Many women apparel retailers are finding their store square footage a size or two too big these days, and are taking steps to shrink the waste in their real estate portfolios.
Some of the more popular chains, such as Abercrombie & Fitch and The Jones Group, are trimming more than others. Both have recently announced major real estate restructurings.
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The Jones Group said it will reset its domestic retail business by closing 170 underperforming stores and streamlining its wholesale divisions and supply chain.
Among the steps Jones Group plans to take to improve profitability are: Closing approximately 170 underperforming domestic retail stores by mid-2014. Afterwards, Jones Group expects to operate a smaller and more productive chain of domestic stores, with outlet stores comprising a significantly higher percentage of the overall retail portfolio; Continuing to evaluate individual store profitability, and considering converting certain stores to other brands; consolidating production, design and selling divisions, and its distribution and supply chain facilities; reducing domestic retail staff by approximately 18% and corporate, support and supply chain staff by approximately 2%, for a total headcount reduction of approximately 8% upon completion.
Jones Group began reducing its retail staff headcount this month and will continue through the first half of 2014.
Pinched Pocketbooks Hurting Abercrombie & Fitch
Michael S. Jeffries , chairman and CEO of Ohio-based Abercrombie & Fitch, explained this past month that the second quarter proved to be more difficult than expected for his firm due to weaker traffic, particularly in July, and continued softness in the female business, although the reason for the drop-off in traffic remains unclear.
"Our best theory is that while consumers in general are feeling better about the overall economic environment, it is less the case for the young consumer," Jeffries said. "In addition, we believe youth spending has likely diverted to other categories. We assume that these effects will abate at some point, but until we have seen clear evidence of that, we are planning sales, inventory and expense levels on a conservative basis.”
The fashion retailer expects to open only a small number of stores this year but plans to close 40 to 50 stores, primarily through natural lease expirations at the end of the year.
In addition, the company is nearing the completion of a long-term strategic review of its real estate. The results of that review will be presented to the company’s board of directors in the middle of this month.
Meanwhile Some Fashion Retailers Back In Growth Mode
While, eight of 13 publicly held women apparel retailers whose earnings announcements CoStar News examined for this report reported plans to close more stores than they planned to open, five of those major retailers are planning store growth, with three of the five -- Chico’s FAS, Ann Talor and Victoria Secret -- each planning to open 50 or more stores.
Chico's FAS new store growth continues to be a key element of its omni-channel strategy. The company said increased square footage provides its customers the important ability to touch and feel its inventory.
It opened 33 new stores this past quarter, for a total of 112 net new stores compared to last year, and is on pace to open 135 to 140 new stores in 2013.
"Rather than trying to open these stores coast to coast, border to border, like we did with Soma, we're really trying to go in and concentrate in areas where we can build massive stores, like in Southeast and Southwest Florida,” said David F. Dyer, CEO and president of Chico’s FAS. “And then we're going into the Texas area, and we'll go into Arizona. But we're going to go in with multiple stores so we can get the efficiency of our marketing and media dollars."
Outlets are a big part of Chico's store square footage growth as that is one of the few areas where there is new mall development occurring, the company said.
Ann Inc., operator of Ann Taylor stores, opened 21 stores this past quarter, including three Ann Taylor stores, three Ann Taylor Factory stores, 11 Loft stores, and four Loft Outlet stores. It closed only three stores and is on track to open 65 stores this year.
By brand, Ann Inc. plans to pursue the continued rollout of the Ann Taylor new concept stores, and expects to have nearly 40 additional stores in this format by year end. Approximately five of these will be new stores, 15 will reflect existing store downsizes and remodels, and 20 will reflect capital-light refreshes of existing stores.
L Brands, operator of the Victoria’s Secret chain, is planning to increase its real estate investment at Victoria's Secret, primarily to increase square footage in stores for its Pink brand. Only about 20% of its current stores carry the full Pink assortment.
Victoria's Secret square footage in the U.S. will increase by just a little less than 4% this year, driven by expansions of the existing Victoria's Secret stores and the opening of about 50 new Pink stores. Total company square footage will increase by just under 3%.
Additional Future Chain Plans
Bebe stores plans to open one bebe store, one 2b bebe and to close up to 10 bebe stores and five 2b bebe stores, which will result in approximately a 5% decrease in total store square footage from the end of fiscal 2013.
Body Central plans to open 22 stores this year and is contructing a new office in Washington, DC.
Christopher & Banks closed eight stores in the past quarter. Luann Via, its CEO, said it is taking a very methodical approach to its real estate portfolio and is evaluating it continually fFor opportunities to grow its outlet stores.
Express took possession of a site in Times Square that will be the future home of its New York City flagship store and also controls a future flagship store location in San Francisco. For the full year, Express is projected to open 16 stores and close only nine.
Guess opened three new stores and closed seven, ending the period with 507 stores in the U.S. and Canada.
New York & Co. is operating 21 fewer stores than this time last year. Comparable store sales are expected to increase by a low to mid-single digit percentage.
Wet Seal expects to close five Wet Seal stores and three Arden B stores this quarter and more by the end of the fourth quarter in both divisions.
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