By some estimates, the arrival of coronavirus vaccines could open up certain events and drive pent-up demand, making “2021 a good year for apparel.”
Bank of America analyst Lorraine Hutchinson, for one, believes that investors will compare 2021 to 2019, given the disruption cause by the Covid-19 pandemic in 2020.
According to the analyst, who covers apparel, accessories and retail brands, proprietary debit and credit card data indicates that 2020’s total holiday sales rose 2 percent, with athleisure, comfortable apparel and home dominating the gift-giving categories. And while the shift to e-commerce was already growing, Hutchinson expects that trend to continue to accelerate. One result will likely be more stores going dark, she said.
As for apparel, Hutchinson, speaking at the virtual ICR Conference 2021 Monday, said that after a year of working in leggings, sweats and clothing that offers both comfort and a way to work with pandemic pounds, what used to sell will likely evolve as consumers head back to the office.
“Consumers want more out of their clothes. We think wear-to-work apparel will have to be more functional in the future,” she said. What’s more, the off-price sector is seen benefiting. “Consumers said they are eager to be back in stores and, in the middle of the pandemic, they indicated an enthusiasm for the treasure hunt [format] that’s part of the off-price model,” Hutchinson added.
Meanwhile, a panel of real estate experts addressed leasing activity at malls, pointing out that operators are pondering how consumers will define convenience in 2021.
And with many office workers working from home due to Covid-19, mall operators are also keeping tabs on what they think deurbanization might mean for the future of suburban malls.
Mary Rottler, executive vice president of leasing and operations at Seritage, the mall real estate investment trust formed from the sale of certain real estate assets from the former Sears Holdings Corp., said the company took a long-term view last year working with its tenants and trying to “accommodate anything we possibly could” as Covid first hit. While the first half of 2021 still feels like 2020 so far, what demand may look like later in the year gives the company reason to be “pretty bullish in the back half,” she said.
She said many tenants are still trying to figure out the store of the future, and that means looking at convenience and trying to map out what that shopping journey looks like. “Will [consumers] shift sales from delivery to home to return to the store? What does that look like?” she said.
Lisa Palmer, president and CEO of Regency Centers, said the company is seeing “new leasing,” noting that the strongest demand is in markets with fewer restrictions. “What we’re most excited about with our portfolio is the deurbanization of America,” she said, adding that the work-from-home movement will turn shopping centers into local destinations as consumers head there for doctor’s offices, banks and vet clinics.
Consumers cooking at home have been able to save money, giving them additional spending power at nonessential retailers such as apparel and home goods, at the expense of restaurants, Rachel Elias Wein, founder and CEO of Wein Plus, said, noting that we could see a rise in drive-throughs as a service options. She also expects off-price retail to be the winners because consumers still like to treasure hunt in stores, and the amount of savings from working from home and eating at home will translate to a huge spend in the back half of 2021, likely benefiting travel, leisure and apparel. And while there’s less demand in major urban locations now, Wein said that will likely change as retailers that couldn’t get into urban locations before might now be able to secure more flexible lease terms to move into the cities.
Chris Benjamin, president and CEO of real estate firm Alexander & Baldwin, said the Hawaiian company saw its centers stay open, even though many retailers were unable to. The company worked on rent and lease issues last year and moved many tenants to sales-based rent. He also expects to see more drive-throughs and more services being offered, since Covid accelerated in-progress trends. He expects some services such as pick up and delivery will probably continue post-Covid.
