Q1 2013 | RETAIL
NORTH AMERICA
HIGHLIGHTS
Retail Follows
Housing Recovery
JAMES COOK Director of Research | USA
KEY TAKEAWAYS
MARKET INDICATORS
Q1
2013*
Q2
2013**
VACANCY
NET ABSORPTION

CONSTRUCTION
RENTAL RATE
* Compared with prior period
** Projected, relative to prior period
U.S. RETAIL MARKET*
SUMMARY STATISTICS, Q1 2013
Vacancy Rate: 10.06%
Change from Q4 2012: -0.03%
Under Construction:
5.2 Million Square Feet
New Supply:
2.1 Million Square Feet
Net Absorption:
4.5 Million Square Feet
ASKING RENTS PER SF
Shopping Center Space: $14.80
Change from Q3 2012: +$0.03
*Subset of Colliers markets
Source: CoStar
www.colliers.com

• Jobs and consumer confidence have been a mixed bag
in recent quarters. But the message behind each
statistic is clear: The economy is improving…gradually.
• Shopping centers absorbed 4.48 million square feet in
Q1 2013, with the national vacancy rate dropping from
10.09 to 10.06 percent. Average asking rents continued
their gradual increase, inching up by 0.3 percent to
$14.80 per square foot.
• Employment and housing are driving the U.S. retail
recovery. The five markets with the most absorption are
all on the NAHB/First American Improving Markets Index
(IMI), which highlights areas showing long-term growth
in employment and housing.
• Tens of millions of square feet of shopping center space
are in the development pipeline across Canada. The influx
of American retailers has helped keep occupancy high.
In a special focus
on restaurants,
we examine
how brands are
navigating the
tricky waters of
menu pricing, and conclude that
the gravity of the happy medium
has pulled quick-service pricing
up and casual down. We also look
at why chains have to battle for
qualified franchisees and the
coming shake-up in the crowded
fast-casual arena.
• Mexico built more than 1.5 million square feet of new shopping center space last year and is experiencing
a surge in new store openings from national and international brands.
BEST COMPARABLE
SALES GROWTH
REPORTING
PERIOD
QUARTERLY %
CHANGE (Y-o-Y)
WORST COMPARABLE
SALES GROWTH
REPORTING
PERIOD
QUARTERLY %
CHANGE (Y-o-Y)
JC Penney
Q4 2012
-31.7
7.9
Barnes & Noble
Q3 2013
-7.3
Q4 2013
7.5
Staples
Q4 2012
-5.0
Home Depot
Q4 2012
7.1
Office Depot
Q1 2013
-5.0
TJMaxx
Q4 2013
7.0
OfficeMax
Q4 2012
-4.6
American Apparel
Q4 2012
7.0
GameStop
Q4 2012
-4.6
Cabelas
Q1 2013
24.0
Pier 1
Q4 2013
Krispy Kreme
HIGHLIGHTS | Q1 2013 | RETAIL | NORTH AMERICA
Employment and
Confidence: The Big Picture
The true drivers of retail spending—jobs and consumer confidence—have
been a mixed bag in recent quarters. But the macro message behind each
statistic is clear: The economy is improving…gradually.
• Since the explosion of unemployment, which peaked in 2009, the
situation has gradually improved. April saw an encouraging 165,000
jobs added, and the unemployment rate fell one tenth of a percent.
There is a slow recovery underway.
Consumer spending rose by 0.7 percent in February and 0.2 percent
in March, despite the end of the two-year payroll tax holiday in January.
Much of this increase was due to an unusually cold March, which required
extra spending for heating. In fact, combined retail and restaurant
spending fell in March.
Real GDP grew by 2.5 percent in the first quarter of 2013. The effects
of the sequester have yet to take a toll on the economy. Assuming the
sequester persists through September, IHS Global Insight projects it will
knock 0.4 percent off of 2013 growth. This will cause a see-saw pattern in
growth from quarter to quarter, as we bounce from weak to healthy—not
quite the steady growth that keeps consumers shopping and retailers
expanding, but better than it could be.
• The Conference Board’s Consumer Confidence Index (CCI) was down
in March and up in April. The Thomson Reuters/University of Michigan
Consumer Sentiment Index was down in April and up in March. While
at the micro level these indices appear contradictory, the larger trend
in consumer confidence has been positive: Since November 2008, the
CCI has risen from 55.3 to 76.4 in April 2013. But like employment, it
has had ups and downs along the way.
BELLWETHER ECONOMIC INDICATORS
Q-o-Q CHANGE (%)
Y-o-Y CHANGE (%)
GDP U.S.
0.6
1.8
GDP Canada*
0.1
1.1
GDP Mexico*
0.7
3.2
Retail Trade Sales**
0.6
2.8
DEC 2012
MARCH 2013
69.5
65.1
59.7
28
47
44
NRA Restaurant
Performance Index (RPI)
102.2
99.7
100.6
National
Unemployment Rate (%)
8.2
7.8
7.6
Housing Market Index
*Q4 2012 growth rates of real GDP. Source: OECD
**Advanced estimate of U.S. retail and food services for March 2013. Source: U.S. Dept of Commerce
HOUSING RECOVERY IS THE BACKBONE
Housing fundamentals are strong, making up much of the backbone
of current economic growth. Housing starts rose by 28% in 2012, and
both the number and average price of home sales are on the rise. This
improvement has bolstered consumer spending, as some consumers
spend to outfit their new homes, while others feel more willing to spend
because of the psychological effects of owning a home with a rising
market value.
P. 2
| COLLIERS INTERNATIONAL
Among the varieties of retail property in the U.S., community, neighborhood
and strip centers suffered the most following the recession. As a group,
these shopping centers saw vacancies peak in 2010 and then gradually
decline as the economy improved. Since 2010, the employment and housing
recoveries have led to growing consumer spending, and spurred retailer
demand for further shopping center space. In the first quarter of 2013,
shopping centers absorbed a net 4.48 million square feet and the national
vacancy rate dropped from 10.09 to 10.06 percent. Average asking rents
continued their gradual increase, inching up by 0.3 percent to $14.80 per
square foot. Shopping center construction has remained slow: In the U.S.
markets tracked by Colliers, 2.10 million square feet of new shopping
center space was built in Q1 2012, with another 5.25 million square feet
under construction.
• Chicago saw a 4.1 percent growth in employment since its trough in
MARCH 2012
Consumer
Confidence – Overall
EMPLOYMENT AND HOUSING
DRIVING U.S. SHOPPING CENTER RECOVERY
2009. The market absorbed 621,107 square feet, more than any other
in Q1. It also topped the nation in shopping center construction, with
560,400 square feet.
• Houston and Dallas have each seen substantial economic growth
thanks in large part to the energy industry. In Houston, where
employment has grown by 10.8% since 2009, the market saw 351,734
square feet of absorption. In Dallas, where employment grew by 8.9%,
the market absorbed 250,089 square feet.
• Three more IMI markets also topped the nation. Hawaii, Denver and
Phoenix each absorbed more than 300,000 square feet. Hawaii ranked
second for new construction, with 283,535 square feet.
U.S. RETAIL PROPERTY SALES VOLUME SLIPS
Retail property sales volume was down 30% year-over-year in the first
quarter of 2013, according to data from Real Capital Analytics. However,
the single-tenant investment sector saw $1.3 billion in transactions, a 98%
jump in volume year-over-year. Cap rates across all retail products, which
had been dropping since 2010, have remained flat for nearly a year. The
average national retail cap rate is 7.3%.
HIGHLIGHTS | Q1 2013 | RETAIL | NORTH AMERICA
The largest deal of the quarter is an example of one REIT’s shift in
strategy. Vornado’s sale of Green Acres Mall in Valley Stream, New York,
came after Chairman Steve Roth wrote in his annual investment letter that
he sees a “bubble on the horizon.” Vornado plans to sell more than it will
buy in the near future, focusing instead on leasing and value creation.
Seeing an opportunity to create value of its own, Macerich paid $278 per
square foot for the Long Island mall, which includes struggling tenants
Sears and JC Penney.
In another notable sale, Extell Development, in a joint venture with
Starwood Capital Group, purchased a former Pathmark grocery site
in New York City for almost $150 million (including a lease buyout of
$46.5 million). The Lower East Side site will be redeveloped to include
one million square feet of luxury apartments, an underground garage
and urban retail.
CMBS LEADS LENDERS IN
RETAIL EXPOSURE, RISK APPETITE
Commercial mortgage-backed securities (CMBS) lending began its
resurgence in 2010 and is on pace to grow even further in 2013. With
first-quarter CMBS originations already at $30 billion, we are on track to
surpass 2012’s total of $48 billion. Additionally, properties with CMBS
loans have higher average cap rates, indicating a larger risk appetite than
other lenders such as banks or insurance companies. Retail properties are
more exposed than other property types: 42 percent of all retail loans in
2012 were CMBS originations.
In Canada, an Influx
of American Retailers
Helps Keep Occupancy Up
Canadian shopping center vacancy rates have remained low across
major markets as American and other international retailers continue to fill
available space. Canada added 8 million square feet of shopping center
space in 2012, but the nation’s retail square footage per capita actually
dropped, thanks to strong population growth.
Canadian malls produce significantly higher sales per square foot than
American malls. According to the International Council of Shopping
Centers (ICSC), Canadian mall productivity for non-anchor space in
2012 was CA$603 per square foot, compared with US$455 in the United
States. Canadian consumers have fewer shopping options than their U.S.
counterparts, and American department stores Target and Nordstrom and
specialty retailers like J. Crew and Apple are eager to tap into that market.
Nordstrom will open five Canadian locations between 2014 and 2016, the
first four of which will be in spots vacated by Sears Canada. La Maison
Simons is also selectively picking up prime mall sites. Simons has seven
locations in Canada and recently opened its first location outside of
Quebec. Target’s ambitious Canadian expansion is going full-bore as it
reopens 124 former Zellers locations in 2013. (Target acquired 189 Zellers
leaseholds in 2011.)
Tens of millions of square feet of shopping center space are in the
development pipeline across the country. Outlet malls, new enclosed malls,
mixed-use town centers and major redevelopments of existing malls are
all on the slate. Seasons of Tuxedo, a 1.5 million square foot IKEA-anchored
center in Winnipeg, completed construction this year. Outlet malls have
sprung up in Canada, with proposed, existing and under-construction
projects in Vancouver, Toronto and Ottawa. Tsawwassen Mills and
Tsawwassen Commons, with a combined 1.8 million square feet of retail
and office space in metro Vancouver, are set to open in 2015.
Online sales have begun to make an impact on Canadian brick-and-mortar
retailers, causing Staples and Best Buy to each reduce their physical
presence. Best Buy Canada will close 15 of its 58 locations, and Staples
will downsize 39 of its 330 locations, reducing its typical footprint from
about 25,000 square feet to 15,000 square feet.
The added competition from new American stores and the growing
popularity of online retail have also helped to keep down core inflation.
One danger for Canadian retailers is that with a strong Canadian dollar,
consumers are more likely to cross the border and do their shopping in
the United States. Net spending by Canadian consumers abroad as a
percentage of total consumption has grown to an historic high.
Mexico’s Growth Opportunities
Attract Retailer Investment
Mexico’s dynamic economic environment is attractive to foreign investment looking for growth in an emerging market. The country’s consumer
income stability, job growth and growing consumer debt have fostered
demand for new retailers and shopping centers.
IN MEXICO, FASHION MALLS
DOMINATE NEW SHOPPING CENTER CONSTRUCTION
2%
1.9 Million
Square Feet of
Construction
in 2012*
ENTERTAINMENT
CENTER
3%
COMMUNITY
CENTER
9%
58%
NEIGHBORHOOD
CENTER
FASHION MALL
28%
POWER
CENTER
*Shopping centers larger than 32,808 square feet (10,000 square meters)
Continued on page 5
COLLIERS INTERNATIONAL |
P. 3
HIGHLIGHTS | Q1 2013 | RETAIL | NORTH AMERICA
UNITED STATES | SHOPPING CENTER MARKET STATISTICS
INVENTORY*
MAR 31, 2013
(SF)
MARKET
Albuquerque, NM
Atlanta, GA
Bakersfield, CA
Baltimore, MD
Birmingham, AL
Boise, ID
Boston, MA
Charleston, SC**
Charlotte, NC
Chicago, IL
Cincinnati, OH
Cleveland, OH
Columbia, SC
Columbus, OH
Dallas/Ft. Worth, TX
Denver, CO
Detroit, MI
Fresno, CA**
Ft. Lauderdale-Broward, FL
Greenville/Spartanburg, SC
Hartford, CT
Hawaii***
Houston, TX
Indianapolis, IN
Jacksonville, FL
Kansas City, MO-KS
Las Vegas, NV **
Little Rock, AR
Long Island, NY
Los Angeles – Inland Empire, CA
Los Angeles, CA
Louisville, KY
Memphis, TN
Miami-Dade County, FL
Milwaukee, WI
Minneapolis, MN **
Nashville, TN
New Jersey – Northern
Oakland/East Bay, CA
Omaha, NE**
Orange County, CA
Orlando, FL
Palm Beach County, FL
Philadelphia, PA
Phoenix, AZ
Pittsburgh, PA
Portland, OR
Raleigh/Durham/Chapel Hill, NC
Reno, NV
Richmond, VA
Sacramento, CA
San Diego, CA
San Francisco, CA
San Jose/South Bay, CA
Savannah, GA
Seattle/Puget Sound, WA
St. Louis, MO
Stockton, CA
Tampa/St Petersburg, FL
Washington, DC
West Michigan**
Westchester County, NY
TOTALS
9,357,745
143,184,402
9,218,188
45,887,036
32,861,126
13,184,888
88,170,235
16,792,668
51,849,351
160,270,592
35,918,886
60,626,327
14,932,030
32,684,609
152,332,565
73,031,397
73,132,356
25,192,720
48,709,104
29,553,542
42,426,173
22,466,081
151,452,085
40,078,169
38,982,251
39,495,416
44,201,964
15,007,964
53,460,462
85,642,305
154,562,752
28,179,753
30,779,841
46,850,779
34,722,964
65,282,915
29,918,740
92,098,990
41,308,389
29,897,451
65,586,140
63,361,112
35,349,625
151,828,180
104,350,972
32,683,640
35,924,753
38,388,032
13,955,444
29,899,453
37,193,248
54,225,614
9,400,841
30,574,677
7,447,066
58,307,050
55,439,026
19,660,494
87,621,579
82,078,726
18,107,823
50,874,312
3,285,963,018
NEW
SUPPLY 2013
(SF)
UNDER
CONSTRUCTION
(SF)
0
2,200
0
49,863
137,000
0
0
11,646
64,977
30,934
41,500
0
18,098
3,900
15,000
560,400
0
9,700
0
0
71,599
25,807
17,100
276,563
0
4,800
0
283,535
10,000
0
89,905
0
0
0
0
65,072
24,622
7,307
14,080
3,643
2,800
19,350
17,537
9,200
53,304
82,659
0
0
15,659
0
73,142
16,000
0
53,424
0
14,400
3,800
63,941
0
0
0
4,358
0
0
0
11,000
0
0
2,108,770
5,177
157,000
0
6,000
0
124,437
329,532
19,931
111,100
386,321
6,007
59,000
44,700
540,000
135,230
36,183
34,787
60,000
0
0
53,300
78,973
148,269
21,800
0
49,762
5,558
130,836
20,000
42,800
88,400
556,621
0
0
4,446
134,500
18,543
23,400
0
0
6,500
15,500
0
190,383
0
0
0
350,009
57,500
0
24,232
399,982
13,000
585,299
5,246,073
VACANCY RATE VACANCY RATE
DEC 31, 2012
MAR 31, 2013
(%)
(%)
12.4
14.5
9.1
7.8
11.1
11.0
6.5
7.3
12.0
12.2
13.2
12.5
10.0
11.0
12.8
9.5
15.4
13.6
9.3
10.4
8.7
6.3
9.8
11.4
12.0
13.1
10.7
7.9
5.2
11.8
7.3
10.3
14.4
4.8
11.6
6.4
12.0
9.9
6.3
9.3
7.0
12.0
9.5
10.0
15.6
5.6
9.1
8.9
14.5
11.4
12.4
7.4
3.8
6.4
9.5
9.1
11.0
10.2
10.6
7.0
10.1
7.0
10.09
11.7
14.6
8.9
7.6
10.8
10.8
6.5
6.9
11.6
11.7
13.1
12.2
9.8
10.7
12.6
9.1
15.2
12.9
9.3
10.8
8.3
n/a
9.6
11.3
11.4
12.9
10.4
8.4
5.3
11.8
7.2
10.5
13.7
4.9
11.7
6.4
11.7
9.7
6.1
9.3
6.8
11.8
9.0
10.0
15.3
5.5
8.6
8.7
14.2
11.1
12.3
7.2
3.9
6.1
9.4
8.9
11.0
10.2
11.0
7.2
10.0
6.9
10.06
ABSORPTION
Q1 2013
(SF)
QUOTED RENT
MAR 31, 2013
(US$/PSF)
59,523
-91,494
12,532
112,182
89,472
35,592
-33,068
13.27
12.85
14.12
19.15
11.41
12.24
15.55
12.82
13.08
15.62
10.54
10.05
10.27
11.68
13.13
14.10
12.45
13.24
17.59
9.11
13.09
38.40
14.31
11.85
12.80
11.81
16.20
10.63
22.86
16.92
22.20
10.86
10.88
23.41
11.26
15.53
12.92
19.41
20.93
12.19
22.37
13.65
16.51
14.23
13.59
11.40
16.53
14.68
14.73
13.14
16.80
20.60
26.52
25.53
14.74
17.63
11.91
14.94
13.05
21.64
10.70
19.38
14.80
231,162
621,107
25,010
169,081
-1,812
70,743
250,089
303,556
108,002
127,839
15,893
-110,939
141,080
340,649
351,734
3,544
235,502
78,515
119,649
-61,327
-11,319
4,039
106,540
-65,141
187,565
-30,282
-44,731
-21,064
84,103
234,354
78,999
-31,342
92,552
128,431
182,228
-55,667
303,341
14,829
174,104
42,051
40,211
85,654
33,472
103,581
-13,706
77,280
6,238
107,125
21,178
112
-402,251
-194,615
22,159
24,090
4,487,934
Q-o-Q
CHANGE IN
RENT(%)
1.3
1.0
0.9
2.2
n/a
2.0
0.3
-17.1
-1.2
2.9
-0.5
-3.1
-2.2
-0.4
-1.4
1.7
0.5
-1.7
0.4
2.0
-0.9
0.0
2.0
2.0
0.8
-1.1
-0.7
0.4
-2.1
-0.1
-0.9
-1.0
0.3
-0.6
-1.4
0.3
-0.3
-0.6
-0.5
2.4
-1.5
-1.5
0.6
-0.7
-0.5
-0.5
1.5
0.1
-1.1
0.2
3.4
1.6
0.9
-2.4
1.8
-1.0
-0.9
-1.4
-0.1
-2.7
0.4
0.2
0.3
NOTE: CoStar’s periodic building reclassifications, rather than actual new supply, can result in larger-than-expected changes to inventory numbers. Care should be taken when making quarter-over-quarter comparisons.
*Community and Neighborhood Centers | **Select Colliers offices track their own retail market data. | ***Hawaii data is year-end data. | Sources: CoStar, Colliers Research
P. 4
| COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | RETAIL | NORTH AMERICA
Mexico saw over 1.5 million square feet of new shopping center space built
in 2012, including Plaza El Dorado, a fashion mall in Boca del Rio, Veracruz,
anchored by Liverpool and Chedraui. Several large mixed-use projects are
now in the planning stage. These micro-city projects will include residential,
retail and office, as well as parks and service buildings. Medica Sur City
and Vía Vallejo are two notable examples.
In the first three quarters of 2012 there were 9,857 new restaurants and
bars in the U.S., according to preliminary figures from the Bureau of Labor
Statistics. Franchises bent on growth must compete to attract qualified
franchisees, and some chains will have to choose between taking a risk on
an inexperienced operator or scaling back their expansion plans.
Mexico is experiencing a surge in new store openings from national and
international brands, as well as the creation of new concepts. Last year,
Home Depot opened its hundredth store in Mexico, and has said it may
open as many as 25 more in the future. National restaurant operator
Corporación Mexicana de Restaurantes is introducing Olive Garden, Red
Lobster and the Capital Grille to Mexican diners, and will open at least 37
locations in the next few years under its agreement with Darden
Restaurants. Starbucks, which has been present in the market for ten years,
will reach nearly 500 locations by 2015. Operator Alsea will open between
80 and 100 restaurants in 2013 across several brands, including 45
Starbucks, 20 Domino’s Pizza, 10 Italianni’s, six PF Chang’s and three Chili’s.
FAST-CASUAL SEGMENT PROSPERS, BUT ONLY
A HANDFUL OF NATIONAL LEADERS WILL EMERGE
Colliers expects this large domestic and foreign capital investment in retail
to continue over the next several years.
Restaurant Spotlight
RESTAURANT CHAINS BATTLE
FOR QUALIFIED FRANCHISES
Restaurant sales are growing, but many chains have seen their expansion
limited by the sheer quantity of concepts seeking franchisees and a dearth
of experienced operators. According to data from the National Restaurant
Association (NRA), nominal sales grew by 4.2 percent year-over-year in
2012 and are forecast to grow a further 3.8 percent in 2013. Chains are
relying heavily on franchisees to support this expansion: Bank lending to
franchisees is at its highest level since the recession, and U.S. Small
Business Administration loans and the EB-5 Investor Visa program have
also propelled chain expansion.
While we hold positive expectations for the fast-casual segment, we are
cautious about how many real winners will emerge from the crowded
field. Many players are in a frenzy to reach critical mass; a few will deploy
enough successful stores to support a national advertising campaign and
a few others will end up as successful regional operators. With little
new construction and few open end-caps, new players are aggressively
pursuing opportunities and competing with other users that also seek
these high-visibility spots.
GRAVITY OF ECONOMICS PULLS
MENU PRICES TOWARD EARTH
Many quick-service restaurants (QSRs) relied on dollar menus and other
discounts to prop up customer traffic during the recession. Fine-dining
chains like Flemings and Ruth’s Chris suffered dramatic declines in samestore sales, which remain significantly below pre-recession peaks despite
recent steady growth. Now QSRs are raising prices on value menus, while
polished chains are using fixed-price menus to drop theirs. Meanwhile,
fast-casual chains continue on with price points in the happy middle.
QUICK-SERVICE RESTAURANTS LABOR
TO PUSH UP DISCOUNT MENU PRICES
ADULT-ONLY RESTAURANT VISITS RISE
With commodity and labor costs on the rise, QSRs have walked a tightrope,
reining in discoun ts to improve margins while still attracting valueconscious consumers. According to data from the NRA, QSR menu prices
grew by 3.2 percent in 2012, up a full percent from the 2.2 percent growth
seen in 2011.
1.0
0.0
-1.0
-2.0
Adult-only parties
-3.0
Parties with kids
-4.0
-5.0
A host of casual operators are testing the waters with fast-casual pilot
programs. Applebee’s, Red Robin, Famous Dave’s and even Denny’s are
trying to get in on this hottest of restaurant segments. And who can blame
them? In an uncertain economy, these chains strike a balance between
quality and value that’s irresistible to consumers, which is how a concept
like Chipotle Mexican Grill—which some thought to be mature—can report
20.2% sales growth in 2012.
2008
2009
2010
2011
% traffic change vs. prior year
Source: The NPD Group
2012
Some QSRs are repositioning “dollar menus” as “value menus” that still
offer appealing discounts, but allow them to break through the one-dollar
ceiling. Until the beginning of this year, McDonald’s had been marketing its
Extra Value menu with higher price points, but a decline in same-store
sales has led to a return to value. McDonald’s has expanded its dollar
menu, though it is less extensive than it once was and features many
add-on items such as the side salad. Others are increasing the items on
their single-item value menus to nearly two-dollars. Wendy’s, Burger King,
Arby’s and others have opted for more pricing flexibility with their discount
Continued on page 8
COLLIERS INTERNATIONAL |
P. 5
HIGHLIGHTS | Q1 2013 | RETAIL | NORTH AMERICA
UNITED STATES | RETAILER REPORT CARD
RETAILER
MOST RECENT
REPORTING
PERIOD
% CHG IN
Y-o-Y SALES
% CHG IN
Y-o-Y SALES
(MOST RECENT QTR)
(PREVIOUS QTR)
Q4 2012
Q2 2013
Q1 2013
Q4 2012
(1.9)
1.8
0.6
(2.6)
(1.8)
0.2
4.2
(2.7)
launched in-house credit program; entered NYC boroughs for the first time
Q3 2012
Q4 2012
Q4 2012
Q4 2012
Q3 2012
Q2 2013
Q4 2012
Q4 2012
Q4 2012
5.8
3.0
(31.7)
3.9
6.3
5.3
0.7
0.8
1.0
4.9
5.0
(26.1)
3.7
10.7
5.4
3.3
(1.6)
1.9
converting 15 more stores to flagships through remodels and enhanced premium brands
Q4 2012
Q2 2013
Q4 2012
Q4 2012
Q4 2012
Q2 2013
Q4 2012
Q4 2012
Q4 2012
Q4 2013
Q4 2012
Q4 2013
Q3 2013
Q4 2013
(3.5)
5.0 / 5.0
3.0
2.4
3.6
2.9
4.8
1.9
5.0
2.3
0.4
7.0
2.8
1.0
(4.6)
7.0 / 6.0
4.0
1.6
6.3
6.6
(2.5)
1.1
6.0
2.7
2.9
7.0
5.6
1.5
Canadian operations post first profit since acquisition in 2011, total sales increase 5%
Q4 2012
Q2 2013
Q3 2012
Q4 2012
Q1 2013
Q4 2013
Q2 2013
1.9
3.6
3.0
(2.1)
0.7 / 1.5
(4.1)
6.9
5.6
2.5
3.2
(3.6)
1.2 / 0.8
(4.5)
7.2
consumer trends in 4Q will make management cautious; upbeat about new store openings
Q3 2013
Q4 2013
Q1 2013
Q4 2012
Q4 2012
Q3 2013
Q1 2013
Q4 2012
Q4 2012
Q4 2012
(7.3)
(0.8)
24.0
1.2
(4.6)
(9.7)
(5.0)
(4.6)
4.6
(5.0)
(2.9)
(4.3)
12.0
5.1
(8.3)
(8.8)
(6.0)
(2.6)
6.5
(2.0)
COMMENTS
AUTO
Advance Auto Parts
AutoZone (U.S.)
O'Reilly Auto Parts
Pep Boys
purchased Web-based auto parts retailer, AutoAnything, to generate material sales growth
implementing loyalty program to grow loyalty amongst the DIY customer
2013 CapEx is $65 million for 31 new service & tire centers, 7 new supercenters
DEPARTMENT STORES
Belk
Dillard's
JCPenney
Macy's
Nordstrom
Neiman Marcus
Saks Fifth Avenue
Sears (U.S.)
The Bon Ton
10th consecutive quarterly comparable comps increase; sales weakest in home & furniture
store traffic fell 17%; replaced Ron Johnson with previous CEO Mike Ullman
strong holiday sales with strength in handbags, watches, furniture, men's overall & mattresses
full-line stores +2.2%, Rack +7.1%; increased CapEx attributable to Rack & Manhattan store dev.
womens sportswear and shoes, designer handbags and jewelry & mens were strong performers
NYC flagship store lagged in sales due to impact of Hurricane Sandy & decreased tourism
Sears apparel category has achieved comp store sales increases for 6 consecutive quarters
focusing on better-balanced merchandise assortment, enhanced marketing & e-commerce
DISCOUNTERS
Big Lots (U.S.)
Costco (U.S., with/excl. fuel)
Dollar General
Dollar Tree
DSW
Family Dollar
Fred's Super Dollar
Kohl's
Ross
Sam's Club (U.S., excl. fuel)
Target
TJ Maxx
Tuesday Morning
Walmart (U.S.)
fared well in U.S. but cited weak international sales; will open 10 new stores by Sept 2013
4Q sales driven by consumables w/perishables leading the way, opened in 2 new states (CA/MA)
increase in both ticket sales and store traffic; opened 47 stores in Q4
positive growth comps in all business segments, strongest in men's footwear & accessories
double digit market share gains in Consumables over the last 12-, 26- and 52-week periods
pharmacy department continues to perform well, will address general merch sales in 2013
e-commerce sales up 43% for the quarter; exclusive Only-at-Kohl's labels performed strongest
for the quarter, juniors performed best; geographically strength was broad based
sales growth slowed late in Q4 and was most pronounced from business members
strong results from Credit Card division; free wireless now available in all Target stores
raised long term view for HomeGoods to 750–825 stores versus prior est of 750
customer traffic was flat but saw a 3.7% increase in average ticket
underlying business of Walmart is strong, slower sales due to delay in tax refunds
GROCERY
The Fresh Market
Harris Teeter
Kroger (excl. fuel)
Roundy's
Safeway (total/excl. fuel)
SuperValu (Retail food)
Whole Foods
promotional strategies were effective in driving unit sales & increasing market share
record Q3 EPS; will build, expand, or relocate 50 stores during calendar year 2013
own brand product sales strong; discount grocers impacting sales in Milwaukee & MN markets
sales flat, but management team predicting market share gains through 2013
eliminated 100 positions at headquarters in Q4; added 200 private label items to collection
demand for healthy foods continues to grow; opened 6 locations in the second quarter
HOBBY
Barnes & Noble (retail)
Best Buy (U.S.)
Cabela's
Dick's Sporting Goods
GameStop (global)
hhgregg
Office Depot (N. America)
OfficeMax (retail)
PetSmart
Staples (N. America)
P. 6
| COLLIERS INTERNATIONAL
proposal to purchase all assets of the retail segment by company founder being evaluated
designating 2014 as a transition year, will require further investment to advance transformation
in addition to expected strong ammunition & gun sales CAB saw increases in 10 of 13 categories
2013 growth investments include omni-channel retailing, store remodels, new concepts
continued declines in hardware business in 4Q12, will continue to be slow until 4Q13
shifting product mix away from video, electronics to appliances, furniture, fitness equip.
merger with OfficeMax currently under way
merger with Office Depot currently under way
comp transactions positive for the 11th consecutive quarter
realigned business segments to better address changing needs of the Staples customer
OUTLOOK
HIGHLIGHTS | Q1 2013 | RETAIL | NORTH AMERICA
UNITED STATES | RETAILER REPORT CARD (CONTINUED)
RETAILER
MOST RECENT
REPORTING
PERIOD
% CHG IN
Y-o-Y SALES
% CHG IN
Y-o-Y SALES
(MOST RECENT QTR)
(PREVIOUS QTR)
COMMENTS
OUTLOOK
HOME
Aaron's (corporate-owned)
Bed Bath & Beyond
Home Depot (U.S.)
Lowe's (U.S.)
Pier 1
Williams-Sonoma
Q1 2013
Q4 2013
Q4 2012
Q4 2012
Q4 2013
Q4 2012
3.4
2.5
7.1
1.9
7.9
4.0
4.6
1.7
4.3
1.8
7.9
8.5
Q1 2013
Q4 2013
Q2 2013
(1.2)
2.0
(2.6)
4.3
(1.5)
(8.0)
reduced revenue and earnings guidance for the year due to market conditions
continued World Market integration and made substantial progress on website improvements
positively affected by Hurricane Sandy repairs and the improving housing market
10 of 14 product categories had positive comps in Q4; aided by Hurricane Sandy repairs
roll-out of new POS complete this summer; 30 new stores in fiscal 2014
will open first international location (Australia) in May; positively impacted by housing market
PHARMACY
CVS
Rite Aid
Walgreens
pharmacy same-store sales declined 2.3% due to new generic introductions
2013: company record for full-year adj. EBITDA & generated full-year net income
rewards program, "With Our Balance," has reached 60 million members
RESTAURANTS
Applebee's
BJ's Restaurants
Bloomin' Brands
Bob Evans
Brinker Int'l (system-wide)
Buffalo Wild Wings (owned)
Burger King (U.S./Canada)
Cheesecake Factory (total)
Chipotle
Darden (Basic/Specialty)
Denny's (system-wide)
Domino's
Dunkin' Donuts (U.S.)
Einstein Noah
Jack in the Box (system-wide)
Kona Grill, Inc.
Krispy Kreme (company stores)
McDonald's (U.S.)
Mimi's Café
Panera Bread
Papa John's (N. America)
Qdoba (system-wide)
Ruby Tuesday, Inc.
Ruth's Hospitality
Ruth's Chris
Mitchell's Fish Market
Starbucks (Americas)
Yum! Brands (U.S.)
Q1 2013
Q1 2013
Q1 2013
Q2 2013
Q3 2013
Q1 2013
Q1 2013
Q1 2013
Q1 2013
Q3 2013
Q1 2012
Q1 2013
Q1 2013
Q1 2013
Q4 2012
Q1 2013
Q4 2013
Q1 2013
Q2 2013
Q1 2013
Q1 2013
Q4 2012
Q3 2013
Q1 2013
Q1 2013
Q2 2013
Q1 2013
(1.3)
0.9
0.4
3.0
1.6
3.6
1.0
1.0
0.2
0.9
1.4
5.8
(3.0)
3.7
2.0
2.5
1.0
3.8
(4.6) / 2.3 (2.7) / 0.7
(0.7)
1.3
6.2
3.7
1.7
3.2
(0.6)
1.4
3.1
2.8
(2.6)
0.1
7.5
6.8
(1.2)
0.3
(5.6)
(3.3)
5.0
5.1
1.6
5.2
0.4
2.1
(2.8)
0.3
6.6
1.5
6.0
2.0
5.4
3.4
7.0
3.0
Q1 econ. conditions decreased traffic, comp sales; “2 for $20” doing well
13th consecutive qtr of comp growth; will open up to 4 new restaurants in Q2, 17 by YE 2013
continued international growth, new restaurants in Asia & Brazil
corporate focus on restaurant updates; post-"refresh" locations lift sales 5%, ROI 20%
Maggiano's (+0.4%) achieved 13th qtr of comp growth
developing new guest-facing technologies; has enhanced sports programming in locations
value-oriented promotions were successful when paired with premium limited-time offers
Cheesecake (+1.6%) performing well both domestically & abroad; closed 3 Grand Lux Cafes
165–180 locations expected to open in 2013; flat or single-digit comp sales expected
all three chains comped lower: Olive Garden (-4.1&), Red Lobster (-6.6%), Longhorn (-1.6%)
battled headwinds from payroll tax & high gas prices by rolling out new value menus
increased advertising, value prices & higher-quality food offerings drove sale increases
strategic development and investment aimed at increasing franchisee profitability
3.1% increase in average sales check was offset by decline in number of transactions
quarter sales growth nearly 2x the QSR sandwich segment average; gaining market share
secured $20 million in credit for new restaurant development, current remodels
increased FY 2013 outlook; predicted double-digit earnings growth for FY 2014
continued reinvestment to fuel growth; restaurant modernization & new food items
$50 million sale to French operator of multiple café brands should drive ops efficiencies
opened 123 locations in 2012, continues to put money into further expansion
acquired 50 locations in Denver & Minneapolis from franchisee, inc company owned sales 9.8%
looking to further differentiate from competitors by elevating catering business
predicting flat sales for the remainder of the year; continue to expand Lime Fresh concept
12th consecutive quarter of positive comp sales, 13th straight quarter of traffic gains
testing new items at lower price points but high returns to boost sales on underperforming days
raised projected store openings (globally) to 1650 over previous target of 1300
Taco Bell: 6% SSS due to success of Doritos Locos & Cantina Bell platforms
SPECIALTY APPAREL
American Apparel (w./excl. online)
Ann Taylor
The Buckle
Destination Maternity
The Gap (all)
H&M
Hot Topic
Limited Brands (all)
Men's Wearhouse
Zumiez
Q4 2012
Q4 2012
Q4 2012
Q2 2013
Q4 2012
Q1 2013
Q4 2012
Q4 2012
Q4 2012
Q4 2012
*Sources: Company Reports, Colliers Research
7.0 / 42.0 20.0 / 21.0
1.0
4.0
flat
2.4
1.6
1.9
5.0
6.0
3.0
flat
2.6
0.1
5.0
5.0
1.0
9.5
(1.0)
3.7
opened 225K SF distribution center in effort to minimize future overhead costs increase
launched international shipping to more than 100 countries to expand global reach of brands
online sales (not included in comp sales) showed growth of 8.4%
completed closure of all leased departments in Babies R Us locations
acquired Intermix, discontinued operations at Fourth & Towne; online sales increased 28%
price perception strategy continues to pressure profitability
announced plans to merge with companies owned by Sycamore Partners
CapEx increase vs. last year attributable to increased real estate investment at VS
reevaluating alternatives for K&G operations, view MW & Moores as core strengths
men's and juniors apparel comped positive, all others comped negative
COLLIERS INTERNATIONAL |
P. 7
HIGHLIGHTS | Q1 2013 | RETAIL | NORTH AMERICA
482 offices in
62 countries on
6 continents
United States: 140
Canada: 42
Latin America: 20
Asia Pacific: 195
EMEA: 85
• $2 billion in annual revenue
• 13,500 professionals and staff
• 1.12 billion square feet under
management
• $71 billion USD in total transaction value
• More than 400 retail professionals in
80 U.S. offices
COLLIERS INTERNATIONAL
601 Union Street, Suite 4800
Seattle, WA 98101
TEL +1 206 695 4200
FOR MORE INFORMATION
James Cook | Director of Research | USA
TEL +1 602 633 4061
EMAIL [email protected]
James Smerdon | Vice President, Director
Retail Consulting | Canada
TEL +1 604 661 0808
EMAIL [email protected]
Flavio Gómez Aranzubia | National Manager
Market Research | Mexico
TEL +52 (55) 5209 3682
EMAIL [email protected]
CONTRIBUTORS
Mark Keschl | National Director, Retail
Services Group | USA
menus. Arby’s is piloting a Snack ‘n Save menu, in an effort to shift the focus of the discount menu away from
meals in favor of snacks and add-ons.
But decreasing discounts too quickly may backfire and price out family visitors. Growth in restaurant
visits by families remained flat in 2012, according to data from the NPD Group’s CREST service. Given
that family visits make up such a large share of their traffic, QSRs should be concerned that families
who had come to expect one-dollar price points will be less attracted by two-dollar ones.
CASUAL AND POLISHED CHAINS FOCUS ON VALUE
While casual restaurant customers may not be as sensitive as QSR regulars to a one-dollar price hike,
there is still no doubt that value continues to be a prime strategy for casual chains.
Applebee’s and Chili’s have offered a selection of two meals for $20 for some time. Darden, which operates
Red Lobster, Olive Garden and LongHorn Steakhouse, saw a significant drop in same-store sales
across the chains in February. This may have prompted the operator to introduce value options of
its own, including two-for-one entree deals at Red Lobster and Olive Garden. Ruby Tuesday has
also changed course, abandoning its 2012 strategy of upgrading the chain to a polished-casual option.
Here again, the return to value and a renewed focus on core casual customers was perhaps the result
of a 2.8 percent drop in same-store sales in February.
Even polished and fine-dining brands are finding they can offer a deal that generates traffic without
sacrificing quality. Ruth’s Chris, Capital Grille and Sullivan’s have all added everyday fixed-price menu
options at some or all locations, with prices ranging from $39 to $53 per diner. Roy’s, a concept of
Bloomin’ Brands, has offered a $36.95 prix fixe menu on Mondays for several years.
RESTAURANT SEGMENTS POSITION FOR TOMORROW’S CONSUMER
It is no fluke that fast casual is the sector du jour. Many consumers feel more extravagant than they once
did, yet are still cautious of overspending. Fast casual offers the happy marriage of premium
quality with lower price points. We expect affordable quality to continue to be an attractive option for
diners even as the economic recovery continues and attitudes shift. While many of the new concepts on
the crowded stage may not manage to break into the national scene, the fast-casual sector as a whole
has a bright future.
For QSR and fast-casual brands, the constant push and pull between lower traffic-generating price
points and the need to increase margins is a tricky challenge. While it may make sense to hold down
prices a bit longer in the QSR world, many brands are now showing a willingness to test the waters in
favor of healthier margins.
KC Conway | EMD, Market Analytics | USA
Ann Natunewicz | Vice President, Retail
Services Group | San Francisco
Jeff Simonson | U.S. Senior Research
Analyst | USA
Bridget Berry | Research Analyst | USA
Aaron Finkelstein | Communications
Manager | USA
Jennifer Macatiag | Graphic Designer | USA
Copyright © 2013 Colliers International.
Accelerating success.
P. 8
| COLLIERS INTERNATIONAL
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it.
No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.