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Vol. 28, No. 14
HOT WAREHOUSE CLUB NICHE GETS EVEN MORE COMPETITIVE
Smart & Final looks to challenge the warehouse club leaders and become a national player as it emerges
from its close quarters in California and throughout the Southwest. The chain wants to expand beyond its
familiar territories and will look initially to contiguous markets in Idaho, Oregon and Washington within
the next few years. Competition in the niche is already contentious, with Costco and Sam’s Club squaring
off all across the country and BJ’s Wholesale Club hanging tough in the East. California-based Smart &
Final has found success with a new Extra! format and will utilize a forthcoming $100 million IPO in order
to expand its 195-location portfolio to 1,250 stores throughout the U.S.
Smart & Final Extra! stores are vastly different from the other three major warehouse clubs. For one, sites
only occupy 28,000 s.f., which is a third of the size of the smallest Sam’s Club or Costco. With those space
requirements, Smart & Final can open new stores in places unavailable to its competitors. Secondly, Smart
& Final does not charge a membership fee, which buoys revenues for the other chains.
Continued on Next Page
Fast‐Growing Power Center Retailers for 2014 Company Name Preferred Square Footage
Spring Mobile 900 to 2,600 s.f. 200‐250 Sport Clips Supercuts Best Cuts 1,000 to 1,400 s.f.
200
Notes Eyeing select urban mixed‐
use sites in major metros
AT&T Authorized Dealer, owned by GameStop
Targets any sized market
5,500 to 8,000 s.f. 225 Growing nationwide Mattress Firm 4,000 to 10,000 s.f. 150 Massage Envy 2,800 to 3,500 s.f. 120‐130 ULTA Beauty 10,000 s.f. 100 Jiffy Lube 1,900 to 2,400 s.f. 100 Skechers 2,500 to 7,000 s.f.
70‐80
Ross Dress For Less 22,000 to 30,000 s.f. 73 Hobby Lobby 55,000 to 60,000 s.f. 70 Kay Jewelers Firestone Complete Auto Care 1,200 to 1,600 s.f.
70
6,500 to 7,500 s.f. 70 Five Below 7,500 to 10,000 s.f. 62 The Vitamin Shoppe 3,000 s.f. 62 Likes freestanding or end caps within power centers
Likes feminine‐focused retail co‐tenants Northeast and Midwest, as well as fill‐in nationwide
Needs freestanding site with centers Expanding nationwide
Targeting Midwest, especially in Chicago Eyeing West Coast, Northeast and Florida Transitioning from malls
Freestanding or end cap spaces within centers
Targeting Southeast for new market growth
Likes Texas, Southeast and East Coast WalMart SuperCenter 180,000 to 260,000 s.f. Openings
115 Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.
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Crittenden’s Retail Space™
RECENTLY UPDATED CONTACTS
Company (Parent Company)
Conn’s
(Conn’s, Inc.)
www.conns.com
Address
4055 Technology Forest Blvd.
Suite 210
The Woodlands, TX 77381
Contact/E-Mail
Don Welch
VP, Real Estate & Construction
[email protected]
Phone/Fax
(936) 230-5841
Freddy’s
(Freddy’s Frozen Custard LLC )
www.freddysusa.com
260 N. Rock Road
Suite 200
Wichita, KS 67206
Sarah Selmon
(316) 719-7845
Real Estate Analyst & Communications Director
[email protected]
Quiksilver
(Quiksilver Inc.)
www.quiksilver.com
15202 Graham St.
Huntington Beach, CA 92649
Priscilla Pokipala
Real Estate
[email protected]
(714) 889-2200
fax: (714) 889-2200
Zumiez
(Zumiez Inc.)
www.zumiez.com
4001 204th St. S.W.
Lynwood, WA 98036
Darla Shertzer
Senior Director of Leasing
[email protected]
(425) 953-1657
fax: (425) 551-1555
For a full list of national and regional contacts please visit our online directory at:
www.directory.crittendenonline.com
HOT WAREHOUSE CLUB NICHE GETS EVEN MORE COMPETITIVE…
Continued from Previous Page
Smart & Final stores are perhaps more similar to supermarkets as they don’t offer more esoteric
merchandise like hot tubs and caskets often carried by Costco or Sam’s Club. However, unlike standard
supermarkets, Smart & Final relies on sales of bulk-sized food stuffs and common household items, which
remains the larger clubs’ bread and butter. The membership fee is a primary obstacle keeping younger
shoppers in the Millennials age bracket from frequenting other chains, which gives Smart & Final a unique
opportunity to reach this most prized demographic.
If Smart & Final’s efforts in Idaho, Oregon and Washington pay off, it will not be long before the retailer
starts looking eastward. In addition to its national ambition, Smart & Final still has plenty of room to grow
within current markets. The chain sees the opportunity to add 180 new Extra! stores in Arizona, California
and Nevada, with 100 units allotted for the Golden State alone. Extra! stores average sales of $324 psf.
Smart & Final will look to grow in markets of all sizes; this year it has California stores opening in
downtown Los Angeles and in Goleta, which has a population of 30,000 residents. Looking ahead to
potential nationwide growth, the chain will certainly benefit from reduced expansion costs when it enters
markets which are generally much cheaper than its California home turf. The IPO will provide a needed
boost in long-term stability, as the chain only has $69.8 million in cash on hand against $704.7 million in
debt. Comps for the chain increased 3.6 during the first quarter on sales of $561.9 million. Although the
chain has a sweet spot of 28,000 s.f. in freestanding buildings and shopping centers, smaller and larger
spaces will be considered. Smart & Final will also look to relocate and/or expand older stores, which
average 17,000 s.f. The company also operates 52 Cash & Carry restaurant supply stores in northern
California, Idaho, Nevada, Oregon and Washington; it will open three new Cash & Carry stores this year
and next, which take 20,000 s.f.
Costco, the niche leader by sales, will open 15 new locations in the U.S. both in 2014 and 2015. Texas will
receive plenty of attention from the warehouse giant, as will multiple markets throughout the Midwest,
which are vastly underpenetrated. The Southeast has plenty of runway for Costco as well, since the chain
has yet to open any stores in Arkansas or Mississippi, with nearby Oklahoma seeing its first store opening
in Tulsa next year. Even with openings planned for downtown Los Angeles in 2015 and Redding in 2016,
California is far and away the strongest market for Costco, as the Golden State’s 120 stores is four times
greater than the next closest state. Costco is also in a healthy financial position long-term with $7.2 billion
in cash reserves, versus $4.8 billion in debt. For the fiscal third quarter, U.S. comps increased 5 percent on
sales of $25.2 billion worldwide. Stores range from 73,000 to 205,000 s.f., although new locations
generally exceed 150,000 s.f. Costco operates 464 locations in 43 states.
Sam’s Club will add 17 to 22 new stores this year, leading the niche in total number of domestic openings.
The majority of growth for the WalMart-owned chain will be throughout familiar markets, including five
new stores in Texas this year and another store planned for Dallas in 2015. Midwestern markets are also
high on the list for Sam’s Club.
Continued on Next Page
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Crittenden’s Retail Space™
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HOT WAREHOUSE CLUB NICHE GETS EVEN MORE COMPETITIVE…
Continued from Previous Page
The chain entered its 48th and 49th states this year with debuts in Montgomery, Ore., this month and
Warwick, R.I., back in January, leaving Vermont as the lone holdout. Comps at Sam’s Club were down 0.8
percent during the first quarter, with sales of $13.89 billion. Sites average 136,000 s.f., although the chain
will drop down if necessary. Sam’s Club also leads the niche in store count with 640 locations.
BJ’s Wholesale Club will open five to six new locations in 2014, and will likely target a similar goal in
coming years. The Massachusetts-based chain will expand within familiar markets along the East Coast and
in parts of the Midwest. Two stores will open in separate boroughs of New York City this year. The Miami
metro area will also add two locations in 2014. BJ’s operates 200 locations in 15 states, more than half of
which have on-site gas stations. Stores average 120,000 s.f., but will fit as low as 85,000 s.f. BJ’s is
privately held by Beacon Holding Inc., a subsidiary of Leonard Green & Partners LP.
CONN’S EASILY OUTPACES CONSUMER ELECTRONICS LEADERS
The biggest players in the appliance and electronics niche will use 2014 to steady themselves after years of
uncertainty and reorganization, although one company will expand aggressively and enter multiple new
markets. Conn’s will lead the niche this year by opening 17 to 20 new stores. RadioShack will open 20 to
30 new store this year, although the chain will also close a vast number of locations over the next few
years. Meanwhile, leading big-box chains, hhgregg and Best Buy will each devote less capital toward
expansion efforts and instead invest in remodeling stores and pruning unsuccessful locations.
Conn’s will reach into new regions this year and next, including its first stores in Colorado, Mississippi and
Tennessee. The chain will see further opportunities as the housing market recovers in areas outside
California or Florida, a factor which is certainly stalling other competitors in the niche. The Southwestern
retailer will look to expand from its current 80 locations to exceed 300 stores nationwide, although Conn’s
will focus on growing within the Sun Belt region for the time being.
The underlying factor for Conn’s recent success is its in-house credit financing, which accounts for
approximately 80 percent of all sales. The chain thrives on providing financing to customers with low
credit scores. Coupled with its reliance on financing, Conn’s has seen success by marginally upgrading its
merchandise and abandoning value-oriented items, as customers would rather spend a little more on better
wares, spreading out the cost over time. Comps increased a strong 15.6 percent during the first quarter on
$335.4 million in sales. Conn’s looks for anchor sites filling 30,000 to 45,000 s.f. in strip centers.
hhgregg opened one new store in Kendall, Fla, this year, its only planned opening for 2014, and will likely
relocate another couple locations. The chain will make a splash of sorts with a debut location in California
in 2015. hhgregg may have over-extended itself by jumping on past opportunities to take up vacated Circuit
City stores and once desired going nationwide with more than 400 locations targeted. Instead, the chain
will likely spend this year and next primarily focused on repositioning itself by updating stores and
merchandise, including offering more furniture. Sales for fiscal 2014 were $2.3 billion, with comps down
7.3 percent. Sites need 25,000 s.f. in power centers and freestanding boxes, down from the previous
35,000 s.f. hhgregg operates 229 stores in 20 states throughout the Midwest, Mid-Atlantic and Southeast.
Best Buy will not add stores this year, instead focusing on remodels by reserving more space for co-brands
and in-store sections devoted to other retailers like Apple, Google, Samsung and Sony. The appliance and
electronics giant is showing positive results with its expanded in-store sections for co-brands Pacific
Kitchen & Home and Magnolia Design Center, which the chain will continue to add in existing locations.
For the second quarter, domestic comps declined 1.3 percent on $7.7 billion in sales. The majority of Best
Buy locations in the U.S. run 30,000 to 45,000 s.f. The chain operates 1,053 stores nationwide.
RadioShack will close 200 locations in each of the next three years, while also remodeling manu of its
aging stores. Of course, the chain had originally planned to close 1,100 units but was blocked by several
investors. Despite its struggles, however, RadioShack will open a handful of flagship stores in prominent
streetfronts and destination areas in major markets. First quarter sales were $736.7 million, a drop of
14 percent. Sites need 1,200 to 2,800 s.f. in malls, strip centers and freestanding spaces.
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Crittenden’s Retail Space™
BURGER/ICE CREAM CHAINS CHALLENGE FOR SPACE
Two of the fastest growing retail space users over the past few years have been burger chains and frozen
yogurt and ice cream chains. There has long been a crossover niche, however, with several chains like DQ,
Culver’s ButterBurgers, Freddy’s Frozen Custard & Steakburgers, Steak ‘n Shake, among others,
which will grow at similar rates as other restaurant chains, both regionally and nationally. National leader
DQ (formerly known as Dairy Queen) will continue to set the pace and has plenty of room to grow,
especially after opening its first ever location in the New York City borough of Manhattan back in May.
Wisconsin favorite Culver’s hit its own milestone earlier this year by opening the chain’s 500th unit.
DQ will likely open at least 50 new locations this year, topping last year’s rate. The chain will focus growth
in the Southeast, as well as in California, Indiana, Massachusetts, New York, Oklahoma and Texas. DQ
Grill & Chill design fits 1,800 to 2,700 s.f. DQ combo locations with co-brand Orange Julius run 1,000 to
1,800 s.f. for inline and streetfronts; while malls and nontraditional spaces require 600 to 800 s.f. DQ
operates 5,100 locations domestically.
Culver’s will add 35 new units in both 2014 and 2015. The Midwestern chain debuted in Florida last year
and will look to grow in select Sun Belt markets like Arizona, Nevada and Texas as its traditional Baby
Boomers base enters retirement and migrates south. Sites need 4,000 to 4,200 s.f. for freestanding buildings
and shopping centers. The company likes new construction but can also open in former Burger King and
Hardee’s locations.
Freddy’s Frozen Custard & Steakburgers will open 30 to 40 new locations this year, including the Kansasbased chain’s first in Arkansas, Georgia, Idaho, Minnesota, North Carolina, South Carolina, Tennessee and
Wyoming. Sites take 2,800 to 3,600 s.f. for freestanding or end caps in shopping centers near big-box
anchors, schools, hospitals and other local traffic drivers.
Steak ‘n Shake will likely add 10 to 15 units in 2014. Most of the chain’s 500 locations are in the Midwest
and South, although the chain has recently expanded into top-tier markets in California and New York.
Second quarter comps increased 3.7 percent on sales of $229.7 million. The chain otherwise prefers
freestanding buildings of 3,315 to 3,800 s.f., with a drive-thru. Airports and other non-traditional spaces
need 500 to 800 s.f. Look for a 2,000 to 2,500 s.f. design to roll out this year for urban sites.
Friendly’s will open two new locations this year after spending the past few years updating existing spaces
and consolidating its footprint. Target markets for the Massachusetts-based chain include the Northeast,
Mid-Atlantic, Florida and Ohio. Traditional sites need 3,200 to 3,500 s.f. for freestanding and end caps in
neighborhood shopping centers.
Braum’s will add five to six new locations annually, with growth primarily concentrated within Oklahoma
and northern Texas. The Oklahoma-based chain operates as both a restaurant and a general store, with
space for dairy items and other food stocks. Freestanding sites need 5,000 to 6,000 s.f. Braum’s operates
279 locations in Arkansas, Kansas, Missouri, Oklahoma and Texas.
TEEN ACTION SPORTS RETAILERS LOOK TO REVERSE DOWNWARD TREND
Action sports retailers will all grow steadily while looking to hit certain milestones and expand outside
established markets. Skechers will lead the niche in growth this year and will top 400 stores. Journeys and
its co-brands will expand selectively this year and in the future as the chain seeks to ovoid oversaturation.
Zumiez will edge closer to its long-term target by growing outside California. Tilly’s and Vans will also
look beyond the West Coast for stores at consistent annual growth rates.
Skechers will open 70 to 80 new locations both this year and next year. The Midwest and Texas are strong
markets for growth for the chain, although it will target opportunities nationwide. In the first quarter, the
chain saw comps increase 5.8 percent with U.S. sales of $344.6 million. Skechers operates three formats.
Concept stores carry full-line merchandise and are located in marquee streetfronts, tourist areas or malls in
major markets.
Continued on Next Page
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Crittenden’s Retail Space™
Page 5
TEEN ACTION SPORTS RETAILERS LOOK TO REVERSE DOWNWARD TREND…
Continued from Previous Page
Skechers Concept stores range from 900 to 7,800 s.f. but average of 2,500 s.f. Factory Outlet stores occupy
outlet centers and need 1,400 to 9,000 s.f. Its Warehouse Factory format opens near Concept stores in order
to liquidate excess apparel; sites run 5,200 to 15,000 s.f. Skechers operates more than 330 stores.
Journeys and sister chain Journeys Kidz will combine for 63 new stores in 2014, with 38 and 25 on tap,
respectively. The chains have a presence in a majority of malls nationwide, but still see opportunities to add
prime locations. Parent company Genesco Inc. operates 1,172 stores among four Journey banners:
Journeys, Jouneys Kidz, Shi by Journeys and Underground by Journeys. During the first quarter of its fiscal
2015, comps increased 1 percent on sales of $262.1 million. Journeys stores run 1,500 to 2,000 s.f.
Journeys Kidz sites take 1,000 to 1,500 s.f. Shi by Journeys needs 1,800 to 2,200 s.f. Underground by
Journeys averages 1,825 s.f., with new sites opening exclusively in malls and outlet centers.
Zumiez will add 43 stores both this year and in 2015. The chain has long targeted a cap of 600 to 700 stores
nationwide and will hit that goal by the end of the decade. In fact, Zumiez essentially has its expansion
planned out for the next few years and is working to finalize the last few leases, after which new doors will
likely dwindle to relocations. Comps increased 1.8 percent for the first quarter on $162.9 million in sales
worldwide. Traditional Zumiez stores need 2,500 to 4,000 s.f. in malls and outlet centers, with spaces
located near highly trafficked areas like the food court, movie theaters or arcades. However, the chain is
experimenting with off-mall streetfronts in urban markets like New York City.
Tilly’s will open 20 new locations in 2014, including the chain’s first outlets. Tilly’s operates a dozen
stores already within outlet centers, but those locations are actually full-line stores, rather than the smaller
stores with exclusive merchandise that the company has planned for this year. The chain will look to grow
along the East Coast and in the Midwest. Elsewhere, Tilly’s is really thin in Texas, the Southeast (except
Florida) and the Northwest. First-quarter comps declined 6.8 percent on sales of $111.1 million. Tilly’s will
also look to shrink size requirements, with sites needing 6,700 to 7,200 s.f. in malls, power-, strip- and
outlet centers.
Vans will open 20 to 25 new stores annually in order to double the chain’s U.S. portfolio of 303 stores. The
East, Northeast and Midwest are primary regions for expansion. Sites need 7,500 s.f., primarily in malls
and outlet centers.
PacSun will mainly focus on relocations and outlet centers for new real estate activity as the chain
continues efforts to sustain itself following a dramatic decline in sales several years ago. Second-quarter
comps increased 3 percent on $215.2 million in sales. PacSun stores need 3,800 to 4,000 s.f. in malls and
outlet centers.
Quiksilver opened a new store in East Honolulu, Hawaii in March but will mainly consolidate domestic
store count this year as the chain struggles to stay afloat. Comps increased 1 percent worldwide during the
second quarter, with $90 million in sales at retail stores. Quiksilver operates 110 stores in the U.S.,
primarily on both coasts, often sharing spaces with co-brands Roxy and DC Shoes. Sites average 3,000 s.f.
in streetfronts, malls and outlet centers.
RTO CHAINS RELISH ECONOMIC REBOUND WITH EXPANSION
Rent-to-own furniture and electronics chains will expand rapidly this year and next in order to capture sales
from eager customer looking to outfit homes now that the economy is gradually improving. Aaron’s will
lead the niche in growth, although it still trails Rent-A-Center in store count by a substantial margin.
Meanwhile, up-and-coming Southeastern-based Buddy’s Home Furnishings will target rapid growth on
the backs of strong franchising efforts.
The rent-to-own niche benefits from an established, core customer base, with 72 percent of shoppers
returning to stores repeatedly — and the chains know where to find these customers. Other than built-in
financing systems, one of the advantages rent-to-own retailers have long implemented with their growth
Continued on Next Page
strategy is signing shorter leases than other retailers.
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Crittenden’s Retail Space™
RTO CHAINS RELISH ECONOMIC REBOUND WITH EXPANSION…
Continued from Previous Page
Using five- to seven-year primary terms as the standard entry allows chains to capitalize quickly on market
improvements without worrying about getting stuck with an underperforming store should the local
economy sours within a few years.
Aaron’s will open 60 to 70 new stores this year and aims for another 50 to 60 during 2015. The chain prizes
markets with populations above 20,000 residents in California, Florida, Kansas, New Jersey, New York and
Texas. Walmart, Sam’s Club and dollar stores are preferred co-tenants. Urban and rural areas are equally
valued. Aaron’s will also look to close 44 underperforming stores by September. First-quarter comps
decreased 3.7 percent on sales of $585.4 million. The company will also look to grow weekly-rate sister
chain HomeSmart. Aaron’s operates 2,135 stores and prefers strip center and freestanding sites, which need
8,000 to 10,000 s.f.
Rent-A-Center will likely open 15 to 20 new locations during 2014 in familiar markets. Florida and the
Midwest are strong growth markets for the niche leader. Rent-A-Center closed 150 stores in June and could
look to shutter more underperforming units in the future. First-quarter comps decreased 6.1 percent on
$634.7 million in sales. Sites average 4,700 s.f. in strip centers with grocery- and dollar stores as preferred
co-tenants. Rent-A-Center operates more than 2,800 stores nationwide. The company also operates a
weekly-rate Home Choice chain and a furniture chain called Get It Now based in Wisconsin.
Buddy’s Home Furnishings will add at least 70 new stores this year and will grow primarily throughout
familiar markets, especially in Alabama and Texas. The 175-store chain is strongest in the Sun Belt and
Mid-Atlantic regions, but will reach out to select western markets in Arizona, California, New Mexico and
Washington. Growth is primarily driven by franchisees. Sites run 5,000 to 6,000 s.f. on freestanding pads
and in strip centers.
The Retail Space News Team
[email protected]
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Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.