Retail’s Reality Gets More Complex

Michael Gerard is Marketing Director at GRS Group(949) 272-0022mgerard@grs-global.com

Michael Gerard is Marketing Director at GRS Group
(949) 272-0022
mgerard@grs-global.com

This is a difficult year to get a pulse on how the retail industry will perform going forward.

On the one hand, overall, the segment has been performing well. On the other, there is concern and uncertainty, maybe more than in the recent past, about some major retailers shutting stores in early 2017 due to a poor holiday performance.

Here’s the good news: Black Friday was a success for the most part, with an 8.6-percent increase at physical stores from the same period in 2015, even though online retail sales are increasing at a much faster pace.

Retail sales have been upbeat, as calculated by the Commerce Department, too. Minus auto sales, retailers saw sales rise 0.8 percent during October. Last month, they rose one percent, after the Commerce Department revised its previous report of 0.6 percent. Dick’s Sporting Goods, TJX Cos., Nordstrom and others all saw their share prices jump as a result.

Additionally, Citigroup has upgraded the stocks of several retailers due to the perception that president-elect Donald Trump will cut taxes, making it more favorable for the industry. The thought is that this will lead to increased consumer spending. Among the stocks upgraded were Kohl’s and Chico’s FAS.

Meanwhile, executives at some major chains forecast strong holiday sales to continue due to rising wages and tighter inventories that won’t leave them with unsold goods that need to be discounted. The National Retail Federation predicts that retail sales will increase 3.6 percent this year during November and December, hitting $655.8 billion.

But there is concern that some major store closings could loom if those holiday sales aren’t as strong as expected.

Sears Holdings, which has been a worry for landlords for years, is reportedly on the brink of bankruptcy. A bad holiday season could expedite that process, leading to major store closings.

Macy’s is already closing plenty of stores. If its holiday season doesn’t work out as well as planned by company executives, expect it to shut even more doors.

Though retail real estate landlords are used to department stores closing – reportedly 700 have vacated spaces since 2013 – these large spaces can take a lot of time to lease up, if they even can find a new tenant, or tenants, interested in the shells.

How the holiday season shapes up can be tough to predict, especially with unknown consumer confidence due to the election results. Every year, different forecasts vary. Either way, it’s a very important coming few weeks for the retail industry that landlords are likely watching very closely.

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