Big Builders

Connie Robbins Gentry

12/1/2009

The annual Big Builders Survey represents retailers with measurable construction activity in the 2008 and 2009 calendar years. Although not intended to be an all-inclusive ranking of retail construction activity, the report highlights many of the biggest builders in select sectors: drug stores, food stores, discount stores, specialty hardlines, specialty softlines and do-it-yourself concepts.

There is no getting around the dramatic impact the economic downturn has had on retail construction: Organic growth slowed in 2008, and in 2009 it ground to a halt at many retail companies.

Flat-line growth or worse became the new norm. In fact, many retail organizations spent more capital closing stores and canceling planned store openings than expanding their portfolio’s footprint.

In October, for instance, The Home Depot announced it had closed 15 stores in the last quarter and also removed 50 planned stores from the company’s future-growth pipeline. New-store openings for the home improvement retailer plummeted from 62 in 2008 to only eight this year.

Office Depot, which plans to open 15 stores this year compared with 66 in 2008, is also closing 118 stores in 2009.

Methodology Behind the Rankings

Information and rankings included in this report were compiled from direct contact with retail corporate offices as well as research of the retailers’ company reports, most recent SEC filings and published statements.

Rankings: This compilation is representative of retailers with measureable construction activity in the 2008-2009 timeframe. However, this report is not intended to be all-inclusive or to be a ranking of all retailers opening new stores.

Timing: The research represents construction activity during the 2008 and 2009 calendar years. The majority of retail companies surveyed operate on fiscal years ending on or near the last week of December, January or February. In a few instances, fiscal years ended with the last week of August or September.

New Stores Opened: In financial statements, retailers typically report their total net stores at the end of a given period: Net stores being the number opened less the number of stores closed. The Chain Store Age report measures construction activity; therefore the “new-store” numbers reflect the actual number of new stores opened, including relocated stores. It does not include acquisitions activity, nor does it reflect store closings.

Square Footage: As with the new-store totals, the square footage in this report reflects square footage added from construction, including new-store openings, relocations of existing stores and expansions. Whenever possible, the amount cited is the actual number reported by the retailer. In some cases, square footage is an estimate based on the retailer’s typical store footprint. When the retailer has not reported actual square footage or when there are multiple formats and no exact indication of which format opened, it would be too speculative to estimate a square-footage total.

Capital Expenditures: These are the capital expenditures reported by the retail companies as actual in 2008 and projected in 2009. When the retailer defined specifically the amount of capital expenditure dedicated exclusively to opening new stores, relocations and expansions, that total has been used. In other cases, the retailer’s total capital expenditure is quoted. Therefore, capital expenditures should not be viewed as a comparative analysis between retail organizations.

Even Walgreens, which led the industry in new-store openings in both 2008 and 2009, announced it had “reduced organic drug store growth from 9% to a long-term target of 5%” per year.

Capital Expenditures
(000 omitted) Source: Company reports/Chain Store Age research

Rank	Company	2008	2009
1	Wal-Mart Stores	$ 11,500,000	$ 13,000,000
2	Lowe’s	3,600,000	2,500,000
3	Kroger	2,100,000	2,100,000
4	Target Corp.	2,600,000	2,000,000
5	Walgreens	1,900,000	1,800,000
6	Costco	1,600,000	1,700,000
7	CVS	1,300,000	1,600,000
8	Safeway	1,595,700	1,000,000
9	Delhaize America	1,000,000	906,000
10	Kohl’s	1,000,000	800,000
11	Supervalu	1,200,000	750,000
12	Publix	1,289,700	665,000
13	J.C. Penney	1,000,000	600,000
14	Macy’s	897,000	450,000
15	TJX	583,000	450,000
16	Whole Foods Market	358,000	350,000
17	Dollar General	205,500	275,000
18	AutoZone	243,600	272,200
19	O’Reilly Automotive	195,000	210,000
20	BJ’s Wholesale Club	138,000	200,000
Total		$34,305,500	$31,628,200

The annual “Big Builders” survey conducted by Chain Store Age revealed continued, albeit diminished, construction activity across many retail sectors.

However, it also uncovered some optimism in the fact that, for some retailers, digging out of the economic crisis does not mean burying the shovel. Instead, the current economy separates the fertile ground from the wasted fields, enabling retailers to shutter underperforming assets, improve existing locations and focus on prime opportunities as they take advantage of the weak commercial real estate market.

Not surprisingly given the economic climate, retailers in sectors focusing on needs-based and consumable merchandise have more resilient construction pipelines than those in the specialty categories, which explains why the food and drug store segments have maintained, and, in some instances increased, their construction activity.

VALUE RETAILERS

But the retailers that have the biggest expansion programs in 2009 have one thing in common: value—and the more extreme the better. Led by the fast-growing Dollar General, Dollar Tree and Family Dollar, all of which have ambitious growth plans in place for 2010, extreme-value retailers have benefited immeasurably from the U.S. consumer’s new frugal mind-set.

Tawn Miller, senior director of corporate communications at Dollar General, told Chain Store Age the company would open 500 new locations this year plus relocate or remodel another 450 stores. Thayer Morgan (Century 21 Commonwealth Commercial) ranks Dollar General as one of the fastest gr

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