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Shopping Centers Today -> November 1999
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Footwear losing ground
Centers seeking new strategies for category
By Debra Hazel
Despite footwear's troubles, chains such as Steve Madden are expanding. |
Kinney and Thom McAn have vanished, Nine West is downsizing and the category killer Just For Feet has stubbed its toe financially.
A staple of shopping centers for decades, the segment has been troubled in recent years, reflecting the woes of apparel overall. But as clothing sales have rebounded in 1999, footwear sales continue to decline.
Yet shopping center owners and managers cannot ignore or eliminate these chains from their mix. Instead, many are choosing to protect themselves through clever leasing, even as they pursue expanding chains such as the trendy Steve Madden.
"We did have a formula for percentage of shoe stores in the mix, and that probably was higher years ago," said Mark Guth, vice president of Westfield America, Los Angeles.
But to say that the entire footwear segment has been troubled may not be totally accurate. Some chains, such as Madden, Payless ShoeSource and DFS Shoe Warehouse, continue to expand. But some of the best-known retailers in the United States have shuttered or are cutting back dramatically.
The financially troubled Woolworth Corp. (now Venator) closed 467 Kinney and 103 Footquarters stores in 1997. Thom McAn shuttered its stores in late 1996.
Nine West, acquired in June by Bristol, Pa.-based Jones Apparel Group, originally announced plans to close 100 to 110 stores, out of nearly 700 Nine West, Nine & Co., Enzo Angiolini, Easy Spirit and Calvin Klein stores.
That number has since been increased, and Jones will now shutter an additional 145 to 165 stores, said a spokeswoman.
"We estimate 25 or 30 stores will be closed in 1999, with the rest to close in 2000. In addition, we have announced plans to sell our Canadian stores, and the closing of 40 international stores," the spokeswoman added.
Despite the naming of Helen Rockey as its new CEO, Birmingham, Ala.-based athletic footwear seller Just for Feet faces an uphill battle to turn around flagging sales, and store closings are considered likely. In late September, the 359-store chain's stock fell nearly 50% in a one-week period as it delayed its 10-Q filing with the Securities and Exchange Commission while it renegotiated loans. The firm also has retained a financial adviser to look at selling stores, divisions and other assets.
But the problem may be less the sector's fault than the individual operators.
One
of the first casualties in the shoe shakeout was Kinney.
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Sales of healthier chains, too, have reflected problems in the sector. Sales per square foot at regional mall women's shoe stores have declined 0.9% year to date through July compared with 1998, according to the ICSC Monthly Mall Merchandise Index. Sales per square foot of athletic shoes declined 11.85% over the same period. Children's shoes have dropped 5.1%, while family shoe stores reported flat sales. Only men's shoes reported an increase — 0.8%.
Overbuilding of the sector could be a major culprit behind the overall weakness of the category — chains expanded, even as competing department stores have made a comeback. And demand may not take up all of the slack.
"At this point, we don't see significant opportunity for consumer demand to pick up, so there needs to be a catch-up for all the space added," said Donna Leong, retail analyst for investment bank Bear, Stearns & Co., New York. "A lot of chains have cut back on expansion, and that is a very good thing."
Unless, of course, you're looking to fill out a segment that can't be ignored. Several developers are protecting themselves by writing leases cautiously, reducing their own investment in the chains to a minimum.
"The creditworthiness of a tenant is just one factor we consider [in a lease]. But in the case of questionable credit, we structure the deal in a way to minimize the risk, yet we can still proceed. Obviously, the shoe use is an important one in most centers. We need to be more creative," said Daniel Hurwitz, executive vice president of Developers Diversified Realty Trust, Cleveland.
The firm will attempt to minimize the amount of dollars given to tenant improvement, reducing its capital investment in the store, he said. Troubled retailers usually will agree in order to get the space, he added.
Other developers say they have exhibited such caution for these smaller space users all along.
"The only thing different in shoe store deals is that the large stores pay less rent than the smaller stores. There is still very little tenant allowance going to stores in this sector," said Dane Smith, senior vice president of leasing for The Macerich Co., Santa Monica, Calif.
Others are looking at alternative uses for the vacated spaces, which often are less than 2,000 square feet.
"You look at stores such as Illuminations, which is probably the best out there doing that segment, or Yankee Candle," Westfield's Guth said.
And another possibility remains healthier shoe stores.
"Journeys and Payless have done very well, and that has taken up the slack for the loss of Kinney and Thom McAn," Smith said.
Some analysts believe the sector is starting to turn around. "The footwear environment is improving somewhat, though more from the back end than from consumer demand," Leong said.
The key is clothing, which has been rebounding. In 1999, specialty clothing chains such as Ann Taylor and Talbots, which had been struggling, have posted comparable-store sales gains in the double digits.
"You have to look at the apparel industry. We've seen some encouraging signs, such as an uptick in demand for apparel. We've seen robust demand there, and when you buy a new outfit, you buy new shoes," Leong said.
And some chains are flourishing. Payless ShoeSource will open 50 Parade of Shoes stores next year, and will expand its Canadian division. And Steve Madden is one of the most sought-after mall tenants today.
With 47 stores open at the end of September, the Long Island City, N.Y.-based chain (SCT, August 1998) plans further expansion, said Rhonda Brown, COO of Steve Madden.
"Basically, we plan on expanding by 10 stores every year. However, the number for 1999, while not solidified, should show we'll open at least 13 stores," Brown said.
The chain is planning a slow program of expansion, largely in existing markets, including the Northeast, Florida and Atlanta. New markets entered this year include Texas, Ohio, Michigan and California.
"We have a strategy plotted throughout the country, and we try to make every store profitable," Brown said.
Other regional chains also are doing well.
"One example is Trade Home Shoes, a 75- or 80-store chain out of the Midwest. Many of these stores are million-dollar stores. They provide branded shoes with great service," General Growth's Michaels said.
And in another way, centers actually are carrying more footwear than ever before, he added.
"With so many apparel stores now selling shoes, we probably have more overall square footage devoted to footwear than ever before. Abercrombie & Fitch, for example, now sells footwear," he said.
Athletic footwear may also be turning around a bit. Manufacturer Nike, hit hard by the growth of "brown shoes" such as Timberlands and Rockport hiking boots, reported a 3% increase in U.S. footwear revenues for the first quarter of fiscal 2000. And Venator's Foot Locker is rebounding.
"You still want to have an exciting presentation of athletic footwear. Venator has done a great job," said Tom Unis, senior vice president of lease management for Macerich.
And both high-end and midmarket chains also are looking at growth.
"Prada is expanding. Naturalizer is opening 30 stores in 1999, and an additional 30 in 2000. There is always going to be somebody," Guth said.
After all, footwear is something
of a necessity, Michaels said.
"People
have to wear shoes."
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