Exclusive: Growth Charting

While 2014 was rocky for a great many retailers, with several thousand store closings across most categories of retail, the first half of 2015 has seen some encouraging signs of a modest resurgence in certain retail sectors and from select brands. The higher numbers of store closings are far from over, and it would not be accurate to refer to 2015 as a total turnaround, but it does seem noteworthy that there are significant categories of retail that have aggressively moved to capitalize on opportunities.



Among those expanding segments, the dollar store concepts stand out. A heavy appetite for continued growth is evident amongst all three of the major dollar store players. Of course, those three players will soon be two, with the announced $850 billion Family Dollar/Dollar Tree merger still in the process of being ironed out. The other big name in this category is not standing pat: Dollar General’s 2015 expansion plans include 730 new stores (in addition to a planned remodeling initiative that will update nearly 900 existing locations). The chain’s plans for 2016 are even more ambitious, with a planned 7% square footage increase by the end of next year.



The dollar stores are not the only value retailer eyeing a 2015 expansion. While Walmart announced last fall that it planned to pursue a more conservative expansion plan for 2015, the retailer is actually increasing its growth strategy in Canada. By January 2016, Walmart plans to add 40 new stores north of the border—including a recently revealed 29-store expansion that is part of a $270 million Canadian investment.



In sporting goods and outdoor gear, Dick’s Sporting Goods is continuing to open more units — as well as rolling out its new Field & Stream outdoor-focused brand. Robust fourth quarter numbers in 2014 helped Dick’s increase net sales 10% over 2013. Dick’s is slated to open 54 new stores in 2015, nine of which will be Field & Stream locations.



Other retailers with big expansion strategies underway in 2015 include Charming Charlie, with 55 new stores, a New York City flagship and an international expansion to Canada and the Middle East; Forever 21’s new F21 red concept; Hobby Lobby, with approximately 100 new units; and Men’s Wearhouse, which just had a very successful first quarter and is looking to expand. Ulta is in the midst of a five year strategic expansion that aims to open 100 new stores annually, and Uniqlo has announced the expansion of new locations in Boston, Chicago, Toronto, Seattle, Denver and Washington, D.C., to add to its existing 39-store U.S. presence.



One of the most remarkable expansion stories at the moment is Carter’s, which is opening 110 new stores in 2015 (65 Carter’s locations and 45 OshKosh stores). To put that in perspective, that is a new store every 3.5 days or so. The 5-year plan is even more ambitious, with 550 new stores on tap (300 Carter’s and 250 OshKosh). Carter’s growth is being fueled by some impressive financials, including a record $2.9 billion in 2014 — the retailer’s 26th consecutive year of sales growth.



While the retailers with more aggressive 2015-2016 expansion plans represent a relatively diverse slice of the industry pie, there are some important commonalities. Most noticeably is the fact that most of the expansion-minded names are value-conscious brands. While the economy has been slowly improving for several years now, it seems as if many consumers have been “trained” to look for value plays. This value-bias is especially apparent in the apparel sector, where several big-name apparel retailers that have dominated over the past 10-20 years at a higher price point are now suffering while other style and value-conscious brands like F21 red, Men’s Wearhouse, H&M and Zara have made successful moves into the marketplace.



From a geographical perspective, no one region seems to be performing dramatically better than any other — the expansions on tap for the next 12-24 months seem to be opportunity driven as much as anything else. There is always natural fluctuation and ebb and flow between different markets and different regional/retailer dynamics, but large-scale patterns are not immediately evident. The development landscape is equally diverse and well-distributed, with specific project types less important than the variety of retail and dining options available. The right mix of retailers, strong complementary uses and location are all important, but food options are especially in demand. Restaurant-heavy projects and grocery-anchored centers are a great way to drive traffic, and restaurants in particular (most noticeably fast casuals and many of the newer independent chef-driven concepts) are an increasingly popular inclusion.



One interesting expansion note of a slightly different variety is Payless ShoeSource, which is moving to a new larger store format. At a time when many retailers are tending to downsize, this bucking the trend may seem like a head-scratcher. Payless, however, sees the move as a way to level the playing field somewhat and compete with its larger-format competitors like DSW, Off Broadway and The Shoe Dept. Far more common are stories like Charming Charlie. Four years ago, Charming Charlie was looking for 8,000-sq.-ft. sites, and today the jewelry and accessories retailer is focused on finding locations more in the 4,000-sq.-ft. to 5,000-sq.-ft. range. Many retailers have found that they can still maintain the same level of sales while keeping costs down and improving sales-per-square-foot. Ultimately that enhanced efficiency works out well for both retail tenants and landlords.



While the industry has gone through some big changes in the last few years, and some long-term uncertainties remain, the continued bold growth strategies of so many prominent retailers would seem to indicate that there will definitely be some clear winners (and losers) in the months and years ahead.



Jonathan Lapat serves as principal with Framingham, Mass.-based Strategic Retail Advisors, a brokerage dedicated to providing real estate solutions to the retail and shopping center industry, and president of X Team International, an alliance of retailer brokers with a presence in 45 North American markets. For more information, visit xteam.net.