South Box Openings & Closings: Nov-Dec 2020

South includes: AL, GA, NC, SC, TN, VA

Openings: 118 stores

Ace Hardware Corporation: 3
Aldi: 8
American Freight: 8
Ashley Furniture: 2
Badcock Furniture: 1
Bealls Outlet: 1
Citi Trends: 1
David's Bridal: 1
Dollar General: 35
Dollar Tree: 4
Electronic Express: 1
Family Dollar Stores: 9
Habitat for Humanity: 2
Harbor Freight Tools USA: 3
Hobby Lobby: 1
Lidl: 2
Lowe's Foods: 3
Office Depot: 3
Office Max: 1
Ollie's Bargain Outlet: 2
Party City: 1
Pet Supplies Plus Inc.: 3
Piggly Wiggly: 1
Planet Fitness: 6
Publix: 7
Save-A-Lot: 2
True Value Company: 3
Walgreens: 1
Wegmans Food Markets: 1
Whole Foods: 2

Updated: 2/9/2021

Closings: 100 stores

Ace Hardware Corporation: 1
AMC: 1
American Freight: 3
Ashley Furniture: 1
Bed Bath & Beyond: 7
buybuy Baby: 1
Cost Plus World Market: 2
CVS: 8
David's Bridal: 1
Dick's Sporting Goods: 2
Dollar General: 9
Dollar Tree: 1
Ethan Allen: 1
Family Dollar Stores: 7
Golf Galaxy: 1
Goodwill: 1
Habitat for Humanity: 3
Harris Teeter: 1
JC Penney: 28
La-Z-Boy Incorporated: 1
Office Depot: 3
Office Max: 3
Pet Supplies Plus Inc.: 1
Planet Fitness: 1
Regal Cinemas: 1
Ross: 1
True Value Company: 4
Walgreens: 6

Texas Box Openings & Closings: Nov-Dec 2020

Openings: 46 stores

Ace Hardware Corporation: 1
Aldi: 1
Cinemark USA: 1
Citi Trends: 3
Crunch Fitness: 1
CVS: 3
Dollar General: 9
Dollar Tree: 3
Family Dollar Stores: 3
Five Below: 2
Floor and Decor: 1
Harbor Freight Tools USA: 5
Office Depot: 4
Old Navy: 1
Ollie's Bargain Outlet: 2
Pet Supplies Plus Inc.: 2
Petco: 1
Planet Fitness: 1
Ross: 2

Updated: 2/9/2021

Closings: 49 stores

24 Hour Fitness: 1
AMC: 1
Barnes & Noble: 1
Bealls Department Store (Stage): 5
Bed Bath & Beyond: 6
Cost Plus World Market: 3
Dollar General: 2
JC Penney: 1
Office Depot: 1
Office Max: 5
Powerhouse Gym: 1
Ross: 1
Staples: 1

You Are Never Too Old

You are never too old. At 43, Tom Brady commandingly won the Super Bowl. Next to him in this photo is Ray Kroc, the founder of McDonalds. Ray quit his job as a Dixie Cup salesman at age of 52 to open his first McDonalds. Ray’s story is told in one of my favorite books: Grinding It Out.

Time and time again, I am amazed at the fantastic things people accomplish in the latter half of their careers – it’s never to late, just go for it.

Bitcoin - Maintain Perspective of Reality

There is about $90T in global currency and about $700B or less than 1% of it is bitcoin. Stay away from the shinny nickels and focus on the big picture. Always maintain perspective of reality.

Why did SEG/Winn Dixie cancel their IPO?

First, it’s rare a company cancels and IPO. Second, Winn Dixie matters – they have just over 400 stores and about $10B in sales. Now, let’s say you are offered to buy or lease a Winn Dixie anchored shopping center. Clearly, you would want to know the future prospects of Winn Dixie. Is there a sale or merger in the works? Is the company in trouble? Or was the timing just bad?

https://www.linkedin.com

Price Chopper Merger

https://progressivegrocer.com

In order to complete against larger and better capitalized groups like Walmart, Amazon, Kroger and Aldi, Price Chopper and Tops are merging. Does this merger portend a trend in the grocery sector? Stay tuned, I think it does.

US Retail Growth

US retail sales grow occurs at a steady rate of 3.75% annually. Half the growth is from inflation and the balance is in volume. Over the next 10 years, all of the volume gains will be from the e-commerce component which today, is 15% of the total. The brick and mortar component will remain flat for the foreseeable future. Thus, the US retail system doesn’t need any new brick and mortar space until about 2030. At that time e-commerce will account for 30% of sales.

That’s why Walmart stopped building new stores and made massive investments in their e-commerce platform.

Focus on the facts and do not follow your gut. Onward!

FL COVID Update

As of today, Florida has vaccinated about 2.0M people, 85% of whom are over 65. At this rate, Florida is on track to vaccinate its 4-5 million residents over age 65 in the next 4-6 weeks. Since about 80% of the state’s deaths and hospitalizations have been for those over 65, this is a godsend. Thanks to all those who are working hard to make this happen! Our best days are just ahead.

Hat tip to @jhaskinscabrera on Twitter

The Retail Circle of Life

Risk analysis: what if every financially weak big box tenant in the US went out of business? Big box retailers are 80% of the US retail platform. The way they go portends the state of the whole system. Most markets in the US are severed by about 100 big box brands – everything from Walmart to Walgreens.

Today, in each major US market, about 20 of the 100 big box companies are suffering financial stress. Many had problems well before COVID. Back in April of 2020, I realized that these weak tenants accounted for only about 6% of US retail space and, more surprisingly, they accounted for only 3% of the sales. If all the weak box retailers shut down, the remaining 80 retailers could easily absorb their sales.

About two thirds of these weak firms have already filed bankruptcy and most of them have reemerged with a fresh start and only a handful have been liquidated. A few others, like AMC Theaters have raised capital without bankruptcy. The system is very resilient. There is no retail apocalypse. It’s the circle of life – Simba defeats Scar.

Retail Bankruptcies

The 2020 retailer bankruptcies are not a bad sign. They allow the system to purge imbalances. The talk of “thousands of retailer bankruptcies portend an retail apocalypse” is nonsense in a system that just closed 50,000 stores with only 1-2% drop in occupancy. In 2020, the average open-air center lost just one small business. Of course, every closing is tragic at some level, but the system is strong and will soon recover.

Only a small handful of national retailers are using bankruptcy. There are only about 100 companies occupying 15 or more boxes in Florida, they range from Walmart to Walgreens. All told, they have 80% of the GLA and 11,000 locations. About 10 of them need the help of bankruptcy to get a fresh start. About 5 are non-viable and need to liquidate, like Earth Fare, SteinMart, Pier 1 and Lucky’s Markets. In 2020, 24 Hour Fitness, Tuesday Morning, Guitar Center, JC Penny, Old Time Pottery, Men's Warehouse used chapter 11 to shed unprofitable stores, eliminate excess leverage and build liquidity. They are off again with a fresh start. It's the American way and it works. There is no retail apocalypse.

The auto parts industry is a good example of a 50/50 business

What does retail look like when half the sales occur in the store and rest are on-line? The auto parts industry is a good example of a 50/50 business. As retailers embrace a multi-channel sales model the consumer benefits from better prices, greater convenience, and selection. Don’t panic, the world is changing, and it will be a much better place. There is no retail apocalypse.

How can we restart the US growth machine?

http://scottgrannis.blogspot.com/

Unfortunately, economic growth is not about to set any long-term records. For 50 years, from 1966 through 2007, the US economy grew at an average annualized rate of about 3.1%—a great and dynamic expansion which saw the economy almost quintuple in size. Then came the Great Recession of 2008-09. Not only did the economy fail to recover to that long-term 3.1% trend in subsequent years—for the first time ever, following a recession—it went on to post only slightly more than 2.1% annual growth in the decade from 2009 through early 2019. It was the weakest economic expansion on record, and it looks set to continue for the foreseeable future.

Scott Grannis challenges us to think about the big problems - how can we restart the US growth machine?

Florida Box Openings & Closings: Nov-Dec 2020

Openings: 49 stores

Ace Hardware: 5
Aldi: 5
Crown Wine & Spirits: 1
Crunch Fitness: 1
CVS: 1
Dollar General: 8
Dollar Tree: 4
Family Dollar Stores: 1
Floor and Decor: 1
Esporta Fitness: 3
Harbor Freight Tools USA: 1
Harris Teeter: 1
Office Depot: 2
Old Navy: 1
Pet Supplies Plus: 1
Planet Fitness: 4
Publix: 6
Sprouts Farmers Market: 2
True Value: 1

Updated: 2/9/2021

Closings: 32 stores

ABC Fine Wine & Spirits: 1
Bed Bath & Beyond: 4
Family Dolla Stores: 1
Habitat for Humanity: 1
JC Penny: 8
La Fitness: 4
Office Depot: 1
Office Max: 3
Old Time Pottery: 1
Publix: 4
Save-A-Lot: 4

Oh my god, all my weight gain is in my right arm – The E-commerce Story

For the next 10 years the US does not need any new retail space. Retail sales in the US have grown steadily by 3.75% annually. Over 10 years, at that rate, retail sales grow by 40%. Half of that gain is due to inflation or just raising prices. The other half is volume growth and that’s what really matters. 

Over the last 5 years, a strange thing happened. All the retail volume gains occurred in the e-commerce space. It’s like a person who is gaining weight each year by 2%, but all their weight gain is in their right arm. It’s just weird to watch all the volume gains occurring in e-commerce, but that’s the reality.

For example, 2019 e-commerce was 15% of retail sales and it grew by about 15%. In other words, it added 2.25% which was all the volume growth. E-commerce’s growth rate is slowing, but it’s still accounting for all the volume growth. In a few years, e-commerce will be 20% of retail sales and its growth will have slowed to about 12%. Do the math it’s still 2.4% or all the volume growth.

During the last few years, almost all retailers’ volume gains occurred in deliveries, curbside pick up and in shipping. In other words, all the volume growth came from the “back door” and the volume out the “front door” was unchanged. For the foreseeable future, there will be no additional dinners sold inside your favorite restaurant and no more shoppers at your local grocery store even if your town’s population is growing. Those stores sales will grow, but it will all happen out the “back door”.

It’s no surprise that Walmart stopped adding stores in many key markets recently and instead made massive investments in their “back door” e-commerce platform. Other retailers followed: Target spend $550M to buy Shipt, McDonalds spent $300M to buy a geo-fencing platform. Still, because of high delivery costs, all the profits are coming from the front door where the profit margins average 8%. Warehouse, labor and delivery cost and rising rapidly and it is very difficult to make any profit from e-commerce sales.  And so, it’s no surprise that the King of the Back Door, Amazon, is embarking on a massive store expansion with its Amazon Fresh stores. The profits are from the in-store sales, but all the growth is happening out the “back door”.

By 2030, it will all be over. Most retail businesses will get 25-30% of their sales from e-commerce. They will all have cool apps, frictionless check outs, one-hour delivery and so on. Ecommerce growth and brick and mortar growth will equalize and once again, we will need more retail space to accommodate the growth. Until then we don’t need anymore retail space in the US, we just need to repurpose what we already have.

Occupancies will Return to their Peak Level

We are halfway there. In the case of open-air retail centers, occupancies fell in 2020 by 1-2% and they will likely fall the same amount in 2021. Beginning in 2022 the recovery will reverse those losses and within 5-7 years, occupancies will return to their peak level.

This cycle of going from 8% vacancy to 12% in a short time and then spending the next 5-7 years climbing back to 8% has repeated itself over and over again during the last 35 years. Some things never change. There is no retail apocalypse, it’s just normal business cycle contraction.

There is no Retail Apocalypse

Enclosed malls are only 10% of US retail space. There are over 50,000 open-air centers and just over 1,000 malls. The bottom half the malls will close in the next 5-10 years and yet, those closings will have NO impact on the US economy. It's the circle of life. There is no retail apocalypse.

Ghost Kitchens

News Flash: World's largest ghost kitchen delivers hot food in 30 minutes or less, right to your door, or it's free. Oh wait, this has been around for 35 years. Ghost kitchens and fast delivery are not new - the media dummies just want you to think they are. Wake up!

No, Chicken Little the Sky is not Falling!

No, Chicken Little the sky is not falling! There as 50,000 open air retail centers in the US. Last year, as the economy reeled each shopping center lost on average 1-2% occupancy or in other words, on average, they LOST ONE SMALL TENANT! Yes, there were 50,000 more store closings in 2020 than openings, but it had little or no impact.

Top Secret: Florida Big Box Market

Top Secret: The big box market was unchanged in 2020 in Florida. The market was very resilient even against the pressures of total shutdowns. In 2020, JC Penny and SteinMart closings were a big drag on Apparel; Earth Fare and Lucky’s drove down Grocery, and Pier 1’s shutdown pulled down Other.

We are going to have a great 2022 and 2023!

https://progressivegrocer.com

We will revert to our old behavior, but it will not be until 2022. It will take until August to fully vaccinate the US. Fauci will not give the “all clear” until October. Offices will start full operations in January as they hedge against employee lawsuits. We are going to have a great 2022 and 2023!