Green Street Advisors

 

 

CNBC: Losing your Sears or Macy's? It's not just the weakest stores that get chopped

According to CNBC:

Disappointed that your local Sears, Kmart or Macy's store is one of more than 200 that's about to go dark? Take heart in knowing that for retailers, these decisions aren't easy.

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The math gets even more complicated for retailers that own a large chunk of their real estate — namely, department stores. For those struggling companies, which are losing share to off-price competitors and the internet, it is sometimes more lucrative to sell off a store that is profitable.

"It's a complicated algorithm that doesn't just stop at, 'Are we making money at this store or not?'" Jim Sullivan, president of the advisory and consulting group at Green Street Advisors, told CNBC. "For each retailer, how that algorithm is shaped is different."

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These types of strategies will be a crucial part of legacy retailers' real estate strategies moving forward. They're also a marked change from when these companies were building their brands, and relied on store expansion to increase their sales.

"The management teams at most retailers came up through the operational ranks, and they were not trained to think of real estate as a financial asset," Green Street's Sullivan said.

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While many argue that turnover and other changes have always been a part of the retail industry, "the pace at which it's changing is more rapid than has ever been the case," Green Street's Sullivan said.

To view the full article on CNBC, click here.