Mall is the new black–the IN spot for cash-strapped

NEW YORK —While Kirkland’s seems to have taken an important step toward turning around what had been its declining fortunes, a more than cursory review of its latest financial results reveals an interesting element. Kirkland’s mall-based stores enjoyed significantly better comparable-store sales results than did its stand-alone units, which at least suggests that some larger force might be shifting what has been a negative trend in mall-store sales.

A relevant question is, ‘Could that force be gasoline prices?’ After all, malls provide a range of diversions in addition to shopping, including entertainment and dining. Families could, in theory, have a little fun and get their shopping done in a single trip, potentially saving on fuel.

In posting its latest quarterly results, Kirkland’s noted that comparable-store sales gained 4.3%, but comps in mall stores advanced 9.3%, while those in off-mall stores increased 2.0%.

In the first quarter ended May 3, Kirkland’s posted a net sales increase of 2.1% to $84.1 million. Net loss was $2.6 million, or 13 cents per diluted share, versus a net loss of $7.5 million, or 38 cents per diluted share, in the year-earlier period.

Kirkland’s president and ceo Robert Alderson, attributed the stronger first quarter numbers to “strong merchandising execution and the benefits of aggressive financial initiatives that have reduced our operating costs, improved cash flow and strengthened our liquidity.”

Although Kirkland’s results might provoke curiosity about mall fortunes, the idea that the economy might have a positive effect on shopping centers was on the minds of some observers before its posting. Michael Niemira, vp, chief economist and director of research for the International Council of Shopping Centers, said the organization has been conducting research into the idea that malls might have an advantage in a high-fuel cost consumer climate. The research was nearing completion at press time. He noted, “There is a belief that the shopper will travel further sometimes to centers that have a wider selection to get ‘one-stop shopping.’”

While definitive evidence of a new preference for malls awaits, certainly studies indicate that consumers are looking at shopping alternatives as they confront $4 gas prices over the summer and sustain higher gas prices going forward.

In a Vertis Communications study, 91% of consumers said they have changed their shopping habits in the current economy, with 59% of respondents saying that they are looking at combining shopping trips. According to the Vertis study, lower-income consumers particularly are multitasking on their shopping trips, with those earning $50,000 or below annually and those earning between $75,000 and $100,000 the most likely to do so.

The NPD Group, in one of its Fast Checks studies, pointed out that Americans made significant changes in their economic behavior from April to May. Over those two months, the proportion of consumers who said the United States is in or is heading toward a recession or economic slowdown grew from 79% to 84%.

As a result, consumers said they would engage in less discretionary spending, put more money toward bills and pull back on dollars devoted to toys, video games and home improvement. Additionally, they said coupons and discount/membership programs have become more attractive. Overall, however, NPD determined that consumers are looking for more leisure options closer to home, as 49% say they will cut back on holiday travel. “It looks like ‘stay-cations’ will be catching on this year,” said NPD chief industry expert Marshal Cohen.

And the local mall may turn out to be a popular stay-cation option.