Though early predictions had the industry braced for retail apocalypse 2.0, commercial real estate companies say so far, so good.
In the company’s first quarter earnings call, David Simon, chairman and CEO of Simon Property Group summed up the quarter, saying “Traffic is up. Sales are up. Demand is up and our numbers are catching up.”
Robert Taubman, chairman, president and CEO of Taubman centers, ran through a similar litany of pluses in his conversation with analysts.
“Obviously consumer confidence is up. The economy is doing well. Unemployment is low. Employment is high—all these things are positive, and in good assets you’re starting to see what we think is hopefully a retail revamp,” he said before tempering his remarks. “Now it’s one quarter. It’s too early to say, but we’ll see what happens in the coming quarters.”
While all mall owners may not be as positive as Simon and Taubman, those that have reported first quarter results thus far have acknowledged at least one bright spot: retail sales are up.
And not only is that a general trend, apparel retailers are contributing to the upswing.
“We’re seeing a broad-based recovery in retail,” Stephen Lebovitz, president and CEO of CBL Properties, said. The property group said sales were up by 4.1% in the quarter with a few notable chains showing signs of recovery. “We also saw improvement with a lot of categories that hadn’t been doing as well in the last year or so. Retailers like Abercrombie have really turned it around and so that helps. Foot Locker and Finish Line had good results. And Bath & Body.”
Beyond sales, Lebovitz said he sees other indicators that things are improving. “Retailers have really gotten more focused on profitability, too,” he said. “So sales is an important metric, but another encouraging sign is that the retailer profits have strengthened.”
Even with these gains, company continues to diversify its portfolio. “This quarter, we made solid progress toward diversifying our tenant base, with more non-apparel users as well as renewing and expanding with successful retail concepts,” Lebovitz said, adding hotels, medical offices and co-working businesses are on his radar.
Abercrombie also earned acknowledgement from Taubman for improved performance, along with Ralph Lauren, Uniqlo, Eddie Bauer and Ralph Lauren among others.
“We’re hopeful we’re seeing the initial signs of a real rebound in retail,” he said. “Aeropostale, Abercrombie, the Gap, Banana, these are mainstays of the mall. And when mainstays of the mall start to go up double-digit, that’s a really positive sign.”
Overall, Taubman reported a 10 percent increase in apparel and 20 percent in women’s shoes. Though he didn’t provide specific numbers, the chief executive said luxury brands like Louis Vuitton, Gucci and Dolce & Gabbana contributed to the “strong momentum” in luxury.
Momentum was the word Simon used to describe retail sales as well. He also pointed to an uptick in demand.
Simon president and COO Rick Sokolov agreed, saying retailers are interested in moving on more opportunities this year than last. “[Retailers] have more capital to spend, and they are more focused on new opportunities than they were last year,” he said.
Taubman said his properties are positioned to scoop up its share of the increased demand as well. “Across the board, retailers are acknowledging the critical importance of brick and mortar, and financially healthy retailers are actively seeking new space,” he said. ” These brands are being highly selective about the real estate decision and are only looking at opportunities in the best market in great assets like ours.”
Lebovitz is encouraged by the interested his company has received from a broad range of retailers, including traditional chains as well as online stores looking to put down roots.
On balance, Simon said it’s been “a strong start to the year.”
“We feel better about the business than in ’17,” Simon stated. “We gave you our judgment that bankruptcies would be less in ’18. So far, we’re right.”