The Brutal Truth Is That America Still Has Way Too Many Places to Shop
|
Version 0 of 1. When you watch investors in Macy's (M) and Kohl's (KSS) get their faces ripped off on Thursday because of terrifyingly bad holiday sales, keep this reality in mind as to the root cause of the problem: In the age of digital shopping, there are still too many damn retail stores in America. "I have said this before, but America is still over-stored," Macy's long-time Chairman and CEO Terry Lundgren told TheStreet in an interview Wednesday evening. "My guess is that some rationalization of retail space needs to occur, and I think we were at the forefront of acknowledging that," Lundgren continued, adding that while the online business for Macy's is "booming" it hasn't been enough to offset weak traffic to physical stores. The numbers support Lundgren's claims of the U.S. continuing to be over-stored. There is 23.5 square feet of retail space per person in the U.S., drastically higher compared with the 16.4 square feet in Canada and 11.1 square feet in Australia, the next two highest -- according to the International Council of Shopping Centers. The abundance of stores has retailers battling each other with rampant discounts to try and drive business but with little to show for it. Green Street Advisers recently estimated that the nation's department stores averaged a paltry $165 in sales per square foot last year, a 24% decline since 2006. For department stores to boost sales per square foot, which is vital in driving profits due to the high rents an anchor store such as Macy's pays, Green Street proposed a mind-blowing measure: The department store sector needs to slash about 800 locations in the U.S, or one-fifth of all anchor space in U.S. malls, in order to reach the productivity levels they had a decade ago. Real estate information firm CoStar gives a more drastic assessment, noting that about 1 billion square feet of retail space will be "rationalized" in the coming years through store closures and conversions to other uses. To be sure, Macy's and others are taking a sledgehammer to retail space in an attempt to rectify the issue. |