets and boost occupancy.

While still targeting Boston, Taurus is rapidly expanding its global platform, with deals being chased throughout Europe and both North and South America. Taurus is busy in Argentina, for example, and recently established a beachhead in Lima, Peru.

Source: GlobeSt.

Logan's retail updates play to passenger preferences

A new Nantucket brew pub and a sports bar named after former Red Sox player Jerry Remy are among the more than 30 new restaurants and retail outlets that will open or replace existing retailers at Boston Logan International Airport Terminals B, C and E over the next few months.

The move comes as part of an effort to satisfy travelers' growing demand for more, different and in some cases healthier food choices, according to Jack Hemphill, the business general manager for the Massachusetts Port Authority, which operates Logan. The changes were prompted by responses to Massport's ongoing quarterly passenger surveys.

"There's greater demand," said Hemphill, "but also (the stores and concepts) needed upgrades. These were old facilities that weren't supplying the needs of the customers." It has been at least 15 years since most of the retail facilities were updated, he said.

Massport recently spent millions of dollars updating the food courts and adding restaurants and retail outlets. It spent $18 million on Terminal B alone, a project that included a new food court, upgrades to existing retail outlets as well as other outlets currently under construction. Massport opened two restaurants -- Bonfire and Legal C Bar -- there last fall. There is a 31 percent increase in sales for Terminal B year-to-date, said Hemphill.

Source: Boston Business Journal

Friday, March 28, 2008

Bad Penney

Last year, J.C. Penney had plenty to brag about. It beat annual earnings expectations, partnered with chic cosmetics retailer Sephora and introduced hip new brands, like C7P, from high-end denim designer Chip & Pepper.

Even more ambitious were plans for the roll-out of American Living, a private-label brand from a division of Polo Ralph Lauren. Penney's biggest launch ever, it would arrive in about half its stores in early 2008. The retailer would open 250 new locations over the next five years, including its first store in Manhattan sometime in early 2009.

So much for ambition. Thanks to a weakening economy, lower consumer confidence numbers and softer sales, the retailer reported negative comparable-store sales for the last three months. The company pulled back on store growth plans in February, saying they would open only 36 stores this year instead of the 50 originally planned.

Friday, Penney lowered its first quarter profit forecast, saying it now anticipates net income of about 50 cents a share, down from its prior forecast for profit between 75 and 80 cents per share.

"We expect the continuation of a difficult environment over the course of 2008," said J.C. Penney Chief Executive Myron Ullman, in a statement.

As for the big brand plans, they're not helping--not in a tough economy. "Sephora [shops] within Penney's stores are definitely traffic drivers, but neither J.C. Penney nor Sephora have detailed how the profitability is split between stores," said Bill Dreher, a senior retail analyst for Deutsche Bank.

"As for American Living, its prices are 25% higher than all of Penney's other merchandise," Dreher points out. "In the consumer environment we're facing now, shoppers are trading down price points for purchases in apparel and home."

J.C. Penney began opening Sephora outlets in fall 2006, and today, about 70 Penney locations have the in-store boutiques. During the holiday season, Sephora boutiques were "one of the best-performing areas of the store," according to company spokeswoman Rebecca Winter.

Cosmetics and personal care, of course, are less subject to promotional margin pressure than other high-margin categories, such as apparel and home, observers say. Penney's problem is that only about 6% of its stores have a Sephora inside. Most of the company's new stores will have a Sephora boutique, Winter said. Still, this will bump up the percentage of stores with a Sephora shop to just 9%.

"As far as I can tell, Sephora has no material impact on profits or earnings," Dreher said.

American Living, which landed in 600 Penney stores in February, has also caused some concern among retail analysts. The brand, designed by the Global Brand Concepts division of Ralph Lauren, spans 40 home and apparel categories; in the long term, Penney's expects it be a billion-dollar idea, Winter said. But Penney significantly discounted many items right after they arrived in stores, a move Winter said had been planned in advance.

"Just about everything was marked down a minimum of 30% the week the program landed," said Carol Spieckerman, president of newmarketbuilders, a retail consulting firm. "I believe they are risking an early loss of credibility for a program that promised to build the top end of Penney's. Beyond that, they are providing early 'wait-to-buy' training for brand loyalists."

That is, if these potential brand loyalists ever figure out that the brand comes from Polo Ralph Lauren. The fact that the designer's name does not appear anywhere in the brand's name, merchandise or high-profile advertising could also hurt, Dreher said.

"It's two words right now, it's not a brand yet," Dreher said. "At this stage, I just don't believe consumers have any reason to buy it."

Beyond that, the Ralph Lauren deal may prove a distraction from the real goal: selling more higher-margin clothing and home goods. Based on consumer research, the company will have to upgrade its store experience significantly for consumers to believe American Living is a brand from Ralph Lauren, brand experts say.

J.C. Penney still ranks third, behind Macy's and Sears, in department-store customer loyalty, said Dr. Robert Pasikoff, founder and president of Brand Keys, a brand and consumer loyalty consultancy.

"Despite everything J.C. Penney has done [in recent years] to upgrade [its] image, consumers haven't bought it yet," Pasikoff said. "They definitely don't think J.C. Penney has anything to do with Ralph Lauren."

Source: Forbes

Nordstrom Opens Second Bay State Store at Burlington Mall

SEATTLE, March 28, 2008 /PRNewswire-FirstCall via COMTEX/ -- Leading fashion specialty retailer Nordstrom (NYSE: JWN: 32.62, -1.97, -5.69%) opened the doors to its second Boston-area store today at Burlington Mall. The 138,000-square-foot, two-level store offers a well-edited selection of luxury and quality fashion apparel, footwear and accessories for women, men and children to Burlington Mall shoppers.

"We are thrilled to welcome customers into the store and show them all that Nordstrom has to offer, right here in Burlington," said Cindy Gelb, store manager. "We are still new in the Boston area and can't wait to introduce ourselves to more customers."

In addition to a great selection of fashion merchandise, the store offers a number of services to enhance the shopping experience. These amenities include an in-store alterations and tailor shop, bra and prosthesis fitters, complimentary gift boxes, a shoe shine stand and two family restrooms. Nordstrom at Burlington Mall will also feature two food offerings, including an espresso bar and the company's newest restaurant concept, Blue Stove.

Opening day started at 8:30 a.m. with Nordstrom hosting a beauty bash outside its mall entrance. Shoppers enjoyed complimentary beauty and skincare consultations and learned about the latest trends in makeup and fragrance. When the store opened at 10:00 a.m., 380 excited employees lined the aisles by each entrance and cheered enthusiastically to welcome the first customers through the doors.

Earlier in the week, Nordstrom held an opening gala that raised over $160,000 for partnering charities Dana-Farber Cancer Institute, The Junior League of Boston, and The Links, Incorporated (Boston and Middlesex Chapters).

Nordstrom, Inc. is one of the nation's leading fashion specialty retailers, with 158 stores located in 28 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 104 full-line stores, 50 Nordstrom Racks, two Jeffrey boutiques and two clearance stores. Nordstrom also serves customers through its online presence at http://www.nordstrom.com and through its catalogs. Nordstrom, Inc. is publicly traded on the NYSE under the symbol JWN.

Source: PRNewswire

Advanced tactic targeted grocer

A massive data breach at Hannaford Brothers Cos. was caused by a "new and sophisticated" method in which software was secretly installed on servers at every one of its grocery stores, the company told Massachusetts regulators this week.

The unauthorized intrusion the company disclosed on March 17 stemmed from software that intercepted card data from customers as they paid with plastic at store checkout counters, and sent the data overseas, Hannaford's top lawyer said in a letter sent to Attorney General Martha Coakley and Governor Deval Patrick's Office of Consumer Affairs and Business Regulation.
The software was installed on computer servers at each of the roughly 300 stores operated by Hannaford and its partners. Hannaford did not say how the software might have been placed on so many servers, and company spokeswoman Carol Eleazer said the company continues to investigate how the software was installed and other specifics of the breach. The Secret Service, which pursues currency crimes, is conducting its own investigation.

Data security specialists say the new details show how hackers have grown more adept at penetrating weak links in the systems that connect merchants and banks. In previous breaches, such as the record-setting intrusion at TJX Cos. of Framingham, where as many as 100 million card numbers were compromised, hackers took advantage of merchants who stored customer names and card data - sometimes in violation of payment industry standards - at central locations in their computer networks.

In contrast, Hannaford says it did not store customer information. The hackers who struck Hannaford mined a stream of data that the merchant and banks were not responsible for protecting under industry rules, industry specialists said.

The Hannaford breach "was markedly more sophisticated," said Steve Rowen, a partner at Retail Systems Research of Miami, which does consulting work for merchants.

The Hannaford breach also poses worrisome questions for the payment industry as it struggles to tighten security. Hannaford, for example, had met compliance standards set by Visa Inc. and other card companies, but that did not stop the breach.

"Just because they are compliant, it doesn't mean they are safe," said Graham Cluley, technology consultant for Sophos Inc., a Burlington computer security firm. Card issuers and others need to find other ways to improve security, he added.

"Clearly, consumer confidence is being shaken by this constant stream of breaches," Cluley said.
Hannaford said in the letter that the problem potentially compromised the account numbers and expiration dates on all 4.2 million credit and debit card numbers used at its stores in six states between Dec. 7 and March 10, though the actual number taken may be smaller. Hannaford said it knows of about 2,000 cases of fraud related to the intrusion.

Hannaford's letter was sent by its general counsel, Emily D. Dickinson.

Dickinson wrote that an "illicit and unauthorized computer program" known as "malware" was installed on the servers of each of the stores the company operates in Maine, Vermont, New Hampshire, Massachusetts, and New York, plus at stores elsewhere, including the Sweetbay chain in Florida, that use its payment systems. Hannaford and Sweetbay are owned by Belgium's Delhaize Group.

The malware intercepted the "track 2" data stored on the magnetic stripe of payment cards as customers used them at the checkout counter, Dickinson wrote. This track includes the card's number and expiration date, but not the customer's name.

The data were taken "in transit for authorization from the point of sale," the letter states, meaning as it was transmitted from the cash register to one of the institutions that Hannaford uses to process transactions. Eleazer said these include major card networks and First Data Corp. of Denver, a major processor.

The malware on the store servers stored up records of these purchases in batches, then transmitted them to an unnamed offshore Internet service provider, the letter states. Foreign crime rings have been blamed in a number of other payment card fraud cases.

"Law enforcement officials and others report that the method of illicit acquisition is a new and sophisticated method in that it obtains data in transit during the course of the authorization process," the letter states.

Cluley said the software could have been installed remotely. This could have been accomplished through a breach of the company's firewall. Alternatively, the servers may not have been running the latest security patches, or may have had antivirus programs that weren't updated. Hannaford stated in the letter that it has replaced the hardware on which the malware was installed. Cluley said that could suggest a company insider or a technician for one of its vendors could have placed the code.

Executives of Visa Inc. of San Francisco, the largest payment card company, issued a statement yesterday saying it is working with Hannaford, banks, and law enforcement.

Hannaford said in its letter that it was certified a year ago as meeting card security standards and was recertified on Feb. 27. Eleazer said that was the day Visa first notified Hannaford of unusual card activity and began its investigation. That the standards did not stop the thieves, she said, "speaks to the increasing sophistication of the criminal element that propagates these attacks," she said.

Source: Boston.com

TJX settles data breach charges, avoids fines

WASHINGTON - More than a year after millions of T.J. Maxx and Marshalls customers found out their credit card information had been hacked into, the discount stores' operator agreed to have its information audited but avoided paying federal fines.

TJX Cos. was one of three firms that agreed to settle charges that each "failed to provide reasonable and appropriate security for sensitive consumer information," federal regulators said yesterday in two unrelated data-breach decisions.

Data broker Reed Elsevier PLC and its Seisint subsidiary also avoided fines but have agreed to obtain third-party audits biennially for 20 years under a separate settlement with the Federal Trade Commission.

The agreements, which will be finalized after a 30-day public comment period, also require the companies to implement comprehensive information security programs. "These cases bring to 20 the number of complaints in which the FTC has charged companies with security deficiencies in protecting sensitive consumer information," FTC chairwoman Deborah Platt Majoras said.
TJX said last March that at least 45.7 million cards were exposed to possible fraud in a breach of its computer systems. Court filings by banks that sued TJX estimated the number of cards affected at more than 100 million.

In the other case, personal information about hundreds of thousands of people held by Netherlands-based Reed Elsevier's LexisNexis unit may have been accessed in 2005 by unauthorized individuals using stolen passwords and IDs to access Seisint databases.

Sherry Lang, TJX's senior vice president for investor and public relations, said the company disagreed with the FTC's allegations, but agreed to the settlement "which is consistent with the agreements between the FTC and other retailers that have been victimized by cyber crime."
The Framingham, Mass., company's 2,500 stores include the T.J. Maxx and Marshalls chains. TJX shares fell 29 cents to $33.27, while Reed Elsevier fell 83 cents to $49.97.

A spokeswoman for LexisNexis, which acquired Seisint in 2004, said it has resolved the issues identified by the government.

Source: Boston.com

Banana Republic to Open First Monogram Store

Banana Republic, a division of San Francisco-based Gap Inc., will open its first standalone Monogram concept store in New York on April 7, according to Dnrnews.com. The retailer will convert its Bleecker Street location in Greenwich Village to the Monogram concept store, which will serve as a test store for nine months. The Monogram concept, which has more expensive, sophisticated collections, will offer a men's line focused on tailored pieces, as well as women's merchandise. The men's collection debuted last fall, and the women's Monogram line will launch this spring, with accessories planned for fall 2008. "Monogram offers our customers the best of city style and we are eager to showcase the collection in a dedicated environment for our New York City customers," said Jack Calhoun, president of Banana Republic. Currently, there are no plans to open additional standalone Monogram stores.

Source: Display & Design Ideas

Thursday, March 27, 2008

Simon Malls invests $450M in Boston Area Malls

Simon Property Group is investing $450 million in large-scale renovations and expansions at several Boston-area properties, the company said on Thursday.

Three of the several projects that Boston-based Simon Property Group (NYSE: SPG) is developing include the Burlington Mall in Burlington; the Northshore Mall in Peabody and the South Shore Plaza in Braintree.

At the Burlington Mall an 85,000-square-foot wing will be complete on March 28 with the opening of Nordstrom, which will anchor the mall's new wing.

At the Northshore Mall, a 165,000-square-foot wing will be complete by the fall of 2008. The renovations will culminate with the addition of a 138,000-square-foot Nordstrom that will anchor the new wing and will open in 2009.

The South Shore Plaza is set to debut a slew of new tenants including Teavana on the South Shore, Lego and the children's clothing retailer Janie & Jack. The mall will also renovate several existing retailer space including Origins and Brookstone. The mall will begin construction on a new wing in the fall of 2008. In 2010, the South Shore Plaza will be the third Massachusetts Simon property to open a Nordstrom, which will be housed in the new wing.

"We're seeing our malls in Greater Boston maintain and grow market share, which helps us continue our commitment to providing consumers with the highest quality and selection of shopping possible and the magnitude of these projects pays testament to that," said Laurel Sibert, vice president of mall marketing, in a statement.

Source: Boston Business Journal

Kohl's and JCPenney Will Make You Cry

Kohlscommercial When it comes to TV commercials, I don't have the time. I'm off to grab a snack, fold laundry--anything but watch 30 to 60 seconds of someone telling me I can't live without their product or service. But lately, two apparel retailers have been stopping me dead in my tracks, as I stare at the television in absolute awe. The new Kohl's commercial actually stopped me mid-bite. And nothing gets between me and my food. Until now.

Soft blue colors, gorgeous clothes, Ben Lee crooning "We're All in This Together" drew me in. Suddenly, I had chills. My eyes misted with tears. I wasn't being told to buy anything, I was being invited into a lifestyle where the sky is perfectly blue, the hair is neatly coiffed and the clothes are worn effortlessly (and don't even need to be pressed!). Little children giggle, and the adults are at ease. I want to live there! Thankfully, via YouTube, I can watch this masterpiece again and again.

JCPenney's American Living commercial elicits the same kind of response from me. I can't even talk when this commercial comes on--I shush everyone in the room. It's more subtle than the Kohl's ad, because I don't even notice the clothes. Yeah, it looks a bit like summer in the Hampton's (very Ralph Lauren), but the rest reminds me of growing up, falling in love and laughing with my family. And how cute is the little girl in the red boots stepping on her birthday cake? I mean, seriously. By the end, I'm pulling out the Kleenex. I'm sure Alison Krauss and Robert Plant's version of "Killing the Blues" isn't helping. Don't believe me? Check out YouTube and you'll also find yourself suspended in time, smiling and covered in goose bumps.

Pure genius. Kohl's and JCPenney are employing the same tactics that have made Apple and Nike successful for so long--using a combination of beautiful imagery and music to sell a lifestyle (that just happens to be donning their product). I'm convinced that the success of these commercials is all in the song choice, because it dramatically takes you to whatever you're being shown visually.

Yay Kohl's and JCPenney! I would love to see more retailers employ these advertising methods-- it's not about sales and shoving a product down someone's throat; it's about making people feel something so overwhelming that they can't help but fall in love with your product. And then, tell everyone about it. In a blog.

Now, if you'll excuse me, I'm off to shop at my two new favorite stores...

Source: Retail Design Diva

Sports Authority to open Marlborough store

Sports Authority will open a 40,000-square-foot store in Marlborough on April 5, according to Greg Waters, chief operating officer of Sports Authority.

This will be the Colorado-based sporting goods retailer's 13th store in the Boston area.

The Marlborough store, located at 870 Donald J. Lynch Blvd., will employ about 40 people.

Sports Authority offers top-line brands and a broad product selection from golf and hunting to cycling and soccer paraphernalia.

As part of the grand opening, the store will conduct giveaways and award prizes beginning at 8:00 a.m. and a scheduled New England Patriots' Matt Light appearance from 1 to 2 p.m.

Sports Authority operates 433 stores in 45 states, and employs more than 16,000 people nationwide.

Source: Boston Business Journal

Lowe’s Ground Lease Trades for $13M

WHITEHALL, PA-A 14.3-acre ground lease for a 166,609-sf Lowe’s Home Improvement Center has traded here for $13.2 million. The cap rate was 6.05%. Brad Nathanson, a senior associate and director of Marcus & Millichap’s National Retail Group in Philadelphia, and Jordan Muchnick, an investment specialist also in the firm’s Philadelphia office, represented the seller and the buyer.

According to Nathanson, the buyer was a regional entity; the seller was a national shopping center developer. The legal owner of the property before the trade was Whitehall Newman Associates. The new owner plans to leverage the site’s main selling points, Nathanson tells GlobeSt.com: a rare infill location in this submarket that can accommodate 166,609 sf and that is occupied by a creditworthy tenant. There were between 10 to 20 bidders for the property.

Located at 2650 MacArthur Rd., the property is situated on Route 45, a six-lane highway that is Lehigh Valley’s main retail corridor. “It is difficult to find available acreage of that size on that particular stretch,” he says. Also, “there are few creditworthy big box ground leases that aren’t owned by the tenant themselves.” Lowe's has signed a 20-year triple net ground lease for the space. Originally the property had been a Levitz Furniture store that was vacant when the developer acquired it. Lowe's opened its doors in October, Nathanson says.

Source: GlobeSt.

Williams-Sonoma gives cautious outlook

NEW YORK (Reuters) - Upscale home goods retailer Williams-Sonoma Inc (WSM.N: Quote, Profile, Research) on Thursday posted a higher quarterly profit but gave a cautious outlook for the current fiscal year, citing a challenging economic backdrop.

The owner of the Williams-Sonoma, Pottery Barn and West Elm chains, whose shares fell more than 6 percent before Wall Street's opening bell, said it expects first-quarter results of break-even to a profit of 3 cents a share, below analysts average estimate of a profit of 12 cents a share.

The company forecast second-quarter earnings of 15 cents to 19 cents per share and expects earnings per share for the fiscal year that began on February 4 of $1.42 to $1.56. Both of these forecasts were also below analysts' average estimates.

"As we look forward to 2008, we believe we will be operating in one of the most challenging macro-economic environments we have seen in many years," Chief Executive Howard Lester said in the earnings release.

For the fourth quarter, Williams-Sonoma posted higher-than-expected earnings, helped by an extra week of sales than the year-earlier period.

Fourth-quarter net profit rose to $124.6 million, or $1.15 a share, from $121.1 million, or $1.06 per share, a year earlier. Analysts had on average expected $1.12 per share, according to Reuters Estimates.

Net revenue rose 9.5 percent to $1.37 billion in the fourth quarter even as sales at stores open at least a year fell 0.1 percent.

Lester said the fourth-quarter results reflected the company's ability to execute its business in difficult economic times.

Higher gasoline and food prices, resetting of mortgage rates, a credit crunch and the U.S. housing decline has been felt by all retailers. But chains that specialize in home goods like Williams-Sonoma, Pier 1 Imports Inc (PIR.N: Quote, Profile, Research) and Bed Bath & Beyond Inc (BBBY.O: Quote, Profile, Research) have been especially hurt as the housing decline significantly weakened demand for new furniture and decor.

Given the increasingly challenging home-furnishings industry, Williams-Sonoma said it would focus on reducing catalog circulation, containing discretionary costs and aggressively managing inventory.

The San Francisco-based company also raised its quarterly cash dividend by 4.3 percent to 12 cents per share.

Shares fell to $23.40 in trading before the opening bell from a close of $24.99 on the New York Stock Exchange.

Source: Reuters

Wednesday, March 26, 2008

Experts Clarify Credit Crunch's Impact on Deal Financing

Financing deals during the ongoing credit crunch has left a lot of question marks, but three experts at this morning's Commercial Real Estate Due Diligence conference, hosted by IncreMental Advantage in New York City, shed some light on the market and what both borrowers and lenders can expect in the near future.

Today, life insurance companies and commercial banks are the most viable options for lending money, noted Rick Lechtman, director of The Ackman-Ziff Real Estate Group L.L.C. International balance sheet lenders have also appeared, but Michael Wachs, vice president of AMC Delancy Group, noted that borrows should be concerned with the lenders' deposit base, whether it is through branch or hot money. Asian banks, in particular, are looking in primary markets at sectors that command a lot of money, including multi-family and office.

But whichever today's lender, "what (they) want to see is cash flow," Lechtman explained. "They don't want vacant space or condo projects. They want to lend to people with money. They have a lower risk tolerance." He added that most lenders are willing to finance the "major food groups," but are pulling back on hotel financing with the anticipation that average daily rate is going to decrease. Special properties, like ice rinks, are also not high on lenders' lists, as they prefer to stick to basics. But lenders are even looking at the basics with scrutiny, shying away from tertiary markets and an abundance of similar properties in saturated areas.

Non-recourse borrowers are also having more difficulty finding a lender, because the lenders want to see recourse. Lechtman noted that he has been in the business for 17 years and is doing his first recourse loan ever, and Wachs followed that non-recourse loans have vanished and will not reappear until liquidity returns. Sol Levitin, senior vice president of Silverstein Properties, added that loan-to-values are also significantly lower; before the credit crunch, it was possible to get a 90-percent LTV, but that has since shrunk to 75-percent LTV.

And as a sponsor, it is important to have a solid development plan in place, "with every pitfall thought out," Lechtman cautioned. "If you can't think of an exit strategy for the lender, he is more likely to say, 'No.' He'd rather pass then take on a bad deal."

Overall, balance sheet lenders are requiring more equity and cash flow, whether on a short-term or long-term deal. "Lenders today are real lenders, concerned with risk and not just passing it on to bond lenders," Wachs explained. "Their relationships (with borrowers are back.)"

The time it takes for a borrower to find the right lender has also changed. Lechtman noted that it used to take a couple of days, but it now takes about four weeks to find a lender and three months to do a transaction. Borrowers should go to as many capital sources as they can, and go in with due diligence. And borrowers have been more conservative with putting hard deposits down, and some lenders have walked away at the last minute because there was something missing in the due diligence.

And how can borrowers reduce the amount of equity put into a transaction? "Get the seller to reduce the price," Wachs joked. Lechtman added that sponsors should bring in a stronger joint venture partner, which will get both parties some money rather than none at all.

Some sellers have been cognizant of the market and have reduced prices, structuring the deal to fill in the bid/ask gap, Wachs said. Other sellers, however, are "very jittery" right now, Levitin added, "but need to understand that they don't have to sell."

The panel, titled "Financing Deals During The Credit Crunch," was moderated by CPN Editor in Chief Suzann Silverman. IncreMental Advantage's two-day conference also included sessions on: best practices in development; rehabilitation and environment; title insurance; TICs; sustainable development; transaction financing; pre-emptive due diligence; and property valuation and evaluation.

Source: Commercial Property News

Now a Goliath, Macy's Seeks Localized Focus

NEW YORK (AdAge.com) -- Peter Sachse, like many marketers before him, is doing a tricky balancing act: trying to find the perfect mix of national and local.

Some 18 months after it reinvented itself as the country's largest department-store chain by aligning all its brands under one nameplate, Macy's chief marketing officer is seeking to balance its one-size-fits-all, star-studded national TV campaign with locally tailored products and promotions.

Mr. Sachse, who regained the marketing helm by adding chairman-CEO of Macys.com to his duties following the departure of Anne MacDonald last June, is overseeing the implementation a localization initiative, "My Macy's," that seeks to increase sales by adapting merchandise and marketing based on area preferences. Shifts in merchandise will be evident beginning in the second half of this year, while changes in marketing will follow that, Mr. Sachse said during an interview at his New York office.

From a marketing perspective, the program will ensure that advertising closely reflects local trends. Coats will be marketed more heavily in Minneapolis than they would be in Miami, for example. The initiative also seeks to embed Macy's in the local community. When the high school prom is approaching, Macy's could run a prom ad, Mr. Sachse said. And when the local cheerleading squad wins a competition, Macy's could run an ad congratulating them.

The program, announced last month, could assuage criticisms from customers of the former May Co. stores that Macy's didn't understand their needs. "We want to be locally relevant," Mr. Sachse said.

Following the papers
And for those who would say that represents a sea change from the national message the retailer touted in 2006, Mr. Sachse said there will be "very little" impact on the media mix. He said that newspapers and radio would be the media of choice to convey local messages but added: "We have always believed that newspapers are a very viable part of our media mix. The question has become... are they as big a part of the media mix as they have been in the past?"

The retailer's spending on local newspapers, magazines and radio has dropped 25% since 2005 to $599.4 million, according to TNS Media Intelligence. Macy's total measured-media spending for 2007 was down 7% to $1.02 billion.

This week Macy's breaks the latest round of its celebrity commercials with two spots featuring Carlos Santana, Mariah Carey, Gabriel Aubry, Donald Trump and Martha Stewart. A Spanish-language version of one of the spots began airing March 23. WPP Group's JWT, New York, handled the creative, while sibling Mediaedge:cia developed the media campaign, which runs through May.

The series, which launched last fall, has driven sales and informed consumers, said Mr. Sachse. He noted that businesses featured in the spots have exceeded sales expectations and have ranked among the store's top performers in the wake of the commercials.

Differences of opinion
The retailer's desire to embrace a more promotional strategy was the reason many cited for the departures of Ms. MacDonald and Exec VP-Marketing Brad Jakeman last year. Mr. Sachse declined to comment specifically on those departures said that it is important to equalize the two approaches.

Mr. Sachse said the retailer's promotional plans for this year are similar to last year's, although he said that could change. "The economy is not robust, as we all know today," he said. "But we have to ring the cash register every day, and we have to build a long-term relationship with the customer."

Looking ahead, Macy's is prepping a multimedia green-marketing campaign that will launch around Earth Day, at the end of April. It will promote organic merchandise and its reusable shopping bag and will also dispense tips for being environmentally friendly.

Source: Advertising Age

CVS Sees New Growth

Woonsocket-based CVS Caremark Corp. chief executive officer Thomas Ryan said yesterday that slowing consumer spending is having a “limited effect” on the biggest U.S. drugstore chain by number of stores.

“People will keep filling prescriptions and taking care of personal hygiene and nutrition,” Ryan said in an interview on Bloomberg Television. About 85 percent of the company’s revenue comes from purchases of drugs and health-care products.

Consumers are trimming spending as they face higher gasoline and food prices, declining house values and more uncertainty about employment after further job losses.

“You have about 3 percent of our business that’s affected by the economy,” Ryan, 55, said.

Revenue will rise to “well over $85 billion” this year, CVS said in a statement. That’s in line with a January forecast for sales growth of 13 percent to 16 percent compared with a year earlier, spokeswoman Carolyn Castel said by telephone. Eighteen analysts surveyed by Bloomberg estimated revenue of $87.1 billion this year.

Ryan rang the opening bell at the New York Stock Exchange to commemorate the first anniversary of CVS’s $27-billion acquisition of Caremark Rx Inc. in a deal that made it the second-largest manager of employee-pharmacy benefits.

“As the nation’s number-one prescription provider, we are leveraging our unique combination to help payers control costs more effectively, improve patient access and promote better health outcomes,” Ryan said. “Our integrated model provides us with an opportunity to gain share and create new sources of growth in 2008 and beyond.”

The company operates the largest retail pharmacy chain by store count with 6,300 CVS/pharmacy stores; the largest and fastest-growing retail clinic business through MinuteClinic; the largest specialty pharmacy and health-management programs; and one of the leading mail-order pharmacies.

CVS rose $1.07, or 2.7 percent, to $40.92 at 4 p.m. in New York Stock Exchange composite trading. The shares have climbed 2.9 percent this year.

Source: Providence Journal


$290M Construction Loan Set, Funds Redo

PARAMUS, NJ-It used to be known as Bergen Mall, but Vornado Realty Trust is redeveloping the one-million-sf property on Route 4 here as Bergen Town Center. And Vornado has picked up $290 million in construction financing to help complete that transformation.

The interest-only loan has a rate of Libor plus 1.5%, according to information released by Vornado this week. It matures in March 2011 with two one-year extension options. The source of the funding was not released.

The mall area subject to the loan totals approximately 950,000 sf, with about 40% of that leased to anchors Century 21, Whole Foods and Target, according to a spokesman. Vornado also plans to develop another 250,000 sf of retail on an adjacent 27.5 acres.

The funding comes as Nordstrom Rack, that chain's off-price division, prepares to open a new 35,000-sf store in the mall. It's the company's first Nordstrom Rack in New Jersey.

"We've wanted a Nordstrom Rack in New Jersey for many years now," says Scott Meden, president of the division. "We're excited to offer customers here their own Rack location."

The redevelopment of the shopping center was first revealed in 2005 and carried an estimated price tag at the time of $102 million. The projected completed date of late 2008 has now been moved to early 2009. Along the way, the property has shed anchors Macy's and Value but has added, besides those mentioned, Filene's Basement, Marshalls and Saks Off Fifth.

Built as an open mall in the late 1950s, the original Bergen Mall was enclosed in the early 1970s. It was acquired by Vornado from Simon Property Group in late 2003 for $145 million.

Source: GlobeSt.

Economy Hits Casual Male Sales

CANTON, MA-Same-store sales fell 0.2% year over year during Casual Male Retail Group’s fourth quarter, while total sales fell 7.5%, to $133.9 million. “The men’s apparel business was at the forefront of the slowdown,” said David Levin, the plus-sized retailer’s president and chief executive officer, during a fourth-quarter conference call, pointing out that men cut back before other apparel shoppers during an economic downturn.

One of the things management plans to do this year to fight lower sales is decreasing capital expenditures by 50% from last year, to between $11 million and $12 million. The company’s total store count is expected to stay flat at 488 units, made up of 462 Casual Male XL retail and outlet stores and 26 Rochester Big & Tall stores.

For the coming year, management predicts that same-store sales will come in between a drop of 2% and flat from 2007. Earnings per share are forecast to hit from 25 cents to 30 cents, up from 1 cent last year.

Casual Male Group also plans to launch an e-commerce site in Europe this year. Management said that its London Rochester location is the second-most productive in the entire chain.

Source: GlobeSt.

Tuesday, March 25, 2008

Braintree Planning Board to hear details of South Shore Plaza expansion

Simon Mall said Tuesday it will make the first of its presentations to the Braintree Planning Board Tuesday night, regarding the proposed construction of a new three-level mall expansion to the South Shore Plaza.

The new wing would be anchored by and lead to a new Nordstrom department store at the site of the former Macy's building at the rear of the plaza.

The first hearing will be held at 7 p.m. at Braintree Town Hall. Subsequent Planning Board hearings have been scheduled for April 8 and April 22.

The proposed plans provide space for a number of new, upscale retail shops. In order to accommodate the new shops and Nordstrom, the vacant, four-level building that once housed Macy's, as well as another outbuilding, will be demolished. After the demolition of the two existing structures, the new construction project will result in a net increase of 120,000 square feet to the existing plaza. The new Nordstrom will be about 150,000 square feet.

The March 25 public hearing will signal the next step in bringing Nordstrom to the South Shore.

Nordstrom will open a store at Simon's Burlington Mall this Friday, March 28. Simon's North Shore Mall in Peabody is set to open one in the spring of 2009.

Once plans have been approved and construction permits have been secured, the South Shore Plaza construction is scheduled to begin this summer, with the Nordstrom store opening planned for spring 2010.

Judy Tullius, South Shore Plaza manager, said the presence of Nordstrom will be a boon to shoppers throughout the region.

"Our partnership with 'best-in-class' retailers like Nordstrom demonstrates our commitment to deliver the highest-quality project to the community of Braintree and the entire South Shore," said Tullius, in a statement.

Source: Boston Business Journal

Circuit City Takeover Effort Gains Steam

A recent change in the makeup of Circuit City’s investors, as well as the proxy fight being mounted by activist investor Mark J. Wattles, are “fueling expectations of a management change” at the CE retail giant, according to an analysis published Monday in the Wall Street Journal.

Wattles went public last month with a plan to oust virtually the entire board of the company, save for the slate of directors that represent his own firm, Wattles Capital Management (WCM.)

The Journal piece pointed out that with major institutional investors selling off stakes in the company and activist investors coming in to replace them who have a history of forcing changes, that Wattles’ bid, set to be heard at the company’s annual meeting in June, could gain significant support.

The Journal quoted executives at two funds that hold stakes in Circuit City, Royal Capital Management LLC and First Pacific Advisors LLC, as being receptive to a change at the top. Wattles, for his part, told the paper that has yet to find “a single shareholder who didn’t agree there needs to be a change in management.”

A Circuit City spokesman told the paper that while they are willing to listen to Wattles’ offer, the company is happy with the current composition of its board.

Last week, Circuit City was dropped from the S&P 500, effective March 28.

Source: DealerScope

Tiffany Opening New Prototype

NEW YORK CITY-Despite economic weakness domestically, Tiffany & Co. will open some 26 units worldwide, including a new smaller format that could be expanded in the US, executives said at the company’s fourth-quarter conference call.

The company will open six stores in the United States and approximately 20 units internationally this year. One US unit will be in a new, smaller 2,000-sf format, in Los Angeles.

“We believe the design of this exciting smaller store format will help the selling and service environment that will further enhance Tiffany’s appeal to the self-purchase customer and broaden our expansion plans,” said Michael J. Kowalski, chairman and chief executive officer.

International expansion will dominate, including the company’s first units in Spain and Belgium, and openings in Asia and Australia.

For the fourth quarter, sales were $1.1 billion, up 10% from the previous year. Worldwide comp sales rose 1%. Net earnings were $118.3 million, down 16% from the previous year due in part to a number of one-time charges.

For the year, net sales were $2.9 billion, up 15% from the previous year. Comparable store sales increased 7%. Net earnings in the fiscal year increased 20% to $303.8 million, up 20% from last year.

At year-end, the company operated 184 Tiffany & Co. stores and boutiques worldwide.

Source: GlobeSt.

Legacy Place will include L.L. Bean and market

Despite difficulties in lending markets, the developers of a planned Dedham shopping center with as many as 80 stores and restaurants have secured construction financing and are set to break ground next week.

Legacy Place, at the intersection of Route 128 and Providence Highway, will have a 60,000-square-foot Whole Foods Market with a cafe and outdoor seating, a two-level L.L. Bean store, and a National Amusements Cinema de Lux premium movie theater complex.

Other tenants include Kings entertainment, which offers billiards, bowling, and beverages; a Legal Sea Foods; an Aquitaine restaurant and a Ruth's Chris Steak House; and clothiers Ann Taylor Loft for women and Pink for men, plus Gap, Levi's, and of course, a Starbucks.

"People have been trying to build better retail in this area for 20 years," said Dick Marks, a partner in WS De- velopment of Newton, one of the developers, which started planning four years ago. "You need to have enough different opportunities for people to visit as you can."

WS Development and partner National Amusements of Dedham have a loan of almost $200 million from Sovereign Bank to finance the 675,000-square-foot project.

"I've been in this business 30 years, and it's the worst credit market I've ever experienced," Marks said. "But they're obviously as confident as we are in this asset."

Designers for the retail portion of the project are PCA Architects of Cambridge. The architect for the theater complex on the site and for an 85,000-square-foot headquarters for National Amusements, owner of the cinema chain, is spg{+3} of Philadelphia.

Suffolk Construction will begin construction on April 1, with completion planned for summer 2009, including parking for 2,900 cars.

WS Development has been in heavy competition for some of the same prominent stores with the developers of Westwood Station, a retail, residential, and office development a few miles east along Route 128. The larger Westwood Station, which is also just getting underway, will have Target, Eddie Bauer, and McCormick & Schmick's Seafood, among others.

In Dedham, Massachusetts-based companies that will lease at Legacy Place include National Jean Co., City Sports, Finale desserts, Magic Beans baby goods, and lululemon athletica apparel.

Other signed tenants include Anthropologie, b.good health food, Banana Republic, Levi's, H&M clothing, Cold Stone Creamery, Qdoba Mexican Grill, Fossil watches, Dandelion dining, the house wares company Stil Haus, and Yankee Candle.

The developers will demolish the existing cinema and office buildings bracketing the large parking lot, then construct seven new buildings, mostly of two stories, on the 47-acre site.

Legacy Place will be a large example of the "lifestyle centers" that are in vogue in the retail world, and which comprise a shopping center with entertainment and a variety of restaurants.

Marks said shopping centers at South Shore Plaza in Braintree, the Natick Collection, and Chestnut Hill in Newton are far enough away that, even in a weak economy, Legacy Place should do well.

"That's why this is such a good market - there really isn't any competition," he said.

Source: Boston Globe

Monday, March 24, 2008

Jordan's Furniture plans Red Sox promotion

Jordan's Furniture is running another Red Sox-related promotion this year. But this time, the Sox need to sweep the World Series, rather than simply win.

When the Boston Red Sox won the 2007 World Series, over 24,000 customers of Jordan's Furniture won free furniture in the company's "Monster Deal" promotion, according to a release from the company. The Taunton, Mass., furniture company offered rebates to customers who bought furniture between March 7 and April 16, 2007 if the Boston Red Sox won the World Series that year.

Jordan's President and CEO, Eliot Tatelman, said Monday that the company would run a similar promotion this season. However, under the terms of the special, the team must win the first four games of the series in order for customers to cash-in.

"If the Boston Red Sox sweep the 2008 World Series by winning the first 4 games, customers who make a purchase between March 25 and April 27, 2008 will receive sofas, sectionals, dining room tables, beds, mattresses, and rugs for free," said Taltelman.

Like 2007, Jordan's Furniture has taken out an insurance policy for Monster Sweep 2008. It's estimated Jordan's insurer paid out between $20 million and $30 million to consumers last year in the promo, according to news reports.


Jordan's Furniture chain is owned by Berkshire Hathaway Inc.

Source: Boston Business Journal

Kimco Vice President sells shares

NEW YORK (AP) - A vice president of shopping center real estate investment trust Kimco Realty Corp. exercised options 32,500 shares of common stock, according to a Securities and Exchange Commission filing Thursday.

In a Form 4 filed with the SEC, Edward Raymonds reported he exercised the options on Wednesday for $15.34 apiece and then sold 25,000 shares the same day for $36.11 apiece.

Insiders file Form 4s with the SEC to report transactions in their companies' shares. Open market purchases and sales must be reported within two business days of the transaction.

Kimco Realty (nyse: KIM - news - people ) is based in New Hyde Park, N.Y.

Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Source: Forbes

Pension Fund Pays $91M; $190-PSF for The Loop Methuen

A warranty deed recorded in Essex County, Massachusetts has confirmed the $91 million sale of The Loop in Methuen, MA to Core Fund Loop Property LLC, an affiliate of Dallas-based fund manager, Invesco Realty Advisors with an address registered to Ohio Police & Fire Pension Fund ("Ohio P&F). The 480,000-square-foot regional shopping center was acquired from Loop Methuen Associates Inc., also an affiliate of Invesco.

The last transaction of The Loop occurred in April 2002, when Wilder Companies sold it to Loop Association for $54.5 million. Loop Association was an affiliate of fund manager, Lend Lease Real Estate Investments, which at the time, managed the Ohio P&F fund. In 2003, Lend Lease announced its intention to exit the equity real estate investment management business in the U.S. and in turn, Ohio P&F assigned Invesco as the new manager of its fund.

The Wilder Companies has continued to manage The Loop throughout the transactions; the company completed the redevelopment of the 46-acre property in 2000. The Loop was once the site of the enclosed Methuen Mall. Now an open-air power center / lifestyle center; The Loop Methuen is home to Loews Theatres, Borders, Marshalls, Old Navy, Home Depot, Stop & Shop, Gap, Starbucks, Bath & Body Works, Ann Taylor LOFT, Olympia Sports, Macaroni Grill, and more.

"The Loop" is a format Wilder is trying to carry across other developments - it already operates The Loop Kissimmee in the Orlando area, and is under development on The Loop in Punta Gorda, FL and The Loop in Northborough, MA.

Source: GlobeSt.

Morson Collection plans store on Greenway

A luxury home furnishings retailer has signed a 15-year lease as the anchor store in Lincoln Plaza, an upscale condominium building on the Rose Fitzgerald Kennedy Greenway.

The Morson Collection is scheduled to open its 4,100-square-foot, ground level showroom at 76 Lincoln St. in May. A purveyor of fine European furniture and home accessories, the retailer also plans designer events and workshops for its trade clients at the new location, which is near South Station and the city's Financial and Leather Districts.

Store owner Caroline Morson, which had a previous showroom at the Park Square Building, chose Lincoln Plaza after months of scouting locations around Boston. "I knew immediately it was the right location and the right building," she said.

In 2006, lease holder Linear Retail Properties LLC, bought the retail space and basement storage at Lincoln Plaza from Cresset Plaza LLC, which developed 85 residential units in the building.

Source: Boston Business Journal

Report: Charming Shoppes Scales Back Openings

Bensalem, Pa. (March 21, 2008) Charming Shoppes Inc. executives are cutting back year-over-year store openings in 2008 by 50%, according to GlobeSt.com.

The news follows the announcement of the company’s decision to close approximately 150 stores. The stores, most of which are set to close during the second half of the year, account for an annual loss of around $5 million, the report said.

However, the retailer plans to open 45 to 55 new stores this year, primarily in its plus-sized Lane Bryant chain.

Charming Shoppes said Wednesday it swung to a loss in its fourth quarter same-store sales, which fell at each of the company's brands. The company reported a loss of $127.6 million, compared to a profit of $24.9 million in the prior-year quarter.

Revenue fell 10% to $784.9 million from $874 million a year earlier. The company said sales in the prior-year period reflected an extra week. Meanwhile, same-store sales dropped 9%.
The company will have a more focused promotional strategy than it did late last year, said Dorrit Bern, the company’s president and chief executive officer, during a conference call.

“We want to get her in the store, but we don’t want to give away product like we did in the fourth quarter,” she said.

Source: Chain Store Age

Ann Taylor Changing Merchandise Focus

NEW YORK CITY-In efforts to turn around slumping sales, Ann Taylor’s management is trying to focus on more “modern” clothing at its namesake 349-store chain. The company will incorporate “more holistic” marketing campaign and focus on other styles after a fourth quarter that saw waning demand for women’s suits and classic separates, said Kay Krill, Ann Taylor’s president and chief executive officer, during a conference call.

During recent customer surveys, management found that the chain is “not as clear or as exciting in stores” as it could be, she said. Fourth quarter traffic saw a double-digit decline at the chain.

Same-store sales at Ann Taylor stores fell 7.8% year over year at Ann Taylor stores. By contrast, comparable sales at its 512 Loft units only fell 0.5%. The company’s overall net sales fell to $600.8 million from $610.5 million during the same year-ago period, while operating income dropped to $18.2 million form $30.5 million.

In the coming year, as previously announced, Ann Taylor will close 64 underperforming stores. There are 50 to 55 openings planned, with 20 to 25 of them planned as Ann Taylor outlets, 15 Lofts, 10 of the newly launched Loft outlet stores and four Ann Taylors.

Like other retailers such as Home Depot and Macy’s, Ann Taylor is abandoning its monthly sales reports because they “distort a true picture of performance,” said Maria Sceppaguercio, senior vice president of communications and investor relations.

Additionally, management announced that it’s new concept geared toward the “modern Boomer,” which was planned to roll out this year, is delayed until 2009.

Source: GlobeSt.

154,611-SF Retail Trades in Suburban MD

GLEN BURNIE, MD-A retail trade here has closed with assumable debt that is reminiscent of happier credit market days. The building, called Ordnance Plaza, is a 154,611-sf center, shadow-anchored by a 122,711-sf Costco store and a 121,200-sf Home Depot store. The seller was an affiliate of Cohen Commercial Properties; the buyer, a private New York City investor. Helen Putterman, president of CCIRE and Vera Thomas, senior managing director, represented the seller and brought in the buyer as well.

"The center’s tenancy, location and assumable debt made it a very attractive purchase," says Putterman. Specifically, she continues, the ability to close with 15% equity and a mortgage in place for nine years at a fixed rate created a high cash on cash return that enabled the seller to entertain a high number of competitive offers and the buyer to capture an exceptional return on his equity.

“There were numerous buyers who saw great value in owning Ordnance Plaza,” Thomas says. “The buyer was chosen amongst over a dozen candidates because of his 1031 requirement.”

Other national and regional tenants at the property include Sports Authority, PetsMart, Sears, Staples, McDonalds and Planet Fitness. The center was purchased from an affiliate of the original developer, Price REIT in 2002. At the time there were 40,000 sf vacant in the complex, which the former owner fully leased.

According to the property’s marketing materials Ordnance Plaza is benefiting from a more heavily trafficked Ordnance Road due to the completion of Route 10, which now allows the center to draw more heavily from the Baltimore area. Also, the center is bordered by two office parks that generate increased traffic.

Source: GlobeSt.

Sunday, March 23, 2008

PetSmart learns new tricks for tough times

At a time when customers and Wall Street are more bottom-line focused than ever, the challenge for the country's largest pet-store chain is to give customers reasons to keep walking in the door.

"We have lots of competition," said Philip Francis, PetSmart chairman and chief executive officer. "Our strategy has been to zig when everyone else is zagging."

One way the Phoenix-based company intends to zig this year is to focus more on specialty services. The company is aiming for a 20 percent increase in sales of services not offered by competitors, including "doggy day camp"; overnight boarding that includes dessert and a belly rub; and a combination of a credit and rewards card that can be decorated with an image of the customer's pet.

The numbers appear to back up the strategy: A bright spot in PetSmart's fourth-quarter earnings was a 26.9 percent increase in sales of services, to $123.4 million.

PetSmart, which had $4.67 billion in annual sales in 2007 and operates more than 1,000 stores in the United States and Canada, has long been a top dog with Wall Street. As recently as last summer, analysts and national financial writers were praising the company's business model.

More recently, analysts have begun to question whether, in light of the tougher retail climate, PetSmart has zigged too far in the direction of store expansion and racks of items like $12 rhinestone dog collars.

After the company's earnings report this month projected flat or single-digit same-store sales for the next two quarters, financial writers and stock-market analysts razzed the company with headlines such as "PetSmart needs a scooper" and "Some days you're the dog, some days you're the hydrant."

PetSmart's same-store sales were nearly flat in the fourth quarter, which included the holiday season. And while shoppers spent an average of 3.5 percent more per ticket in the last quarter, shopper traffic was down 2.6 percent. PetSmart's net income was 2 percent lower than the same quarter a year ago: $75.4 million.

"Our current situation is unlike anything this business has experienced in the past," said Francis, who noted that Pet-Smart's business continued to grow even during the aftermath of the terrorist attacks of Sept. 11, 2001, as people stayed home to strengthen bonds with family and pets.

PetSmart officials said they traditionally have counted on about half their business coming from sales of items like dog leashes and cat toys. Slightly more than 40 percent has come from pet-food sales, an area that continues to be profitable.

What surprised PetSmart officials late last year was the lack of spending on toys, leashes and other gear.

To bring things into balance in the slower market, Francis said, the company will scale back construction of new stores in the next two years. And, while it won't drop sales of pet luxury items, PetSmart store buyers will be pickier about the items they stock.

Opening 45 more PetsHotels and hiring additional staff to provide services, like breed-specific dog grooming, are among the company's priorities this year, Francis said.

The strategy may sound risky in economic times when families are cutting back on small luxuries, like visits to sit-down restaurants.

But industry observer Mark Kalaygian, editor in chief of Pet Business magazine, a New York-based trade publication, said he thought the focus was smart. Independent pet stores traditionally have offered pet-care advice as a bonus to customers, he said.

Phoenix customer Vicki Myles, who owns both a busy fast-food restaurant and a lively pug-beagle mix named Lola, fits the profile of the customer PetSmart covets. She said she views doggy day camp and stays at the PetsHotel as necessities.

Lola "has so much energy and she loves to be around other dogs," said Myles, who has worked as many as 100 hours a week at her Chick-fil-A. " We don't feel guilty at all about leaving her."

Source: The Clarion Ledger

Friday, March 21, 2008

Cedar Closes on $18M Kimco Assets

NEW CUMBERLAND, PA-Cedar Shopping Centers Inc., a Port Washington, NY-based shopping center REIT which also has an office here, has closed on four Pennsylvania supermarket-anchored properties in which Kimco Realty Corp. owns a 75% interest. The properties are located in Williamsport, Halifax, New Cumberland and Newport.

The two firms entered into joint ventures in 2002 and 2003, which included the option that either would be entitled to certain preferred returns on contributed equity. Cedar paid to Kimco $17.5 million for the four properties, funding the transaction from its revolving credit facility.

Valued at approximately $52.9 million, their current debt is approximately $27.3 million. The acquisition is expected to be accretive to the company's FFO on an annual basis in the amount of approximately $0.015 per share/OP Unit--approximately $0.005 to its net income per share.

According to Leo Ullman, Cedar's CEO, one of the advantages of the deal’s structure is that it eliminates the continuance of a preferred return structure, in effect replacing it with much cheaper debt, “while permitting our company to benefit from future growth of these fine supermarket-anchored properties, which continue to evidence strong results.” Ullman also notes that the 484,500-sf portfolio dovetails with the company’s development strategy as two of the properties are already included in its revealed pipeline allowing the company to improve its return on investment as full owners of the assets.

Source: GlobeSt.

Kohls offering discount chic

Midtier department store chain Kohl's (42, KSS) is managing through the tough times with style. Retail is among the most damaged sectors in the current downturn, as pinched customers stay away from stores. While controlling inventory and cutting expenses with the best of them, Kohl's is doubling-down in cheap chic. That's the trend among pedestrian retailers to class up their offerings with high-end names, such as Martha Stewart housewares at Kmart and Isaac Mizrahi clothing at Target.

Kohl's lately has been busy launching women's fashions from designer Vera Wang, shoes from skateboarder Tony Hawk and kitchenware from celebrity chef Bobby Flay. Wang's dresses and handbags often sell for under $100 at Kohl's, versus the four-figure goods she peddles at chichi boutiques.

Kohl's also is targeting young (under 25) women as the exclusive retailer for Candie's apparel and shoes. Teen actress Hayden Panettiere will serve as Candie's spokesperson for the spring marketing campaign. Later this year the 930-store Kohl's chain will expand its Elle fashion offerings and debut new Fila apparel and footwear. In 2009 it plans to offer women's clothes from Dana Buchman, a renowned women's apparel brand that is a division of Liz Claiborne.

To Richard Jaffe, retail analyst at Stifel Nicolaus, this all will pay off eventually, expanding Kohl's market share and its margins. For the moment, though, Kohl's has taken its knocks. Same-store sales for the holiday quarter dropped 4%. For fiscal 2007 (ended Feb. 2, 2008) the company reported net income of $1.1 billion, flat compared with 2006, on revenue of $16.5 billion. The stock trades at a modest trailing price/earnings multiple of 12, versus 15 for Target , 16 for Wal-Mart.

Source: Forbes

Dunkin' Donuts continues to roll out Baltimore expansion plans

Two New York franchisees are planning to boost the number of donuts being sold around Baltimore.

Richard Greenstein and Howard Novick said they will open 16 Dunkin' Donuts locations around Baltimore within the next three years. Five of the locations are expected to open this year. The exact locations of the new restaurants were not disclosed. In September, Dunkin' said it was expanding in the Baltimore area, with plans to open 50 new stores during the next several years. Greenstein and Novick's planned locations are part of Dunkins' expansion goals in Baltimore.

The two already own multiple Dunkin' Donut locations in New York.

Canton, Mass.-based Dunkin' Brands Inc. has been unveiling a slew of national growth plans within the last year. The company has said within the last several months it was rolling out new locations around Washington, D.C., Dallas-Fort Worth, St. Louis, and the Kansas City area.

Dunkin's plans are to triple its number of stores to 15,000 over the next 13 years.

Dunkin' has also recently launched a new line of products that include flatbread sandwiches, personal pizzas and hash browns.

Source: BizJournals

Thursday, March 20, 2008

Whole Foods to Open 25 to 30 Stores in Fiscal 2009

NEW YORK (AP) -- Natural foods grocer Whole Foods Market Inc. said it will open between 25 and 30 stores in fiscal 2009, according to a Securities and Exchange Commission filing Thursday.

In the filing, the company said it made the announcement on Monday at its annual shareholders meeting. The Austin, Texas-based company operates more than 270 stores.

Source: Yahoo

Circuit City to run with "The City"

NEW YORK (MarketWatch) -- Circuit City Stores Inc., which lost more than one-quarter of its stock value after posting a wider loss than expected, is hoping that a new store concept two years in development will be a turning point for the company

Circuit City (CC
)
this year opened seven "The City" stores, including one in New York separated only by a wall from a store operated by its larger and better-performing rival, Best Buy Co.

Best Buy Co., Inc. (
BBY) The 20,000-square-foot concept is at least one-third smaller than its standard 30,000 to 35,000 square-foot stores, the company said.

The new concept also will be where it allocates capital spending. Circuit City had 681 U.S. locations at the end of its third quarter and plans to open as many as 60 The City stores next year.

Circuit City, which analysts said has lost sales and traffic to Best Buy and others partly because of aged stores and lackluster customer service, said that the City is cleaner and more brightly lit. The concept also showcases digital cameras and other products in round pods, offering customers a more desirable retail experience.

"The City is more than just a better-looking store," said Chief Executive Philip Schoonover on a conference call Friday. "We have data that show both the customers and associates prefer this experience to our older stores. Customer-shopping patterns have changed a lot. They are looking for full service."

At the City, employees are armed with tablet PCs to help answer customers' questions and are trained to handle different tasks and sell various product categories throughout the store, instead of only being assigned to one product category. Almost all of the fixtures are on wheels and can be easily taken apart to quickly feature different merchandise. In addition, the concept has portable price scanners for customers to check on product information and price.

The new City stores also use more of their footprint. While 400, or under two-thirds of the company's stores only use up to 60% of the stores as selling space, the City takes 85% of its floor.
While the City marks a step in the right direction, some analysts commented that Circuit City has higher priorities. "The initial read on the City stores is that management understands what it takes to be competitive in the industry," said Scott Tilghman of Soleil Securities. "But I don't think it'll be the driver of the turnaround."

On Friday, the retailer reported that its third-quarter loss widened after weakness in product categories from traditional TV sets and desktop computers to more-profitable warranty-service programs. Discounts on flat-panel televisions also dented profit. Circuit City said that it may expect a loss in the fourth quarter, when analysts were expecting profit of 56 cents a share. See full story.

"They have bigger problems than coming up with new store concepts," said Pali Research analyst Stacey Widlitz. "It's innovative, but they need to work on their current store base."
The new stores have yet to prove they can help Circuit City. Joe Feldman, a Telsey Advisory Group analyst whose office is right near the City on Fifth Avenue in New York, said that the Best Buy store next door is generally more crowded and open longer hours.

"They've got a long way to go," Feldman added. "It's going to take a long time to turn things around."

Source: MarketWatch

Copley Place to undergo expansion

Mall owner Simon Property Group said Thursday it is planning a major expansion of Copley Place, including a residential tower and a large addition to its Neiman-Marcus anchor store.

The expansion, first discussed with city officials in 2006, calls for 660,000 square feet of luxury residential space, 60,000 square feet for new shops and restaurants and an additional 54,000 square feet at Neiman-Marcus, as outlined in the initial papers filed this week with the Boston Redevelopment Authority.

A 4-season "winter garden" will be added to the main entrance of the complex at the corner of Stuart and Dartmouth Streets in the city's Back Bay. No additional parking is called for by Simon in the plan, which noted the proximity of nearby public transit stations.

The project is expected to bring about 1,700 construction jobs into the city, and eventually, to add from 250 to 270 permanent jobs at the complex.

The expanded Neiman-Marcus store and the winter garden will serve as the "base" of the residential tower, which calls for 300 condominiums and high-end amenities including a 24-hour concierge and spa services.

Source: Boston Business Journal

Children's Place to Exit Disney Store Business

New York City (March 20, 2008) Children's Place on Thursday said it is in advanced talks with The Walt Disney Co. for Disney to regain ownership of two-thirds of Disney Stores in North America.

Disney confirmed it was talking about potentially buying back a portion of the Disney Store chain, which Children's Place has operated under a license.

"Given the challenging macro-economic environment, we believe the steps we are taking today, while difficult, will put The Children's Place in position to realize its full potential," Chuck Crovitz, interim CEO of The Children's Place Retail Stores Inc., said in the earnings release.
Children's Place also on Thursday posted a net loss for the fourth quarter, compared with a year-ago net gain, hurt mostly by one-time charges regarding its exit of the Disney Store North America chain.

The company reported a quarterly net loss of $58.5 million compared with a net profit of $44.7 million a year earlier. Excluding items such as asset impairment charges, the company earned $20.5 million.

The company said it recognized a pretax asset impairment charge of $80.3 million in the fourth quarter of fiscal 2007, related to exiting the Disney store. The company said it plans to cut 80 positions from its shared services work force.

Children's Place said consolidated comparable sales for all its stores in the fourth quarter rose 3%, while the Disney Stores comparable sales fell 4%. Apart from the charges, Children's Place said a tough economic environment and high inventory hurt earnings.

"By any measure, fiscal 2007 was a very tough year for our company. For the majority of the year, our merchandise assortments ... did not resonate with the consumer and our inventory levels were too high, particularly given the challenging economic environment," Crovitz said.

Source: Chain Store Age