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MALL EXECS NAME HOTTEST TENANTS

By Debra Hazel

Apparel, computers, furniture — this year’s hottest tenants appeal to a variety of consumers, say leasing officers from some leading U.S. retail development companies. From the 30- and 40-something patrons of Chico’s to the techies and gadget-lovers of Apple Computer to the tweens served by Mishmash, new chains are looking to niche markets and finding ways to serve them.

Each year SCT polls mall management and leasing executives to gauge the buzz about which tenants are in high demand. The survey is not meant to be scientific, but serves to tell which way the winds of consumer taste are blowing.

Some of the tenants named in SCT’s survey are new, debuting in the past year. At press time, fashion designer Adrienne Vittadini had yet to open a store at all. Others, such as J. Jill, appeared in a previous survey and are still highly sought after.

Mall managers, constantly on the hunt for tenants that will differentiate their projects, are clamoring for those on the cutting edge. That doesn’t mean any easy search. The economic downturn hasn’t helped matters in leasing terms, and despite the Internet’s well-publicized bust, its prior boom still affects bricks-and-mortar retail.

“In the 1990s, venture capital was split between the Internet and retail investments, so [now] you have a delay in startups,” explained Joseph Tagliola, executive vice president and director of leasing at Westfield America, Los Angeles.

Not surprisingly, then, many of the chains listed below are divisions of larger companies: Too’s Mishmash or Hot Topic’s Torrid, for example.

“The public guys need to grow,” said Tagliola. “It’s the public companies doing the innovation today.”

The following are among the innovators cited by mall executives this year:

Adrienne Vittadini
Enfield, Conn.
Designer fashions. Owned by Retail Brand Alliance.
CEO: Claudio Del Vecchio.
Chain to debut this year. Plans call for 15 stores this year, to average about 4,000 square feet, according to published reports. To locate in regional malls and lifestyle centers.

Ironically, the first “hot” retailer on this year’s list didn’t have a single store open at press time; the signature boutiques for designer Adrienne Vittadini will begin debuting this year. Yet developers say they are anxiously awaiting the opportunity to add another designer name to their lineup.

The knitwear and accessories designer has been a staple in department stores for years. Vittadini was bought by Retail Brand Alliance (formerly Casual Corner) in late 2000, and stores carrying apparel, fragrances, handbags and scarves are planned to give a full presentation of her goods.

Deals have already been signed at The Summit, a lifestyle center in Birmingham, Ala., and Triangle Town Center, in Raleigh, N.C.

“Adrienne Vittadini has an image that is chic, yet casual, not pretentious,” said William Fullington, SCMD, vice president of marketing for the Richard E. Jacobs Group, the Cleveland-based developer of Triangle Town Center. “It is a classic modern look, sensible yet fashionable. Her collections serve an entire lifestyle, not [just] a part of it. A lot of things are sold in an Adrienne Vittadini store.”

Apple Computer
Cupertino, Calif.
Computer hardware and software.
CEO: Steven P. Jobs.
First store opened in 2001; there are now 31 units open, with 20 more to come by year-end.
Stores average 5,000 square feet in malls, streetfronts and lifestyle centers.

Want to buy a computer in a mall? In the past, consumers had little luck finding them, except at Sears. Computer retailers historically flocked to big boxes, general consumer electronics chains and the Internet.

“We’ve never had a strong computer component in the malls,” Westfield’s Tagliola said. “Online sales killed CompUSA.”

But true to form, industry maverick Apple Computer bucked the trend and became the first computer maker to open full in-line stores inside upscale malls. (Dell Computer is rolling out kiosks having tested them at a couple of centers.) Besides Apple computers and software, the stores sell compatible non-Apple accessories, such as digital cameras. They also provide repairs.

A big plus is that the stores bring in a larger proportion of men than would normally go to a fashion-oriented mall, executives say.

“It’s a wonderful point of difference for our centers,” said David Weinert, vice president of Taubman Centers, Bloomfield Hills, Mich. Taubman did 10 of Apple’s first 15 deals.

Other stores have gone into lifestyle centers such as Aspen Grove, Littleton, Colo.

The stores also offer classes and special events, which brings in those customers who already own a Mac on a regular basis.

“This use has just not existed,” Weinert said. “You couldn’t get service. You get that here; this is a great addition to the shopping centers.”

Chico’s
Fort Myers, Fla.
Upscale private-label apparel targeted to women 35 to 55.
Chairman and CEO: Marvin Gralnick.
First store opened in 1983; as many as 365 are planned by year-end around the United States in regional malls, street locations and lifestyle centers.
1,800 to 3,000 square feet.

The Chico’s phenomenon appears to see no end as it expands into regional malls — and even into new formats of its own.

“It’s probably at the top of most lists today,” said Robert A. Michaels, president and CEO of General Growth Properties, Chicago.

Originally a retailer of both apparel and artwork, Chico’s retooled its concept in the late 1990s to focus on apparel for women 35 to 55 who sought stylish, comfortable garments. While the stores still sell a bit of art and jewelry, the clothes are clearly the focus.

Women have responded. Sales totaled $378.1 million last year, up 46 percent from $259.4 million in 2000.

More traditionally found in urban locations and lifestyle centers than regional malls, Chico’s has opened more units in enclosed centers of late, providing increased opportunities for growth. But what really has mall managers salivating is the company’s plan to launch a new, as-yet-unnamed concept aimed at women 22 to 40. Six or eight test stores will open in the first quarter of next year at sites that are yet to be determined.

“The concept will be for strategic and impulse pricing of casual, easy-care clothing suitable for work, travel and play, presented in a European boutique atmosphere,” said Marvin Gralnick co-founder, chairman and CEO, during the company’s first-quarter results conference call at the end of May.

The merchandise will be younger in feel and lower in price.

The expansion provides another advantage for the chain: not diluting the impact of Chico’s stores by overexpanding.

“Companies like Chico’s don’t want to be on every corner,” Michaels observed. “By rolling out a new concept, they can grow.”

Forever 21
Los Angeles
Junior fashions and accessories.
CEO: Do Won Chang.
First store opened in 1984; now there are more than 120 in the United States and one operating under the XXI banner in Canada.
Stores range from 6,000 square feet to 25,000 square feet in enclosed major malls.

In sharp contrast to the classic yet contemporary styles favored by the older customers of J. Jill or Chico’s, the junior apparel retailer Forever 21 skews both younger and less expensive.

“It’s the rage right now,” Taubman’s Weinert said. “It’s a junior business that goes into missy — it’s throwaway fashion.”

The original 6,000-square-foot formats sold women’s merchandise, from evening clothes to intimate apparel to purses. More recently, the stores have been expanded to 25,000 square feet, accommodating men’s wear, cosmetics and accessories.

Like H&M, Forever 21 knows that trendy today will be tossed tomorrow, and the quality can reflect that. But the young customers don’t seem to care — and the clothes’ very disposability means the shoppers will be back to the centers in short order, executives say.

Torrid
City of Industry, Calif.
Apparel, accessories, gifts and music aimed at plus-size teen-agers.
President and CEO: Betsy McLaughlin.
First store opened in 2001. The chain will have more than 20 units by year-end.
Stores average 2,200 square feet in enclosed malls.

Even as Hot Topic (a Hot Retailer in 2000), which is geared toward edgy teen-agers, continues to expand, it has opened a new vehicle for what is perhaps the most neglected consumer segment in the market: plus-size kids.

The number of American teens size 18 and over continues to grow. But they’ve had no place to buy the same types of clothes that their smaller-size friends wear. In some cases, the clothes did not exist, let alone places to buy them. Enter Torrid, which provides many of the same styles as Hot Topic, in plus sizes.

“Torrid is a terrific growth vehicle,” said Bruce Johnston, vice president of leasing for The Macerich Co., Santa Monica, Calif.

J. Jill
Quincy, Mass.
Specialty chain offering women’s apparel, accessories and gifts.
CEO: Gordon C. Cooke.
First store opened in November 1999. The chain now has 69 stores, with 80 scheduled by year-end.
Stores average 4,000 square feet to 4,500 square feet.

A 2000 SCT Hot Retailer, J. Jill continues to expand and to thrill mall leasing managers.

“This is a wonderful new women’s apparel retailer at a time when they are more challenging to find,” Taubman’s Weinert said.

The natural-fiber clothing designer/maker appeals to those looking for less-formal career apparel and also to shoppers seeking nicer weekend wear.

“They’re growing more to the Talbots market, but more from the casual side,” Westfield’s Tagliola added.

Though the chain is expanding, the fact that it will have only 80 units or so by year-end is also appealing.

“It’s a unique experience,” Weinert said. “The more apparel you can do that’s unique, the better.”

Mishmash
New Albany, Ohio
A division of Too.
Intimate apparel, accessories and personal care products for girls 14 to 19.
CEO: Michael Rayden.
First store opened in September 2001; there are currently 11 stores, with 12 units expected by year-end.
New stores will average about 3,000 square feet to locate in ‘A’ or ‘A+’ malls.

Girls who’d graduated from Limited Too but were not yet ready for college styles or career clothing had little choice — until the arrival of Mishmash, a Too spinoff that has the industry talking.

“Their customers are a bit older than Limited Too’s,” Westfield’s Tagliola said.

This year the store is still in the experimental stages. In response to sales and focus groups, the amount of sportswear at each location has been increased from 10 percent of the product to about 30 percent. Still, a spokesman says, the most successful part of Mishmash’s business has been cosmetics. The stores sell a combination of department and discount store brands, with a private-label collection falling between the two in price point terms.

The real rollout will take place in 2003, when 30 units will debut across the United States, in top-performing regional malls.

Appealing to children has become a major trend in the industry. Other expanding companies include Adopt-A-Bear (teddy bear retailers) and Children’s Place’s new concept, Baby Place, said Howard Grody, a vice president at CBL & Associates Properties, Chattanooga, Tenn. Chains such as Mishmash are at the “older” end of this trend.

“It’s why you see Abercrombie Kids,” Grody said. “They’re playing at being grown-ups.”

P.F. Chang’s China Bistro
Scottsdale, Ariz.
Fine Asian-themed dining.
Chairman and CEO: Rick Federico.
First unit opened in 1993; now the chain operates 67 restaurants averaging 7,000 square feet in malls, urban areas and lifestyle centers.

The first restaurant ever on the list reflects two changes in the shopping center industry: awareness on the part of developers of the need for fine dining in malls, and the realization of the restaurant business that malls can be very profitable locations.

“If you tried to talk to a sit-down restaurant 15 or 20 years ago, they’d just laugh,” recalled Taubman’s Weinert. “But locating in a regional mall gives them the best of both worlds.”

P.F. Chang’s provides high-quality ethnic food, a rarity in many regions without a substantial Asian community, and the decor has a high-end feel, with wood dominating. But upscale food is the key.

“It’s consistent from unit to unit. The service is very good,” said Macerich’s Johnston. “It’s not cheap Chinese.”

The restaurant’s first unit was at a mall: Scottsdale (Ariz.) Fashion Square. Since then, the company has expanded to lifestyle centers and urban locations. To accommodate even more locations, P.F. Chang’s has created Pei Wei, a high-quality café and takeout division putting 3,500-square-foot units in better neighborhood centers.

This year’s plans call for the opening of 12 more P.F. Chang’s units, bringing its total to 79, and eight more Pei Weis, for a total of 13.

Pottery Barn Kids
San Francisco
A division of Williams-Sonoma.
Casual furnishings and textiles for children.
CEO: Dale Hilpert.
First store opened in September 2000; the chain expects to have 53 by year-end.
Units average 8,000 square feet.

Pottery Barn Kids may be the flat-out cutest of all the retailers listed here, with its child-size furniture, colorful sheets and building blocks. The latest division of Williams-Sonoma sells home furnishings strictly for infants and children.

Of course, it’s their affluent parents and grandparents who are actually paying for tables that rise barely 18 inches from the floor, cribs, bunk beds and sheets. The bedding and accessories provide the color in stores that have merchandise set up as individual rooms — some for babies, some for older children.

“There are a handful of merchants that understand their customer,” said Macerich’s Johnston. “Williams-Sonoma is one.”

The company has been expanding slowly, preferring to zero in on demographics rather than quick growth. Several units were already open in indulgent-grandparent haven Florida before any debuted in Los Angeles.

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