Thursday, July 31, 2008

Tim Hortons goes to college: Chain opens first U. S. campus store at UB

Jul. 31--With coffee cups in hand, University at Buffalo dining staff and Tim Hortons executives cut the navy blue ribbon in front of the company's first U. S. college campus location.

A line of anxious and hungry customers waited for pink frosted, sprinkle-topped donuts, a quick sandwich or a mid-day cup of caffeine at the noon ceremony on Wednesday. For Tim Hortons, though, the opening symbolized the beginning of a new chapter in the story of the Ontario-based company.

"We look to UB as the flagship location for us in the United States," said David Clanachan, Tim Hortons chief operations officer, United States and international. "If we can continue to push and penetrate the way we have in other markets, we think there is a tremendous amount of opportunity."

Two Tim Hortons are open at UB's North campus, one in the Jacobs Management Center and another in the Student Union. They both serve a full menu. The Jacobs Management Center store opened two weeks ago, but the official ceremony was held at the Student Union, where the bakery items are made.

For Chelsea Lopez, a junior at Hutch Tech High School and the first customer in line, the opening was timely for her lunch break. She is a participant of the Upward Bound summer program on campus and grabbed a toasted plain bagel with cream cheese, to go.

"Tim Hortons is very popular," she said. "Sometimes it gets old going to Starbucks every day."

UB approached Tim Hortons about a campus location after it conducted a survey and focus groups, asking students and faculty what stores and businesses they would like on campus. Tim Hortons was the overwhelming answer, said Dennis Black, vice president for student affairs.

It took 90 days from the first serious discussions to the end of construction, Clanachan said. The construction had to be completed by July 9, when student orientation began.

Jeff Brady, executive director of food service, said that a portion of the profits will go back to UB. Both UB and Tim Hortons declined to give specific figures.

There are currently 123 Tim Hortons on college campuses in Canada. Soon, more will join UB in the United States. Plattsburgh State College is expected to open a Tim Hortons in mid- September, and one is due at Canisius College in October, said Dale Kezer, director of new business development.

Clanachan said that by the year's end, the current 410 Tim Hortons -- concentrated mostly in Michigan, Ohio and Northeast markets -- will be up to 500 stores.

Among college students, the popular orders are iced cappuccinos and bagels, said Jon Maurer, Tim Hortons regional manager for Buffalo.

Maurer said of overall sales, 50 percent are beverages, 25 percent are baked goods, and the rest are various items, including soups and sandwiches.

Even though Starbucks is directly across the street from the Student Union, Clanachan brushed off the threat of its coffee competitor. He said Tim Hortons is a comfortable and affordable location for a wider audience.

"With $4 a gallon gasoline, no one wants to pay $5 for coffee," he said.

Source: Plain Vanilla Shell

Costco Proposed For Upper West Side

New Yorkers Seem To Like Idea, Which Is In Early StagesNEW YORK (CBS) ― Is Costco about to go cosmo?

One of the biggest of the big box stores may be coming to Manhattan. There's talk of putting a new Costco store on the Upper West Side.

CBS 2 HD spoke to New Yorkers on Tuesday to find out what they thought of the idea.

"Well that's great," one person said. "Sounds good."

It's the gigantic store featuring endless inventory and discount deals. Now, it's potentially coming to Gotham.

"I think, potentially, it could be good," one woman said. "Could drive a lot of business to this neighborhood."

A developer is reportedly in talks with Costco to bring a supersize store to the Riverside South area by the West Side Highway, between 59th and 61st streets.

But not everyone's thrilled.

"This is not a good location for Costco," said NYC Councilwoman Gale Brewer, D-Manhattan.

Brewer is worried about the noise and traffic the store would bring.

"The traffic is always so intensive and this would exasperate the traffic situation ... because you need a car to take home all that toilet paper," Brewer said.

In Long Island City, where Costco has a huge store, residents say its impact has been mostly positive.

"It's good to have it here," one resident said. "It helps out a lot of people here."

But the proposed project is still being called a work in progress, with public hearings in the community to be scheduled if and when the plan goes forward.


Study finds Americans reduce credit card spending

NEW YORK — Americans in all age and income groups have reduced credit card use and cut spending on non-essential items as oil and food prices soar, home prices sink and lenders tighten credit, a new study shows.

Thirty-seven percent of consumers said they have reduced spending on credit cards, while just 10% said they are spending more, according to the study released Wednesday by Javelin Strategy & Research of Pleasanton, Calif.

Meanwhile, 54% of consumers said they plan to spend less on "discretionary" or luxury items, while a mere 5% plan to spend more. The percentages of consumers spending less were even higher among consumers aged 35 to 64.

And 57% said they are "more careful" about eating at restaurants, where bills are often paid with plastic.

COMPARING CARDS: Find the credit card that suits you best

On Tuesday, the company behind Bennigan's and Steak & Ale filed for Chapter 7 bankruptcy, joining a few other operators of casual dining chains that succumbed this year as more people chose to dine at home.

"Consumers are getting more cautious and the credit crunch is far from over," said Curtis Arnold, a consumer advocate and founder of

Americans in May had $961.8 billion of revolving debt, U.S. Federal Reserve data show, equal to roughly $3,150 per person. The total amount is up about 58% this decade.

Card issuers face pressure as credit problems brought about by the housing slump extend into other forms of debt, causing higher delinquencies and forcing even the wealthy to cut back.

Among 13 issuers polled by Javelin, nine said they have pared efforts to solicit new customers, while eight have reduced customer credit lines.

Several issuers reported lower second-quarter results from cards, including Bank of America, Citigroup, JPMorgan Chase, Washington Mutual and American Express.

On July 21, Amex Chief Executive Kenneth Chenault called the U.S. credit situation "disappointing."

Regulators are keeping watch. The Fed said it received more than 41,000 public comments on proposed rules to thwart "unfair or deceptive" card practices, such as excessive rates and fees. (Two-thirds of the comments came on form letters.)

Fed Chairman Ben Bernanke, in announcing the proposed rules in May, said cardholders "should be better able to predict how their decisions and actions will affect their costs."

Arnold said many consumers are charging more day-to-day expenses, as issuers offer rebates to encourage such card use.

But he added that some issuers, including Wells Fargo & Co, have also begun reaching out, even to customers who pay bills on time, to prepare them in case times get tough.

"Yes, the card issuers want to collect finance charges, but they don't want their customers to be delinquent," Arnold said. "We've never before seen the industry start to reach out to their customers, saying, 'we know you're hurting."'

Wells Fargo spokeswoman Lisa Westermann said that bank recently promoted counseling and automatic payment services to "select" customers, whose responses were "mostly positive."

Javelin's survey covered 1,500 consumers who answered questions online in April.

Source: USA Today

Shoppers to face higher prices for holiday shopping this year

NEW YORK (AP) - Christmas in July? Maybe not a bad idea this year.

Retailers are already talking about price increases of up to 15 percent this year on holiday goods, from staples like tree ornaments and toys to luxury gifts like European handbags and clothing. The main cause? It’s the same old chestnut, soaring energy prices.

While most consumers are just starting to think about back-to-school shopping, retailers are already preparing for the critical holiday season. Consumers have been seeing prices creep up for many products, but now escalating cost pressures - which are also being fueled by the weaker dollar and higher labor costs in China - are forcing merchants from low-price warehouse clubs to upscale clothiers to pass on more of the burden in the months ahead.

Many stores are still deciding on their holiday prices, and receding oil prices in recent weeks could provide a bit of relief. Still, buying that status handbag now might help shoppers save a little - but for some items, it’s already too late.

And any big surge in demand could lead to more bad news on the inflation front, serving as a catalyst for prices to spiral.

With bigger price increases, the nation’s merchants risk turning off shoppers who may end up buying fewer holiday gifts to keep to their budgets. That could mean a serious hit for the economy, since consumer spending accounts for two-thirds of all economic activity and the holiday period accounts for a huge chunk of merchants’ sales and profits.

“Truthfully, I probably won’t purchase items that go up that much - especially something like Christmas decorations,” said Marilyn Reese of Cincinnati, who works at an insurance company. “I will just go with what I have.”

Carl Steidtmann, chief economist at Deloitte Research, says that price inflation will be yet “another factor that undermines consumer purchasing power and will hurt spending even more.”

“This will be a very difficult holiday season,” he said.

The price increases come as stores also have to be pushing even deeper discounts this holiday season to attract customers. But that 50 percent off may not be as good a deal as last year since the original price could be higher.

Even Costco Wholesale Corp., which had been one of the bright spots in retailing, warned last week that its profit was getting squeezed by rising energy costs and it would have to raise prices more. Richard Galanti, Costco’s chief financial officer, specifically cited holiday decor and rotisserie chickens, which are popular for holiday meals.

Holiday decor will be as much as 12 percent pricier this holiday season than a year ago, and the price of rotisserie chicken, which had been $4.99 for years, was raised to $5.49 about three months ago and just went up to $5.99 last week.

Toy prices are likely to be about 10 percent higher for the holidays than a year ago, said Sean McGowan, an analyst at Needham and Co.

K-B Toys Inc., which focuses on selling past toy hits at discounted prices, says it isn’t increasing prices for now. The chain even unveiled a program Monday that offers temporary price cuts on some already reduced toys. But the discounts are a result of logistical maneuvering. Advertising director Geoffrey Webb said the chain has started consolidating trips from the distribution centers to stores to save fuel costs.

Kathleen Waugh, a spokeswoman for Toys “R” Us, Inc., said that prices for some products will stay steady, while others will have “gradual” increases beginning in early fall. Waugh declined to comment further because pricing is still being worked out. But at Kidstop Toys and Books in Scottsdale, Ariz., which offers mostly European brands as Haba and Corolle, 10 percent price hikes have already begun, according to owner Kate Tanner.

European luxury goods are also getting even pricier as the dollar erodes against the euro. New York-based luxury consultant Robert Burke estimates that the price tag on European status handbags, shoes and clothing, whose prices have been creeping up in recent years, will rise as much as 15 percent starting this fall.

“No one expected the weak dollar to last this long or get weaker,” said Burke.

Sandy Neiman, director of marketing for clothier Paul Stuart Inc., whose tailored men’s suits are priced from $1,700 to $5,000, expects up to a 10 percent increase on European clothing starting in September. While he believes that his wealthiest clientele won’t “blink an eye,” others may switch to less expensive labels or shift their purchases away from items like knit shirts and more toward suits, which can be worn for several seasons.

Prices for mass-market apparel, which have fallen for decades because of oversupply and cheap labor from China, are also seeing prices rise a bit because of higher wages from that country and that’s forcing stores to shift production to other low-cost countries like Vietnam. Quentin Crenshaw, a spokesman at J.C. Penney, which sources in 17 different countries, said that the department store chain doesn’t expect to increase overall prices for the holidays - even for goods that are sourced primarily in China like footwear and porcelain, which are expected to see an increase in costs.

Officials at Wal-Mart Stores Inc., Sears Holding Corp., and Target Corp. declined to comment, but a clearer picture on inflation is expected after they report their second-quarter results in August.

The profit outlook isn’t pretty. Retailers have been forced to absorb costs at the expense of profits but can’t do it any longer, since the holiday period accounts for about 40 percent of merchants’ profits and 50 percent of sales, says Ken Perkins, president of research company RetailMetrics LLC. The retail industry is set to report an overall profit drop of 5.2 percent for the current quarter compared to a year earlier, what will be the fifth consecutive quarterly declines. Excluding Wal-Mart’s figures, Perkins estimates a 13 percent drop.

Customers shouldn’t expect to see relief after the holiday season, either. Galanti, of Costco, said prices for patio furniture for next spring will rise as much as 15 percent.


MA schedules sales tax holiday

For the fifth year in a row, Massachusetts shoppers will have a brief reprieve from state sales taxes this summer.

Gov. Deval Patrick signed legislation Wednesday that established a tax-free weekend, which will take place August 16-17. Purchases of items $2,500 or less will be exempt from the 5 percent tax.

“I am glad we can provide people with this small break in time for back-to-school purchases,” Patrick said in a statement. “We hope it stimulates all sorts of sales activity during what is otherwise a slow time of year.”

This year the proposal was under fire from fiscal watchdog groups as the state grapples with potentially a $1 billion budget shortfall. Regular sales tax receipts, which exclude food and motor vehicles, are up a paltry 0.8 percent over last year, but $48 million below state Department of Revenue benchmarks used in budget calculations.

Retail groups say the holiday will provide a needed boost to the economy.

“The sales tax holiday weekend is a highly effective way to stimulate economic activity and couldn’t come at a better time for the retailing community,” said Jon Hurst, president of the Retailers Association of Massachusetts in a statement.

More than dozen other states have established sales tax holiday this year, according to the Federation of Tax Administrators.

Source: Boston Business Journal

Wednesday, July 30, 2008

Retail Construction Hits a Red Light

Consumers are checking discretionary spending and, seemingly everyday, new retailers come out with announcements that they are filing for bankruptcy, shuttering stores and constraining expansion plans. As a result, construction is coming to a screeching halt at projects across the country as developers reevaluate proposed centers' economic viability.

Most recently, site work of the planned 215-acre open-air center, Bridges at Mint Hill in Charlotte, N.C., came to a halt. Chicago-based General Growth Properties and local partner Childress Klein Properties originally announced plans for the center in June 2005. It was slated to open in 2007. A series of delays pushed projected completion back to 2009. As for now, no new timeline has been announced.

Elsewhere, Memphis, Tenn.-based Poag & McEwen Lifestyle Centers scrapped plans to build Boise, Idaho's first lifestyle center, a 200,000-square-foot, $50 million project. The developer initially had planned to open the center in 2009. Now the project no longer appears on the company's list of new developments on its Web site. Poag & McEwen did not return calls seeking comment.

CBRE/Torto Wheaton Research, a Boston-based research firm that tracks completions of neighborhood and community shopping centers, estimates that developers delivered 6.3 million square feet of space in those sectors during the second quarter--two-thirds of the planned 9.7 million square feet of space that was supposed to come online. “That, to me, signals that some of the projects are being either taken away or delayed,” says Abigail Marks, economist at CBRE/Torto Wheaton.

However, Marks forecasts the full impact of the current downturn won’t be realized until next year, when only 14.7 million square feet of new neighborhood and community center space is projected to come on-line. In the first half of this year, developers in the U.S. began construction on 71 million square feet of retail space, according to CoStar Group, Inc., a Bethesda, Md.-based commercial real estate information provider. That figure represents a 24.5 percent decrease compared to the first half of 2007, when construction was started on 94 million square feet of new projects.

With the conditions in the retail sector deteriorating precipitously, real estate developers are abandoning projects that appeared to be sure bets a year or two ago. As retailers pull back, many developers have opted to forgo construction of centers that have gone so far as breaking ground. That trend is expected to escalate as the retail market continues to deteriorate, says Gary E. Mozer, managing director/principal with George Smith Partners, a Los Angeles-based real estate investment banking firm. Speculative projects in secondary and tertiary markets especially face a risk of being delayed or scrapped, Mozer says.

The credit crunch is in part responsible for the increase in construction halts and delays. The market's capacity to finance new projects has diminished with CMBS issuance year-to-date down to $12.1 billion from $158.9 billion during the same period in 2007, according to Commercial Mortgage Alert.

To help address the void, Continental Retail Development, in Columbus, Ohio, has formed the Continental Opportunity Fund, a $200 million fund, to provide equity and mezzanine financing for retail developments that have a first mortgage, but require additional funds to begin construction. It will contribute as much as $40 million towards a project.

One reason there hasn't been an even steeper decline in completions this year, says Continental's CEO David Kass, is that most of the financing for retail projects scheduled for delivery this year was completed years ago. Retail centers scheduled to come online after 2008 will be hit harder, he says. Completions in 2009 could be off by as much as 70 percent, Kass estimates.

For example, unable to shore up financing for its $3 billion project, the Grand, in downtown Los Angeles, Related Co. sought and received approval by city officials to delay the groundbreaking of its 3.6 million square foot mixed-use center by eight months, until Feb. 15, 2009. If Related does not begin construction by that date, the city of Los Angeles has the option to impose a $250,000-a-month penalty for up to 24 months. The Grand's groundbreaking has already been delayed three times. Related says it was due to design considerations and not because of financing. Read more here.

A spokesperson for Related says the firm is in the process of putting together the necessary construction documents, which is why it still hasn’t secured a construction loan. As the debt markets have tightened over the past year, lenders won’t negotiate with a developer until all the paperwork is complete, she added.

Mozer says banks would rather lend on a cash-flowing asset than a construction project because you don’t have as much lease-up risk. For Continental to provide financing, a project must have committed anchors and at lease 50 percent of its leases signed.

The ebb in retailers’ expansion is a big issue, according to Bernie Haddigan, national director of the retail group with Encino, Calif.-based Marcus & Millichap Real Estate Investment Services. “I don’t see retailers getting more aggressive at this point,” he says. “I see them getting more cautious.”

Source: Retail Traffic

Retail Detail. The Top Ten List of The World's Most Expensive Retail Addresses

Fifth Avenue - NYC

Location, location, location! Sometimes a location is more than a location, it's a brand.

The CEOs of Tiffany & Co., Bergdorf Goodman and Harry Winston already know this real estate tidbit as their flagships are located on Fifth Avenue between 56th and 58th streets in Manhattan...some the most coveted and expensive retail stretch in the world.

Retailers looking to set up shop on Fifth Avenue - between 59th and 42nd streets - can expect to spend $1,500 a square foot. To put that into context, many shops on that stretch are around 20,000 square feet, making annual payments about $30 million a year.

Even as stock prices and consumer confidence slide, the world's elite addresses, like New Bond Street in London, Ginza in Tokyo, Bahnhofstrasse in Zürich, Switzerland, or Avenue des Champs-Elysees in Paris are not showing signs of stress.

Gangnam Station - Seoul, South Korea This month, Abercrombie & Fitch signed a lease for 90,000 square feet at 666 Fifth Avenue (at 53rd Street) and agreed to pay over $2,000 a square foot. British retailers Topshop and Reiss are in the midst of an international expansion, especially in the U.S, and Apple opened its first flagship store in London.

Still, that doesn't mean retailers aren't aware of the slowdown. "People are using a slowdown as a negotiating tool," says Jeffrey D. Roseman, executive vice president of Newmark Knight Frank Retail, the New York arm of the London-based firm. "But once it's all said and done, retailers are not necessarily losing business from it. The folks buying the $5,000 or $10,000 suits, or $1,000 shoes aren't as affected by what's going on in the world."

In Asia, Hong Kong is home to luxury shoppers. Foreigners can visit on a passport, and Chinese can travel freely to the city because of its status as a special administrative region. Guess where the huge shopping districts for Chinese and international wealth form as a result? In Hong Kong's Causeway Bay, a district built on fill, retail goes for $1,213 per-square-foot per year.

Pitt Street Mall - Sydney, Australia While the highest-end properties continue to hold out, the big questions for the remainder of 2008 and into 2009 are how long properties, retail and office can hold up in the face of a global economic slowdown as investors and businesses alike start to feel the pinch.

But no matter how much you worry about real estate, it's safe to think that the draw and status of places like Ermou Street in Athens, Greece, or Grafton Street in Dublin, Ireland, along with Fifth Avenue in New York, will hold their value longer than other neighborhoods.

Here is the top ten list of the world's most expensive retail real estate:

10. Gangnam Station
Seoul, South Korea
Price-per-square foot, per year: $431

9. Ermou Street
Athens, Greece
Price-per-square foot, per year: $451

8. Pitt Street Mall
Sydney, Australia
Price-per-square foot, per year: $489

7. Bahnhofstrasse
Zürich, Switzerland
Price-per-square foot, per year: $492

6. Grafton Street
Dublin, Ireland
Price-per-square foot, per year: $669

5. Ginza
Tokyo, Japan
Price-per-square foot, per year: $683

4. New Bond Street
London, U.K.
Price-per-square foot, per year: $814

3. Avenue des Champs-Elysees
Paris, France
Price-per-square foot, per year: $922

2. Causeway Bay
Hong Kong, China
Price-per-square foot, per year: $1,213

1. Fifth Avenue
New York City, N.Y.
Price-per-square foot, per year: $1,500


How long can Americans stick to newfound frugality?

NEW YORK - Adrienne Radtke plans to keep riding her bike to work even if gas prices drop. Steve Pizzini got rid of his Cadillac Escalade in favor of a 16-year-old Acura and doesn't expect to have another gas-guzzler.

"I had a paradigm shift," said Pizzini, a financial analyst. "I spent the money on a nice car. But to me, it's not worth it. I don't think I will go that route again.

"Every economic downturn changes shoppers in some way. But this time, experts say the new behavior -- fueled by higher gas and food prices, tightening credit and a slumping housing market -- are the most dramatic and widespread that they have seen since the mid-1970s.

So retailers, marketers and investors are all trying to figure out which habits shoppers will keep and which will they drop when the economy recovers. Will the people who switched to store-brand ice cream go back to Breyers or Edy's? Will shoppers return to department stores or keep looking for labels at T.J. Maxx?

"We are looking at stuff that reminds me of the 1970s," said Patricia Edwards of investment manager Wentworth Hauser and Violich. "Americans have seen a huge amount of their balance sheet evaporate. The effects will be more lingering.

"Wendy Liebmann, president of WSL Strategic Retail, says people's new spending patterns are forcing companies to change the kinds of products they sell and tweak their marketing to appeal to cost-conscious shoppers. She points to the last big recession of the early 1990s that helped trigger a fundamental shift in retailing as affluent shoppers started buying at discounters as well as upscale stores.

Radtke, 31, who holds down two jobs -- at a veterinarian's office and at a flower shop -- recently picked up shoe glue to fix the soles of her worn sneakers. She's buying store-label soups and crackers and bought a bike for her commute after not having ridden one for five years.

"We weren't big spenders, but now we are watching our money more," said Radtke, of Manitowoc, Wis., whose husband works in construction. "Even if I fell into a pile of money, I still wouldn't be spending a lot.

"According to a survey released recently by market research company Nielsen Co., which tracks consumer habits, about two-thirds, or 63 percent, of consumers are cutting spending due to rising gas prices, up 18 percentage points from a year ago.

According to the study, which queried nearly 50,000 consumers by e-mail during the first week of June, 78 percent of them are combining shopping trips and 52 percent are eating out less often. Consumers are also cutting more coupons, doing more of their shopping at supercenters and buying less expensive brands, the survey found.

A rebounding economy may let some consumers revert to their old ways -- like people who switched to smaller cars when times were hard in the 1970s but flocked to sport utility vehicles when gas got cheap again. But with more economists believing that the current woes will last well into next year, many think the underlying frugality will linger. Some Americans say their parents or grandparents affected by the Great Depression are still hoarding buttons and squeezing out several soup meals from ham bones.

"I shop cautiously," said Edna Sott, an 88-year-old resident from Berkeley Heights, N.J. "I would say that is a hangover" from the Depression.

Marian Salzman, chief marketing officer for public relations agency Porter Novelli, cites a "Depression mentality" that's making people "rethink their optimism in the economy.

"The widening gap between discounters and mall-based apparel sellers was evident in monthly retail sales figures released last week. The International Council of Shopping Centers-UBS tally of 38 stores found that same-store sales at discounters rose 5.1 percent in June and 9 percent at wholesale clubs. Discount giant Wal-Mart Stores Inc. posted a robust 5.8 percent, its best June performance since 2002.

At department stores, though, same-store sales -- or those at stores opened at least a year -- dropped 4.1 percent.

"People are spending money on food and the products they need to sustain life," said Todd Hale, senior vice president at Nielsen.

He noted sharp declines in visits to clothing, office supply and hardware stores. He also pointed out that sales of store-brand products in grocery items are up 9.1 percent for the year ended April 19, while sales of branded products rose a more modest 3.9 percent. More than half the sales growth from store label grocery items is now from dairy like milk and cheese, an area that has seen soaring inflation.

Liebmann says Americans are trying to take "control of the little things" like mending socks or buying more store-brand food because they can't control the big things like gas and food prices.

Their little changes, though, are forcing some companies to respond in big ways.Auto executives predict that consumers' newfound appreciation for smaller cars will be permanent, causing major pain at auto plants. Toyota Motor Corp. was among the latest to announce a product overhaul, saying it will shut down truck and SUV production to meet the changing consumer needs.

Pizzini, 29, of Eagleville, Pa., says his elderly Acura gets almost three times as many miles per gallon as the Escalade, whose lease he got out of through a company called Since last October, has seen a 24 percent increase in the number of people who want to downsize to a smaller car, spokesman John Sternal said.

Fred Clements, executive director of the National Bicycle Dealers' Association, said consumers stung by $4-per-gallon gas are shifting toward utility bikes and away from recreational versions. That's forcing bike shops to change their inventories and offer more training for consumers who may not have ridden a bike in years, he said.

Plenty of stores that have benefited from shoppers' woes are hoping to retain them when the economy rebounds.

Andrea Thomas, executive vice president of private brands at Wal-Mart, thinks that many shoppers will stick with store labels since the quality has improved so much. Overall, Wal-Mart expects to retain the affluent customers when the economy recovers because it has made improvements in its stores and customer service.

Edwards, of Wentworth Hauser and Violich, agrees that new fans of discounters will keep buying at discounters as long the products measure up. And she sees lower-income shoppers switching back to meat from beans and rice before going back to name-brand food.

At the Alexandria Shoe Repair and Leather Service in Virginia, sales have increased 18 percent since February.

"I am seeing a younger crowd who lives in the disposable world," said owner Barbara Steube. "They are learning an economics lesson. They will see the benefit of the savings and how much money they walk away with when they fix their shoes."

Source: Baltimore Sun

Circuit City store still in works, despite retailer's challenges

Hyannis, MA-Construction crews are building a Circuit City store on Route 132, but the company's fortunes are hardly written in stone.

The new store, slated to open in September or October, comes at a time when Circuit City is trying to counter its well-documented financial trouble. Sales fell more than 11 percent in the first quarter of this year, resulting in a net loss of $164.8 million. A takeover proposal from Blockbuster stalled and now appears unlikely to occur.

But in the midst of financial uncertainty, Circuit City is expanding.
The Hyannis location will be one of 45 to 55 new stores opening across the country over the next year, Circuit City Stores, Inc. said. The move is raising eyebrows among industry analysts, who caution that expansion might not cut losses.

"Circuit City is pinning its future on turning around its retail options," said Alexandra Biesada, a retail expert at Hoover's, a corporate analysis company.

Biesada said it is becoming more difficult for companies to secure the capital to expand.

"Circuit City, to continue to grow, will need credit," Biesada said.

"But retail is getting hit in the credit crunch."

Circuit City is reinventing itself aggressively, overhauling the layout and sales strategies of its stores. Public relations representative Jennifer Stills said the company is confident the new-model stores will have a positive impact on business.

The new design, called "The City," uses a smaller layout and sales representatives who are trained to be more technology-savvy. The Hyannis location will be built on the new model.
"All of the models have had more success (than traditional layouts)," Sills said.

Sills said she could not comment on whether the strategy was designed to counter the company's recent losses. But retail analyst Donna Flagg, of The Krysalis Group corporate consultancy firm, said other companies have tried the strategy before. The results have been mixed.

"Starbucks kept expanding and expanding and now it has to pull back," Flagg said.

However, she added that expansion strategies can work if they are carefully managed. She cited the Duane Reed chain of pharmacies in New York, which struggled through a period of expansion before business stabilized.

But the factor that will most determine the Hyannis store's success might be its location -- just down the street from the Best Buy in Cape Cod Mall.

Flagg said it will be hard to gauge the competition until the store opens.

"It depends on how loyal the Best Buy customers are," Flagg said. "If they aren't satisfied, Circuit City might have an advantage."

Source: Plain Vanilla Shell

Restoration Hardware introduces children’s line

Restoration Hardware has introduced Baby & Child, a line of products for the little ones that includes apparel, lighting, stroller and security blankets, cribs, play tables and chairs, beds, changing tables, room decor, and toys and playthings.

Of the new line, the company relates on its Web site: “We believe that your design aesthetic shouldn’t end where the nursery begins, we’ve taken the same classics and reinvented them for the little ones in our lives. The same quality craftsmanship and attention to detail. The same luxurious Italian linens and soothing color palette. The same iconic aesthetic that makes us who we are. All in a smaller, sweeter package.”

The retailer that helps consumers upgrade their homes now is going to help the upgrade their baby rooms. The effort is comprehensive, certainly, a turnkey baby operation, so to speak. It will take Restoration Hardware into new categories including layette apparel. It also offers a selection of organic layette apparel and bedding. The Baby & Child operation includes a catalog presentation and a registry. Prices range up to about $1400 for furniture to as little as the $10 range for, for example, shower curtains.

The program is coordinated in several collections, including organics and certainly makes for a handsome presentation. However, retailers have tried to develop upscale baby presentations in the past with limited success.

Not that people won’t spend money on luxurious baby goods. The question is: which people? Parents tend to be or become pretty frugal after a certain point in the whole process of raising kids. A lot of the luxury baby gear is purchased by grandparents, godparents, aunts and uncles, in other words those friends and relatives whose disposable income isn’t overshadowed by the cost of diapers, baby food and education. As Restoration Hardware is something of a DIY operation, one where people shop for their own homes and not for gifts, it may have a particular challenge making an upscale baby program work.

Source: Retailing

Office Depot to slow store openings, cut jobs

ATLANTA, July 30 (Reuters) - Office supply retailer Office Depot Inc (ODP.N: Quote, Profile, Research, Stock Buzz) said on Wednesday that it is cutting its store-opening plans and slowing its remodeling efforts to cut costs and reduce capital spending as the tough U.S. economy pressures sales.

The retailer also said during a conference call that it was reducing its North American staff and had offered a voluntary exit program for some employees.

Company executives said the chain will open less than 15 stores for the balance of this year and plans to open a total of 45 stores for 2009.
Source: Reuters

BIGresearch: Walgreens Losing Ground Among Prescription Drug Shoppers?

Wal-Mart Filling More Prescriptions Among Lower Income Shoppers

Walgreens remains the retailer of choice in the Prescription Drugs category among all adults (14.4% say they shop there most often), according to the July Retail Ratings Report from BIGresearch ( However, it appears that Wal-Mart is closing the gap and increasing share of preference in this category.

Walgreens' share decreased almost a point from July 07 (15.2%), resulting in a negative Consumer Equity Index(TM) (CEI)* of 94.35. #2 CVS saw a marginal decrease in consumer share year over year (13.2% in Jul 08 v. 13.6% in July 07), giving them a negative Consumer Equity Index(TM) (CEI)* of 97.68. Conversely, #3 Wal-Mart is growing in popularity with a two point increase in share to 10.4% (v. 8.4% in Jul 07) and a CEI of 123.71, indicating almost a 24% growth in share. *CEI measures growth in share year over year. An index of 100 is flat, while an index of 105 indicates 5% growth.

Wal-Mart is also improved among consumers with household incomes greater than $50,000. 8.2% say they shop there most often for prescriptions (v. 6.3% in July 07), giving third place Wal-Mart a CEI of 131.73. This is a significantly higher rating than the leaders in the category: Walgreens (94.53) and CVS (100.31).

Over the past year, CVS and Wal-Mart have been battling it out for the number 2 position among consumers with household incomes less than $50,000. However, Wal-Mart surpassed CVS in July. This coupled with Walgreen's two-point nose dive in consumer preference share, gives Wal-Mart a piece of the lead among this consumer group.
Prescription Drugs (Shop at Most Often) - HH Income Less Than $50K
Share Share Share
Store Jul 2007 Jul 2008 +/- CEI
Wal-Mart 12.0% 13.8% 1.8 115.43
CVS 13.9% 12.2% -1.8 87.36
Walgreens 15.8% 13.8% -2.0 87.37
Source: BIGresearch, Retail Ratings Report, Jul 08
"The current economic environment appears to be helping Wal-Mart increase their share among lower income shoppers," said Pam Goodfellow, Senior Analyst at BIGresearch. "Wal-Mart's growth seems to be at the expense of Walgreens and CVS."

Source: MarketWatch

Mervyn's files for bankruptcy

In a move that has been rumored for weeks, Mervyns LLC filed for Chapter 11 bankruptcy late Tuesday.

Officials of the struggling Hayward-based department store chain said they plan to keep their 177 stores, including nine in the Sacramento region, open while they restructure the retailer's debt and "realign" business operations.

"Mervyns needs to reorganize its finances and operations due to the state of the economy and difficult operating environment for our industry," John Goodman, CEO of Mervyns LLC, said in a statement. "After careful consideration of available alternatives, the company's management board determined that a Chapter 11 filing was a necessary and prudent step that allows us to operate our business without interruption as we seek to restructure our debt and other obligations in a controlled, court-supervised environment. We are committed to serving our customers and maintaining regular operations as we undertake this reorganization."

The company also announced it has received a commitment for $465 million from a lender group led by Wachovia Captial Finance Corp., which will be combined with operating cash flow to fund its continuing operations.

Goodman, who became CEO of Mervyns LLC in March, remained upbeat despite the bankruptcy filing.

"The decisive action we are taking provides the company with the most effective means to restructure our operations, strengthen our balance sheet and position Mervyns to compete more effectively," he said. "I want to thank our customers and vendors for their continued support during this process... In addition, we are grateful to all of our associates for their hard work, loyalty and dedication. Our management team is committed to making this financial restructuring successful and leading Mervyns toward a bright future."

Mervyns LLC was created in 2004 after the retailer was sold off by former parent Target Corp. to a group of investment firms, led by Sun Capital Partners Inc. of Boca Raton, Fla., and Cerberus Capital Management LP of New York. Even when still owned by Target, the retailer, founded 59 years ago in San Lorenzo, struggled with increasingly stiff competition from a variety of rivals, ranging from Wal-Mart on the discount end to such mid-range department store chains as Kohl's and JCPenney.

The investment group has closed more than 70 Mervyns stores in the Midwest, South and Pacific Northwest during the past four years, but had also begun opening new locations in what was considered the retailer's core markets — California and neighboring states throughout the Southwest.

Source: Sacramento Business Journal

Court revives U.S. case against Whole Foods deal

WASHINGTON (Reuters) - A U.S. appeals court revived a government antitrust case against Whole Foods Market Inc's (WFMI.O: Quote, Profile, Research) purchase of rival Wild Oats Markets Inc, reversing on Tuesday a lower court decision that allowed the deal to proceed last year.

Whole Foods said it was disappointed by the decision and could seek a review by the full appeals court. Meanwhile, it would carry on "business as usual."

The U.S. Court of Appeals for the District of Columbia said a district court judge erred when he turned down a Federal Trade Commission request for an injunction to block the deal.

U.S. District Judge Paul Friedman "underestimated the FTC's likelihood of success on the merits" when he denied the agency's request, the three-judge appeals court panel said in its ruling. One of the judges dissented from the opinion.

The appeals court remanded the case back to Friedman for further proceedings.

Whole Foods shares fell for a time after the ruling was issued Tuesday morning but closed up 1.6 percent at $22.39 in trading on Nasdaq.

Rating agency Standard & Poor's said it did not see the ruling changing Whole Foods' daily operations or its continued integration of Wild Oats stores. Wild Oats had been effectively "deconstructed" since the acquisition, S&P said in a statement, with store divestments, closures and rebrandings.

Howard University law professor Andrew Gavil said it could take a long time for the FTC to get an injunction because of legal procedures, giving Whole Foods even more time to integrate the two companies.

"Given where things are in this case it's going to be very hard to really undo the merger and come up with an effective remedy," Gavil said.

Nevertheless, he said the ruling could be important for the FTC as it sets a precedent strengthening the agency's hand in seeking a preliminary injunction in future cases.

The FTC is seeking an administrative trial before the agency's five commissioners.

The director of the FTC's competition bureau, Jeffrey Schmidt, issued a statement on Tuesday saying agency officials looked forward to future proceedings before the district court, leading to a full trial on the merits before the commission.


Whole Foods first announced its plan to buy smaller rival Wild Oats in February 2007. The FTC sued to block the $565 million deal in June 2007, saying it would hobble competition in the market for natural and organic groceries.

Judge Friedman denied the FTC's request to block the deal in August of last year, concluding that the FTC had failed to prove the merger would hurt competition. The agency then asked the D.C. appeals court to stop the merger, but was turned down. The companies went ahead with their deal that same month.

The appeals court on Tuesday rejected Whole Foods' argument that the FTC appeal is irrelevant because the agency does not have the authority to undo a completed merger.

Federal courts "have the power to grant relief on the FTC's complaint, despite the merger's having taken place, ..." the court said.

The FTC had said the combination of Whole Foods and Wild Oats raised antitrust concerns in 21 geographical areas where the two chains were each other's closest competitors.

Whole Foods argued that its stores compete in a broader market against all supermarkets, not just organic grocery stores. The FTC disagreed, saying they compete in the premium, organic niche market.

The appeals court said judge Friedman had misconstrued a key legal point, leading him to give short-shrift to the FTC's main argument: that Whole Foods and Wild Oats were in a battle of their own over a distinct market for "core" organic grocery customers.

But the reversal drew a sharp dissent from one of the three judges on the panel, Appeals Court Judge Brett Kavanaugh, who accused his colleagues of trying to "unring the bell."

Source: Reuters

Tuesday, July 29, 2008

Bennigan’s files for Chapter 7

Casual dining chain Bennigan’s Grill & Tavern, owned by Metromedia Restaurant Group, filed for Chapter 7 bankruptcy Tuesday, closing company-owned stores.

It was unclear which of the five Bennigan’s locations in the Washington and Baltimore regions were affected. Only the Bennigan’s in Glen Bernie, Md., answered its phone, saying it was franchise-owned and open for business. . . more

Best Buy to open in-store music centers

Hoping to cater to everyone from the garage guitarist to a recording musician, Best Buy Co. Inc. is announcing a massive new initiative that sets aside store space for an array of musical instruments and gear in dozens of sites nationwide.

The nation's largest consumer electronics retailer will announce Tuesday that it plans to open as many as 85 of the music centers inside its stores by the end of the year and could add even more locations in the future, executives told The Associated Press.

Each site will use about 2,500 square feet of retail space and include roughly 1,000 different products with well-known brand names such as Fender, Gibson, Drum Workshop and Roland.

"We're not just extending the shelf space in the store, we're creating a designated area specifically for this experience," said Kevin Balon, the company's vice president of musical instruments. "And we're trying to create an authentic and genuine musical instrument store look and feel inside of Best Buy."

The Richfield, Minn.-based retailer - already an industry leader in sales of everything from digital cameras to video games - will use its headfirst jump into the $8 billion U.S. musical instrument market to carve out new revenue opportunities as sales of CDs and DVDs slow, experts said.

When the rollout is complete, Best Buy - already considered by many investors to be a global powerhouse in the electronics retailing world - will become the second-largest instrument seller in the country based on locations.

But some observers are cautious about whether the expansion efforts will reap big rewards, particularly as the nation's economy slows and consumers become even more particular about spending hard-earned paychecks.

"It's not a high-growth area and it's obviously going to take up a lot of real estate," said Morningstar retail analyst Brady Lemos.

Executives declined to comment on how much the company is investing in the project or how much they expect to gain from the store-within-a-store effort.

So far, ten sites are already open, including five in California, two in Illinois and two in Minnesota.
Best Buy's selection will include everything from accessories - picks, sheet music and cases - to high-end basses, guitars, keyboards and DJ equipment. Instruments will be housed in separate rooms and the company also plans to offer group music lessons.

Acoustic guitars will sell between $89.99 and $3,200 and drum kits will retail for as much as $5,000.

A selection of the offerings will also be available online in early August.

"However you want to play, if play means you're just learning and you want to play with a bunch of buddies, or you want to play on stage, we can support any of that," Balon said.

Source: Seattle Times

Williams-Sonoma to Bring West Elm to Canada

Williams-Sonoma Inc. (San Francisco) has announced plans to bring its West Elm division to Canada. According to the Toronto Globe & Mail, the younger and hipper version of the parent operation will open its first Canadian stores in October in Toronto's King Street West area.

Later this week, Inter IKEA Systems B.V. (Delft, Sweden), which is going after the same young, on-a-budget, urban apartment-dweller, will launch a temporary "pop-up" showroom in the same Toronto neighborhood.

West Elm has been expanding rapidly. There are 32 West Elm stores today and industry observers told the Globe & Mail that it could have 200 or more outlets over the next several years. "We really want to take on more of the mass market, below Pottery Barn, which is why West Elm was conceived," said Dave DeMattei, group president at Williams-Sonoma. "We go after the upper tier of the mass market. We are a specialty version of IKEA."


Monday, July 28, 2008

Retail Fundamentals Look Solid for Second Half 2008

Photo: Alan Schein Photography/CORBIS

While some REIT sectors more than others reveal signs of the economic slowdown, retail REITs are heading into the second half of 2008 with their fundamentals still on solid ground.

The sector is largely unaffected in the short-term by changes in consumer confidence and spending, both of which have been slowly receding since last summer. “Retailing is a constant,” says Wachovia Securities Equity Analyst Jeff Donnelly. “The average lease is four to seven years, and there are still positive earnings. Retailers are still paying the rent.”

Sector Stats
# of REITs 26
Industry Market Cap (in thousands) $84,602,036
% of Industry 25.7%
Yield 4.63%
YTD Total Return 7.19%
One-Year Return -17.42%
Three-Year Return 10.09%
Five-Year Return 19.64%
Average Daily Trading Volume (Shares) 520,586
Source: NAREIT data as of May 31, 2008
Moderate Rental Growth

Retailers are paying the rent, but they are shopping for bargains. This represents a role reversal compared with the scenario in recent years, Donnelly notes. “In the past two years, retail REITs have benefited from being able to push rents,” he says. “This year, they cannot be as aggressive as leases expire.”

On the contrary, retailers are emboldened by current conditions and asking for significant discounts on rent, reports RBC Capital Markets senior analyst Richard Moore. “They always ask, but this year, they are asking for larger reductions. So far, they aren’t getting them. Landlords are holding firm.”

At some centers, sales are still healthy. Retailers have much less negotiating leverage at centers with strong sales volumes. Property owners are not going to offer meaningful rent concessions, according to Deutsche Bank senior real estate analyst Louis Taylor. “Retail sales levels today are much higher than they were 10 years ago when most of expiring leases were originally signed. As a result, rents on those locations will increase,” he says. Rents on leases signed in 2008 should be able to grow at an acceptable rate for the rest of the year, although growth will be somewhat stronger for regional mall REITs than for shopping centers. He predicts rents on leases this year will be 15 percent to 20 percent higher than the expiring rents for mall REITs.

Strip centers will experience a moderate increase in rental growth for the rest of the year, limited to 8 percent to 10 percent, attributed to the shorter duration of those leases plus the slight uptick in vacancy rates the subsector is enduring.

Even so, Donnelly notes, the major retail REITs will enjoy stable rental income because of the diversity of their portfolios in terms of size, geography and tenants.

However, some recent studies caution against making overly broad assumptions about rental growth. Submarket differences in rental growth may be exacerbated by current economic conditions. For example, PricewaterhouseCoopers reported in its recent “Emerging Trends in Real Estate 2008” that Baltimore, Boston, Denver, Los Angeles, New York City, San Francisco, San Diego, Seattle and Washington, D.C. are the top retail markets where rental growth may exceed the average. At the other end of the spectrum are areas like Miami and Orange County, Calif. that have been hard hit by foreclosures in residential real estate, so rents may stay flat or even decline.

Quality is Key to Occupancy

The retail vacancy rate for the first quarter of 2008 was 7.7 percent, with strip centers and regional malls at their highest vacancy levels since 1996 and 2002, respectively, according to Reis, Inc. data. By the second quarter, Marcus & Millichap, a national real estate firm based in Washington, D.C., posted predictions of a 10.2 percent vacancy rate for the year.

However, retail REIT analysts aren’t buying these gloomy predictions. “The vacancy forecast is irrelevant,” Moore says. “Retail is not a commodity. There are good assets and bad assets, and they are all figured into those averages. I pay little attention to them.”

The bottom line, Moore says, is that “business is very good for existing assets, and retailers will continue to take space at quality locations.”

Where retail malls are feeling a bit of a pinch is with lower quality, less productive space in less attractive markets. “That’s where we are starting to see a pullback in demand,” says Christy McElroy, senior analyst and head of REIT equity research with Bank of America Securities. “High productivity space—producing more than $600 a square foot in a desirable mall in a top city—there’s no problem in leasing it.”

Shopping centers anchored by grocery stores are holding their own. However, strip centers of smaller shops with local and regional owners are pulling back, pushing up the vacancy rate in some centers, McElroy says. She expects big box chains to close more stores this year but sees continuing good demand in urban and infill shopping centers with higher barriers-to-entry.

Retail Snapshot
* Sector's total market capitalization is $76,645,168,000, the largest of any REIT sector.
* REITs own ¼ of the retail industry, the highest penetration among all REIT sectors.
* Kimco Realty Corporation (NYSE: KIM) is the largest retail REIT overall, owning 630 properties with a total market capitalization of $5.6 billion.
* Developers Diversified Realty (NYSE: DDR) is the largest grocery-anchored shopping center owner with 205 centers and a total market cap of $2.4 billion.
Source: and NAREIT
Supply Slowdown

The combination of softening demand from retail tenants, stiff credit requirements and the resulting decline in development yields will keep new retail development constrained for the rest of the year.

As an alternative to growth by development or acquisition, retailers are pursuing better opportunities to grow internally through strategies such as increasing margins and closing unprofitable stores, Donnelly says. As a result, the demand for new space will continue to be modest at least through the rest of 2008. Retail REITs are responding by postponing opening dates for new shopping centers and scaling back the scope of their projects.

Stricter lending rules are the other force affecting development. Bank requirements for pre-sales and pre-leasing levels are so high that even the most experienced developers find them challenging, analysts report. “Instead of 10 percent or 20 percent, banks want 60 percent of a new project leased before a shovel goes into the ground,” McElroy says.

That’s not to say that retail REITs are pulling back completely. Retailers will still want to expand in high productivity areas, but at a lower velocity, she says. “We will continue to see a pullback on expansion plans, but not a complete stop. It’s still about asset quality and location.”

In the newly restrictive credit market, large loans—more than $150 million—for development have the strictest underwriting requirements. This is more of a restraint on regional mall REITs than shopping center REITs due to the nature of their projects. “However, the big players with lease commitments in major markets can still get financing,” Donnelly says.

Taylor agrees that the top retail REITs can readily obtain financing if they are willing to pay the higher cost of capital. “These are companies with strong balance sheets, high quality assets and solid management teams. They still have access to capital if they want it,” he says.

Even so, analysts expect that retail REIT construction starts will be down for the rest of 2008 as the sector reaches the peak of the construction cycle that started two years ago. This constrained supply growth, however, will not support strong occupancy and rental growth because of the underlying economic conditions, Moore notes. “This time, the advantage is tipped toward the retailer,” he says.

Meanwhile, REITs unwilling to risk development exposure at this time are embracing redevelopment as a growth strategy. “Shopping centers and malls are being redeveloped to add value, particularly as they get space back from department store consolidations,” McElroy says. Simon Property Group (NYSE: SPG), for example, will spend $450 million upgrading its 20 New England malls over the next two years.

Even more than renovation, converting shopping centers and older malls to lifestyle centers, such as mixed use, open air shopping centers with plenty of greenery and pedestrian areas, will continue to be a popular trend in retail. Retail REITs are transforming existing properties into lifestyle centers in every region of the country, as they continue to focus on strategies to enhance profitability of existing real estate.

At this halfway point in the year, Moore believes retail fundamentals will remain solid for the balance of 2008. “The sector is a little softer than in 2007, but the difference is in growth, not the heart of the fundamentals,” he says. “The general health of the sector is high, and retail REITs will continue to be a good defensive play for investors.”

Source: NAREIT

Global Apparel Retailers Set Their Sights on U.S. Market

America's shopping venues are getting an international makeover as moderately priced apparel retailers from Europe, Asia and Canada increasingly set up shop in the U.S.

In coming to America, these retailers are following high-end European designers, who planted their flags in recent decades, expanding first to big cities and then to smaller markets. Now, more foreign retailers are taking advantage of the weak dollar, which reduces the cost of their initial investment, and favorable terms on store leases as landlords look for new tenants to attract shoppers as midpriced U.S. chains like AnnTaylor Stores Corp. and Talbots Inc. contract.

Sweden's Hennes & Mauritz AB, with 156 U.S. stores, calls the U.S. its "largest expansion market." Since the beginning of its fiscal year in December, the "fast-fashion" chain has opened 11 stores in the U.S., including its first store in Seattle on Friday. It plans about 27 more openings this fiscal year, including a store at Westfarms Mall in Farmington, Conn., in August.

Canadian yoga-wear retailer lululemon athletica Inc. plans to open 32 U.S. stores this fiscal year, almost doubling its U.S. presence to 66 stores. South Korea's Who.A.U, which is taking aim at Abercrombie & Fitch Co.'s Hollister chain, hopes to open 450 stores in the U.S. in the next 10 years. And Canadian teen retailer Garage hopes to have 500 stores in U.S. malls in seven to 10 years.

Also expanding in the U.S. are Spain's Zara (owned by Inditex SA) and Mango chains, Germany's luxury sport brand Bogner, Russia's Kira Plastinina, Iceland's Kisan, Japan's Muji and Britain's Topshop chain and Karen Millen brand. "There aren't too many important global apparel retailers that aren't looking at the U.S. market for its potential," says Ken Nisch, chairman of JGA, a Southfield, Mich., retail-strategy and design firm.

Opening shop in the U.S., of course, isn't a slam dunk. There's no guarantee that the economy -- or apparel sales -- will recover from the current slump any time soon. Furthermore, the U.S. is a low-growth market where retailers have long had to fight for market share. But "the U.S. is still the world's largest consumer market," says Christine Day, lululemon's chief executive. "Even if it contracts, it would be a mistake not to be in it."

The retailer, which is opening both urban and suburban locations, has been able to negotiate lease terms that are more favorable across the board than a year ago. The terms, which vary by lease, include fewer built-in rent increases, the option to terminate leases after three years rather than five years and higher sales thresholds before lululemon has to pay a percentage of sales in addition to base rent.

Many international retailers are approaching U.S. expansion cautiously. Muji and Topshop, which is set to open its first U.S. location in New York in October, plan to wait and see how their stores in New York perform before opening stores elsewhere. That's the lesson of Japanese clothing chain Uniqlo, part of Fast Retailing Co., which launched its U.S. operations three years ago with stores at three New Jersey malls. Last summer, Uniqlo closed the stores in favor of building brand awareness via the flagship store it opened in New York's SoHo in late 2006. A spokeswoman says the retailer is looking at further expansion in the U.S.

Foreign midtier retailers still account for only a small percentage of U.S. retail sales overall. Twenty-two foreign chains queried by The Wall Street Journal said they will operate about 475 stores in the U.S. by year's end. The U.S. had roughly 150,000 clothing and accessory stores in 2006, according to the latest government data. But the value of foreign retailers' investments in clothing and accessory stores in the U.S. continues to grow. Between 1997 and 2007, it rose more than 60% to $4.1 billion, according to the U.S. Commerce Department's Bureau of Economic Analysis, which released the most recent data Friday.

Furthermore, foreign retailers have had an outsize impact on the U.S. market. The invasion of fast-fashion chains like H&M and Zara has prompted U.S. retailers from Gap Inc. to J.C. Penney Co. to update their selections faster or more often.

Still, it is unlikely that the influx of foreign chains will offset American store closures that have pushed U.S. mall vacancies to 6.3% in the second quarter, their highest level since 2002, according to market-research firm Reis Inc. For example, over the next few years, AnnTaylor is closing about twice the number of stores lululemon plans to open in the U.S. this year.

International retailers "will provide some incremental demand for the better properties," says Rick Sokolov, president of Simon Property Group Inc., the largest U.S. mall owner by market value and number of properties. He says those most likely to benefit are top-tier malls in high-traffic urban areas generating the highest sales per square foot.

At many malls, developers looking for new concepts to excite shoppers are giving international retailers the deals traditionally reserved for top tenants. "These terms have always been there for the hot retailer, but historically the hot retailer was an American company," says Julie Taylor, senior vice president with real-estate-brokerage firm Cornish & Carey Commercial-Oncor International. "Now, more often than not, those are foreigners."

Source: Wall Street Journal

Linens 'n Things to Close 57 Underperforming Stores

CLIFTON, N.J.--(BUSINESS WIRE)--Linens Holding Co. (LNT or the Company), today announced that as part of its ongoing financial restructuring, the Company plans to close fewer than the previously disclosed 87 underperforming stores. The actual number of store closings is now 57 (See list below). LNT filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code on May 2, 2008 and announced the closing of 120 stores at that time.

The reduced number of store closings is the result of improvements in the outlook for these stores throughout the remainder of 2008 into 2009. We are pleased that we are able to keep additional stores open for the benefit of our guests, associates, vendors and the communities we serve, said Michael F. Gries, Chief Restructuring Officer and Interim CEO. While a very difficult decision, the stores that are closing are necessary given the current retail and economic climate and the need to drive the cost savings and operational efficiencies that will allow us to position LNT for long-term growth.

Linens n Things, with 2007 sales of approximately $2.8 billion, is one of the leading, national large format retailers of home textiles, housewares and home accessories. As of December 29, 2007, Linens n Things operated 589 stores in 47 states and seven provinces across the United States and Canada.

Store Closing List






Source: Yahoo Business