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Shopping Centers Today -> December 2005
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IN BRIEF
Officials obstruct Federated’s plans to dispose of 82 stores
Federated Department Stores is encountering resistance from government officials as it moves to dispose of about 82 mall anchor stores throughout the U.S. Nordstrom, meanwhile, is looking hard for a site in New York City. These two issues surfaced at ICSC’s annual Research Conference, in San Francisco.
Federated wants to eliminate the overlap between its premerger stores and those acquired in its purchase of May Department Stores Co. It is negotiating with mall owners to sell back some stores so they can be redeveloped into new uses. But “the states thought we shouldn’t be dealing with developers,” said Gary Nay, Federated’s vice president of real estate. “They’d rather see a new department store move into that space.”
When Simon Property Group floated plans to buy back some of the stores and redevelop them to other uses, state attorneys general said the plans were anti-competitive, according to Richard Sokolov, Simon’s president and COO.
Nevertheless, Federated and developers are pushing forward with plans to turn some of those stores into residential units, hotels, open-air centers and enclosed small-shop space, Nay says. One Las Vegas store could even become a casino, he says.
Several department store suitors have approached Federated about buying some of the units marked for disposition, Nay says. “Nordstrom has been very vocal,” he said, particularly concerning East Coast locations. Department store chain Boscov’s has also expressed interest in the East Coast stores, he says. Citigroup Smith Barney retail analyst Charmaine Tang says Nordstrom is very interested in establishing a New York City flagship.
Nay says the popularity of retail properties and businesses among investors has drawn some unusual fringe players into the bidding wars. A home builder approached Federated with a proposal to buy its Lord & Taylor division, for example.
Bidders push up Goody’s price
In October New York-based private investment funds GMM Capital and Prentice Capital Management teamed up to pay about $327 million for Goody’s Family Clothing, a Knoxville, Tenn.-based department store chain that sells moderately priced family apparel and operates 371 stores in 20 states.
The deal was the culmination of a bidding frenzy. In fact, Goody’s had already accepted a lower offer of $272 million from Boca Raton, Fla.-based Sun Capital Partners IV, when it went for the higher offer. Before the sale, Goody’s Chairman and CEO Robert Goodfriend and his family controlled 42 percent of the retailer’s shares.The new owners have their work cut out for them, says Molly Gerber, an equity analyst at investment banking group Avondale Partners.
“Any buyer would need to clean up merchandising,” Gerber said. “They have missed a lot of fashion trends, and some people say they have gone too deep into private labels. But if they can fix this, the company can be successful with its plan to expand into small towns.” Most Goody’s stores are located in urban and suburban areas. The retailer posted a 5.5 percent drop in September same-store sales.
UPS Store ships itself to India
Mail Boxes Etc., San Diego, plans to expand The UPS Store brand internationally. As a first step, UPS will convert the 95 Mail Boxes Etc. stores in Canada to The UPS Store brand. Also, Mail Boxes Etc. granted Jetair Business Solutions the exclusive right to open stores in India under The UPS Store banner.
JCPenney opens at Wiregrass
The Goodman Co., West Palm Beach, Fla., opened the first phase of its Shops at Wiregrass, a 750,000-square-foot lifestyle center in Wesley Chapel, Fla., with a 98,844-square-foot JCPenney. The unit is the first in Florida to adapt the new JCPenney store layout and will anchor the lifestyle center. The new format offers wider aisles, improved lighting and front-end checkouts. The Shops at Wiregrass will offer 60 specialty stores and restaurants. Dillard’s has also signed on as an anchor.
Body Shop heads to Russia
The Body Shop International struck a partnership with a Kuwait-based retail conglomerate to open and operate stores in Russia. Body Shop International and its partner on the Russia stores, Alshaya Group, expected to open the first Russian Body Shop store this month at Mega Mall 2, Moscow’s largest shopping center. Plans call for seven more stores in the coming year in Moscow, St. Petersburg and other major Russian cities.
The Body Shop at Mega Mall 2 will incorporate the chain’s new format, which features a more modern look, with simple, bright and open product displays. Once the network of Russian stores is in place, the company will launch The Body Shop at Home, a venture that allows customers to buy cosmetic products in home-party settings similar to the traditional Tupperware parties in the U.S.
Smith & Hawken redoing stores
Novato, Calif.-based Smith & Hawken, which sells garden-inspired furniture and household goods, is working on a new design for its stores. The company, which operates 57 Smith & Hawken stores throughout the U.S., expects to introduce two new prototype stores in the spring, ahead of a coast-to-coast rollout beginning in the fall.
Party City goes private
Party City’s new owners have a challenge ahead as they fight to boost sales in a sector now dominated by discounters, observers say. Private equity firm AAH Holdings says it will acquire Party City, which operates about 500 stores, for $360 million. The firm expects to close the deal early in the coming year. Party City plans to open about 15 new stores next year.
The Rockaway, N.J.-based retailer accounts for one-third of the party supply stores in the U.S. But “they do very little advertising and rely on their store locations to draw customers, which is dangerous today,” said Britt Beemer, chairman of retail consulting firm America’s Research Group. The chain’s 2005 fiscal year net income was $4.3 million, one-third of last year’s $13.9 million. Net sales fell 4.6 percent to $977.9 million.
Target, Wal-Mart stress fashion
Wal-Mart and Target, the country’s top two discount department stores, have taken their rivalry to the fashion runways. In October Wal-Mart said it would begin selling a women’s apparel collection called Metro 7 at select stores. The line features tailored outfits and stylish casual wear.
The chain signed singer and former Miss Universe Dayanara Torres to model and promote the line. Target threw a couture counterpunch with its launch of the Go International program, which showcases limited-edition fashions from international designers. Target will present a 60-day run of clothing from Italian label Fiorucci, as well as an assortment of high-end gift clothing, including silver cuff links and cashmere sweaters decorated with Swarovski crystals.
Hilfiger to launch new brand
The Tommy Hilfiger Corp. says it plans to open a new chain of clothing stores called H Hilfiger, which will offer a mix of casual and dressy styles for men and women. The first unit is scheduled to open in February at Tysons Corner Center, McLean, Va. The company says it plans to open as many as 12 of these H Hilfiger stores around the world by the end of 2006, an additional 20 over the next few years and about 200 eventually.
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