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Copyright 2017

Monday, May 22, 2017

HUNDREDS MORE STORES NEED TO CLOSERETAIL SPACE: “UNDER-REPURPOSED” Last year, real estate research firm Green Street Advisors made a startling statement: about 800 department stores had to be closed nationwide to bring sales per square foot back to where that metric had been a decade ago. Now, however, the same firm says last year’s estimate was too conservative—a lot more stores need to be closed! “Just a year later,” Green Street’s latest report says, “the 800 number looks much too light on a strict sales productiv-ity standpoint and is much lower than what will ultimately be needed as the industry will likely need to mas-sively rationalize its store count as it reinvents its business model. The era of a mall anchored by four department stores is coming to an end. One or two such stores per mall are the most likely future.” Green Street also predicts that subsequent store closings could also happen more often in higher-tier malls. Just the currently announced closings of more than 300 major department stores will put about 36 million square feet of vacant retail space back in the market according to analysis from commercial real estate firm JLL, the largest third-party retail property manager in the country handling more than 1000 shopping centers covering 125 million square feet. But it sees the departure of department store tenants as an opportunity, noting “Historically, rents paid by department stores have been extremely low—usually less than $10 per square foot. As they become vacant, owners have a new opportunity to re-tenant the space and create a significant financial boon.” “Retail space isn’t overbuilt,” JLL’s Retail Research director James Cook said, “It’s under repurposed.” As one example of the scope of the opportunity, JLL notes Seritage Growth Properties has 266 properties originally leased to Sears and Kmart at an average of $4.40 per square foot. But for new tenants, has averaged more than quadruple the rent Sears paid; an average of $18.55 per square foot, and about two-thirds of the new tenants are other apparel retailers, restaurants or entertainment venues. H olly Rome, director of national retail leasing for JLL commented, “Beyond dining and entertainment, categories like fast-fashion, cosmetics, sporting goods, home furnishings, and even department store operators like Von Maur are taking space in former anchor locations. The best use for an empty anchor will vary and be dictated by the demographics and lifestyles of the surrounding community, but the many options available might come as a pleasant surprise.”

ADVERTISER NEWS Ross Stores has been among the rare apparel sellers producing solid numbers for the last several quarters and did so again in the just finished fiscal quarter with a 3% same-store gain. Including expansion within the last year, Ross saw a 7% total sales gain despite “uncertainty and volatility” in the retail environment. Ross operates 1,363 of its namesake stores and 198 dd’s Discount locations……Gap Stores did a bit better than had been expected led by its Old Navy banner. Total domestic sales for Old

Navy were up 7.3% while total domestic sales were down 1.4% at Gap stores and off by 3.7% at Banana Republic. Blended comp store sales were up 2%, but that’s a worldwide figure—Gap does not identify comps in the U.S. alone……Target will carry Casper, a previously online-only brand of mattresses and other sleep products, beginning next month. Target has previously offered brands such as Sleep Comfort, Serta and Sealy online but

Casper will now become the only brand at target.com and will have products such as pillows and sheets available in physical stores……Church’s Chicken has signed its biggest franchise development deal ever in which the Goalz Restaurant Group will develop 20 restaurants per year in six states, Florida, Kentucky, Ohio, Colorado, North Carolina and South Carolina. Goalz also is a franchisee of Captain D’s and Dog Haus……Fiat Chrysler announced it has filed for diesel vehicle emissions certification with the Environmental Protection Agency and the California Air Resources Board for 2017 Jeep Grand Cherokee and Ram 1500 diesel vehicles. FCA says it believes this will resolve lingering questions over questions about emissions software in its 2014-2016 vehicles and conclude discussions with the Department of Justice and other governmental agencies. In a related note, the EPA and the California Board are expected to announce approval for a fix for 84,000 2012-2014 Volkswagen Passat diesels that have been part of the 475,000 VWs originally ordered to be bought back or fixed... (Continued on page 3)

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FRAUD FOR AUTO LOANS? Remember when the housing bubble burst a decade ago it was found that many mortgages had been approved based on incorrect or overly-optimistic information about the people who took out those mortgages? That practice led to massive defaults and eventually a recession. There’s some evidence that history may be being repeated now—but this time for auto loans rather than home mortgages. The Point Predictive data analytics firm says as many as 1% of U.S. car loan applications now include material misrepresentations, based on their analysis of reports from banks and finance companies.

While 1% may not sound like a lot, the company estimates that lenders’ losses based on those misrepresentations could double this year to $6 billion. “We see an extraordinary amount of parallels between the auto and mortgage industries in terms of the rising levels of hidden fraud,” Frank McKenna, the chief fraud strategist at Point Predictive said. Much of the problems traces to dealers according to the director for fraud at LexisNexis Risk Solutions, as dealers have an incentive to complete sales and

may better know how to tweak paperwork to get a bad loan funded than a customer.

ADVERTISER NEWS (Continued from page 1) ……Foot Locker first quarter comp store sales were up just 0.5% for the full February-April quarter, but the gains were back-loaded as March and April showed “high-single digit” increases. It’s blaming the slow February on late tax refunds……If customers are no longer coming to malls, might a possible answer be to go out of the mall to sell merchandise? The New York Post reports J.C. Penney is hiring an outside sales force to break into the hospitality industry selling items such as bedsheets, towels, curtains and mattresses to hotels. Penney says many hotels had already been buying those kinds of items and outside salespeople gives Penney a chance at a $200 billion “opportunity.”

THIS AND THAT Should ESPN drop Monday Night Football? That question was asked by Todd Juenger, senior media analyst for Bernstein Research, and reported by Mediapost.com. Juenger estimates Disney spends $1.9 billion a year for the games. Dropping them from its schedule could increase operating income by 50% from its current level of $4 billion a year....Anheuser-Busch InBev will invest $2 billion in the next few years on a variety of initiatives including alternative beverages such as “near beer,” sparkling water with alcoholic content, and tea. Advertising Age reports the first half-billion gets spent this year on three major priorities, elevating A-B’s biggest beer brands, building presence in craft beers and imports, and pushing into low-alcohol beverages and other drinks. A-B InBev has already acquired nine craft breweries and alcoholic sparkling water Spiked Seltzer while also forming a partnerships with Starbucks to brew, bottle and sell Teavana teas.... have pushed beyond that price point.

Monday, May 22, 2017

CABLENET CHATTER Fox News Channel has parted ways with Bob Beckel, one of the co-host of its primetime program, The Five. The network said in a statement, “Bob Beckel was terminated today for making an insensitive remark to an African-American employee.” Beckel was a longtime political consultant as well as a former campaign manager for Democratic presidential candidate Walter Mondale. He joined Fox News in 2000 and was one of The Five’s original co-host and was on the panel for many years……Catherine Zeta-Jones has joined the cast of Cocaine Godmother, Lifetime’s movie that recounts the real life of infamous drug runner Griselda Blanco. Blanco made her way to the U.S. at age 17 with her first husband Carlos. She soon became embroiled in the drug trade, masterminding the use of beautiful women, the elderly and children as drug mules. She also created false-bottom suitcases to smuggle cocaine from Columbia. Cocaine Godmother will be directed by Guillermo Navarro with David McKenna writing the script……For the first three nights of last week, Rachel Maddow’s 9 PM broadcast on MSNBC was the most watched cable news program in primetime, a position that was typically held by Fox News Channel and Bill O’Reilly’s The O’Reilly Factor, in a timeslot that now belongs to Tucker Carlson. According to Nielsen, last week’s MSNBC primetime schedule was the ratings leader in the coveted demographic of adults 25-54 for the first time since December 29th, 2008. Maddow, The Last Word and 11th Hour are all leading in that viewing category for the month to date……AMC Networks CEO Josh Sapan spoke to Wall Street analysts last week attempting to ease concerns about the rating decline of TV’s number one show, The Walking Dead. Sapan, speaking via a webcast at the MoffettNathanson Media & Communications Summit in New York City, said, “It’s pretty alive and vital and there’s a long time that we’re going to be playing with The Walking Dead.” He insisted that the audience for The Walking Dead far outranks viewership for the next most popular TV series like Empire and The Big Bang Theory while conceding that the seventh season of The Walking Dead did see “some minor erosion” in ratings. Sapan also talked up his company’s plan to become more of a studio, intent on owning more of the original shows on its channels, and diversifying where AMC content shows up in an age of skinny bundles……It was announced in March that Rachel Bilson (The O.C.) and Kaitlin Doubleday (Empire) will both be joining the cast of CMT’s Nashville for the second half of season five with few details about their recurring roles in the country music drama. Reports now say that Bilson will play Alyssa Greene, a Silicon Valley marketing expert brought in to take Highway 65 to the next level. Doubleday will portray Jessie Caine, a singer/songwriter who left Nashville a few years ago under a cloud of scandal but returned to reclaim her career and the son that was taken from her. Doubleday’s first episode will be the 100th, set to air on June 15th, and Bilson’s debut is set to follow a few episodes later.

James Corden

A Girl Scout troop leader in Kentucky is on the run from

police after she allegedly stole $15,000 worth of Girl

Scout cookies. The suspect is now at large. And getting

larger every minute.