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JLL Retail: Store closure summary, August 2017

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JLL Retail Research looks at coming closures, the impact of e-commerce on brick and mortar stores, how the store experience is changing and which retailers are actually expanding operations despite the current climate.

Published in: Retail
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JLL Retail: Store closure summary, August 2017

  1. 1. Retail store closure summary 08-01-2017 JLL Retail Research
  2. 2. What’s new in closures? • True Religion has filed for bankruptcy. Denim retailer True Religion filed for Chapter 11 this week, citing a capital structure reorganization as the primary reason. Some 27 retail stores, i.e., 19% of the total store fleet, are set to be closed in the process. • Starbucks closes Teavana locations. Starbucks is pulling the plug on its Teavana division, which it acquired in 2012, due to tepid performance. The specialty F&B retailer will shutter all 379 locations over the coming year. +27 closures +379 closures
  3. 3. Retailers to watch for closures Source: Credit Intell Retailer Credit Intell Rating Retailer Credit Intell Rating Academy Sports + Outdoors D1 Bon-Ton Stores E2 Boot Barn D1 Claire's Stores E2 J.C. Penney Company D1 99 Centers Only Stores F1 Jo-Ann Stores D1 bebe stores F1 Tailored Brands D1 Le Chateau F2 Christopher & Banks D2 Sears Holdings F2 Destination Maternity D2 Gordmans Stores DIP Hudson's Bay Company D2 Sports Authority DIP Lands' End D2 Gander Mountain DIP Stage Stores D2 Gymboree Corp DIP Stein Mart D2 rue21, inc DIP Fred's E1 Aeropostale DIP J. Crew Group E1 American Apparel DIP Neiman Marcus Group E1 Michigan Sporting Goods DIP Rite Aid Corp E1 Wet Seal DIP Credit Intell Rating Definitions CI rating Equivalent S&P rating Credit quality D1 B Below satisfactory D2 B- Below satisfactory E1 CCC+/CCC Poor E2 CC Poor F1 C Critical F2 D Critical DIP - Filed for bankruptcy • These retailers all have credit ratings below satisfactory. Future closures may be imminent.
  4. 4. What’s new in openings? • Macy’s Backstage is expanding. Macy’s off-price concept, Backstage currently has approximately 30 outlets and the retailer plans to open at least 19 more in-store shops by the end of the year. • T-Mobile opening stores at a breakneck pace. At the beginning of the year, T-Mobile reported plans to open 1,000 new T-Mobile stores, expanding its retail footprint to catch up with its network expansion. After the first quarter, T-Mobile updated its outlook to 1,500 T-Mobile stores. The company has opened 1,000 stores already this year, surpassing its original goal. +19 new stores Source: PNC +1,500 new stores
  5. 5. More than 5000 locations will close by end of 2017 © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 5 0 500 1000 1500 2000 2500 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q4 Effective closure date # of stores to be closed Source: PNC,JLL
  6. 6. Retailers wait to identify specific locations to be closed © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 6 Source: Credit Intell,JLL *JLL-tracked closures announced in the last 12 months 6885 2336 928 809 379 370 5756 1780 845 700 351 40 0 1000 2000 3000 4000 5000 6000 7000 8000 Total Apparel Electronics Stores Shoe stores Specialty food & beverage Office supply Planned closures Named locations In the last 12 months, retailers announced plans to close approximately 6,885 stores. However, only 5,756 specific locations have been identified.
  7. 7. California has highest planned closures © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 7 Source: Credit Intell, JLL *JLL-tracked closures 9.5% 7.2% 6.1% 5.0% 4.5% 3.7% 3.3% 3.3% 2.9% California Texas Florida Illinois New York Pennsylvania Michigan Indiana Virginia % of closures announced in 2017 The below 10 states make up just over half of announced closures in 2017
  8. 8. Apparel and electronics will make up 50% of 2017 closures © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 8 Source: Credit Intell,JLL *JLL-tracked closures effective in 2017 34% 16%14% 9% 6% 5% 16% Closures announced for 2017 Apparel Electronics Shoe stores Department store Discount department store Grocery Other • Changing demographics, shifting consumer tastes in favor of discounters and fast fashion and some sales loss to online sellers have all helped to close some apparel stores. • Bankrupt retailers like The Limited, Wet Seal, BCBG Max Azria and American Apparel are leading the store closure count. • Electronics stores like hhgregg and Radioshack are also shuttering hundreds of locations due to bankruptcy.
  9. 9. Retailers closing 100 or more stores © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 9 552 512 400 379 350 300 250 250 240 220 175 171 170 160 150 140 138 120 110 106 100 100 RadioShack Payless Shoe Source rue21 Teavana Gymboree Office Depot Ascena Retail Group The Limited Family Christian hhgregg Kmart Wet Seal Bebe Crocs GameStop Vanity Shop JC Penney BCBG Max Azria American Apparel Gordman's Stores Foot Locker/Lady Foot Locker Michael Kors Announced closures Source: PNC,JLL
  10. 10. More than half of announced closures* due to bankruptcy © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 10 Source: PNC,JLL *JLL-tracked closures 51% 49% Announced closures Filing for bankruptcy Not filing
  11. 11. Retailers who recently announced bankruptcies © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 11 Source: PNC,JLL 552 512 400 350 250 240 220 171 140 120 110 106 68 63 59 36 32 27 27 21 18 12 Announced closures
  12. 12. Apparel and sporting goods are seeing the most bankruptcies © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 12 Source: JLL Apparel 8 Sporting goods 5 Specialty stores 2 Shoe stores 2 Electroni cs Stores 2 Discount dept. stores 1 Grocery stores 1 Books & Music 1 # of retailers filing for bankruptcy
  13. 13. Apparel and electronics stores closing the most locations because of bankruptcy © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 13 Source: PNC, JLL 1568 772 524 240 207 106 99 18 Apparel Electronics Stores Shoe stores Books & Music Sporting goods Discount dept. stores Specialty stores Grocery stores Announced closures
  14. 14. Department and discount department stores will close 564 locations © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 14 Source: PNC, JLL • Discount department stores like JC Penney, Kmart and Gordman’s are closing the most locations. JC Penney 138 Kmart 175 Gordman's 106 Macy's 64 Sears 77 Other 4 Announced closures
  15. 15. Midwest states have the most department store closures Source: Credit Intel, JLL 31 14 18 1416 16 Top 10 announced department store closures # Number of announced department store closures 15 12 11 11
  16. 16. Purchases of office supplies move online © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 16 Office Depot 300 Staples 70 Announced closures • Office supplies are highly commoditized products, making it easy for consumers to purchase online. • As a result, office supply retailers are shrinking their store count. • Office Depot’s acquisition of Office Max means the retailer must also close redundant locations. Source: PNC, JLL
  17. 17. Sporting goods retailers are closing 235 stores © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 17 MC Sports 68 Golfsmith 59 Gander Mountain 32 Eastern Mountain Sports 27 Hibbett Sports 25 Bob's Stores 21 Big 5 Sporting Goods 3 Announced closures Source: PNC, JLL • There are five major bankruptcies happening among sporting goods retailers, resulting in nearly 207 • store closures. • In comparison, Dick’s Sporting Goods is a strong performer and is steadily expanding its footprint, planning 43 new stores in the next fiscal year.
  18. 18. © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 18 Yes, some retailers are expanding!
  19. 19. Despite headlines, retail openings still trounce closures MOVE-OUTS MOVE-INS 24.1 MILLION S.F. Mall square footage opened or closed over the last 12 months 15.1 MILLION S.F. Source: CoStar, JLL Research
  20. 20. 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 Millions Mall SF vacated Mall SF absorbed Mall space absorbed outweighs space vacated Source: CoStar, JLL Research
  21. 21. Wireless stores plan aggressive expansion © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 21 1820 1750 436 386 326 265 230 160 158 125 110 77 50 29 25 25 11 9 8 Wireless Dollar stores Specialty stores Restaurants Apparel Auto parts Discount department… Shoe stores Sporting goods Beauty & cosmetics Home furnishings Grocery stores Health & beauty Wholesale clubs Home improvement Pet supply Jewelry stores Department stores Electronics Announced openings Source: PNC,JLL
  22. 22. Retailers openings 50 or more stores © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 22 1500 1000 650 320 300 190 105 100 100 100 90 80 79 75 73 70 70 65 60 56 50 50 50 T-Mobile Dollar General Dollar Tree Sprint Taco Bell Cantina O'Reilly Automotive Sprint Tractor Supply Ulta Five Below Foot Locker/Lady Foot Locker HomeGoods Sprint Advance Auto Parts Carter's/Oshkosh Ross stores F21 TJ Maxx/Marshalls Hobby Lobby Hibbett Sports Aerie Hammer & Nails Grooming Skechers Announced openings Source: PNC,JLL
  23. 23. Why so many closures? © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 23 • Consumers tastes are changing, especially as millennials increase their prominence and buying power. • E-commerce penetration is a reality and it’s growing (although not as much as some people fear). • Consumers want experiences, convenience and value. Stores that fulfill those functions well stay open. Those that don’t will close.
  24. 24. Does e-commerce tell the whole story? © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 24 Nope. Here’s why: • While e-commerce is growing at a steady pace, the fact is most purchases still take place within a store. • What's more, 1.7 percent of sales occur on bricks-and-mortar retailers’ websites, and some online orders even take place inside a store. • Even more important: online retailers are opening physical locations, proving the importance of bricks-and-mortar. ICSC Research Analysis of U.S. Census Bureau’s Quarterly E-Commerce Report Pure-Play E-Commerce 3.3% In-Store E-Commerce 0.9% Non-Merchandise Receipts 0.6% Omni-Channel E- Commerce 1.7% In-Store sales 93.5%
  25. 25. What can we expect in the future? © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 25 The store function is shifting from simple transactions to full-on experiences. Here is what stores will increasingly look like: • Fluid transactions – no waiting at cash register. • Showroom/museum feel with curated products. • Emphasis on connecting with consumers over selling. • Experiential and interactive environments that entertain consumers.
  26. 26. © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of JLL and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of JLL. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof. Jllretail.com Contacts James D. Cook Americas Director of Research, Retail +1 317 810 7191 +1 602 363 6691 JamesD.Cook@am.jll.com Keisha Virtue Senior Research Analyst, Retail +954 990 0844 +954 449 3182 Keisha.Virtue@am.jll.com

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