Department store retailers – such as Nordstrom, Macys, Saks Fifth Avenue and Neiman’s – are continuing to cut expenses in order to stay afloat. SG&A expenses – such as sales force, marketing/advertising and IT – are being sliced to the bone, which means less money to promote business and drive sales. It also means more lay-offs and therefore fewer customers out there in general.  It makes me wonder how these stores will remain competitive up against the discounters and the internet.

 

This, as both department stores and specialty stores will add square footage this year (1.2% for department stores; 1.9% for specialty stores). (Has no one told them there is already too much retail space?)

 

Will these SG&A cuts, no matter how deep, be enough to do the trick? Even if retailers continue to cut, will it make the needed difference? On the top line, sales are still declining each month for most chain stores. Though the recession is likely to come to an end in a few months, I’m not sure we’ll even be aware of it. Lay-offs in every industry will continue, credit will remain tight and consumers, if you can call them that, will be busy saving to make up the half of their net worth which they’ve lost. Will they really be making beelines for the stores anytime soon? I doubt it.

 

To me it’s looking clear that 2010 will be when it’s time for many retailers to “pay the piper” and start closing more stores. It’ll continue to be a tough year for retailers, as well as for shopping center developers/owners as these stores close. Lowered sales productivity for those that remain open will continue to affect NOI for shopping center ownership and exacerbate the general situation.

 

Despite this glum news, there is some good news. The coming year(s) will be a time of creativity in which retailers find out how to make a go of it in this brave new world. They will work more closely with suppliers (who need to do some cost cutting of their own) to sharpen prices and give consumers what they want and need: value. New formats will emerge and that will signal growth and good things to come for retailers, shopping center developers/owners and for consumers.

 

 The bad news is that, even as the recession draws to a close, there’s still a lot of pain ahead for each of those groups.

This entry was posted on Tuesday, June 16th, 2009 at 11:31 am and is filed under Retail. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.