Mall REITs: JCPenney Is Warning You

Retailers are suffering, and mall REITs are feeling their pain all too well. General Growth Properties (GGP) announced Friday it may seek bankruptcy protection. Other mall REITs have seen declining share prices for some time now. Executive comments on JCPenney's Q308 conference call (JCP) indicate people may avoid malls for some time to come now.

We reported… a decline in sales stemming from the lower mall traffic levels and severely restrained consumer spending.

Mall traffic is down, this is not a secret, but importantly for us, we are outperforming [our competition] in our mall stores and traffic and sales trends with the right style, high-quality merchandise with very competitive prices, especially compared to other mall anchors and the specialty stores in the mall.

Regional malls are the center of activity during the Christmas shopping season so we feel well positioned to take advantage of that. But we are also fortunate to have 400 off-mall stores, including over 130 in our new 100,000 square foot format.

Off-mall today is enjoying better trends than malls. Customers are more consistent in their shopping patterns in off-mall formats. It appeals to many customers the desire to pay discount store prices although they are also getting a department store experience in the same format. Sales at off-mall stores are more productive in the company as a whole and therefore accretive to our earnings.

 

Comments

[Still Renting:]

So, it is mainly a bit of a warning to anyone who has a "specialty store" in a mall.

It looks like the Mall Model may really be dead in a few years.

2008 Nov 17 03:32 PM