Grocery’s New Landscape Leads to a Rebalancing of Risk

By: Kenton McKeehan and Mike Jordan

Although grocery-anchored shopping centers have been in favor among retail asset classes for the last decade, in this edition of Insights on the Margin, we continue to examine what is continuing to drive the attractiveness of investing in power centers, how retail is thriving more than ever and the increasing opportunity for investment in multi-anchor formats like power centers.

Jeffrey Rosenberg

Read Insights on the Margin

By: Mike Jordan, Big V Property Group Director of Research

Monthly Specials

Holiday Sales Beat Expectations

The National Retail Federation said that sales this season rose 4%, beating the estimate of 3%
Total sales were just under $1 trillion, a new record Read More >>
E-commerce set a new record, growing 8.6% to $241 billion
Physical store sales grew 2.9% Read More >>

2025 Forecast: Uncertainty Drives a Shift in Consumer Spending

Deloitte and EMarketer predict a +3% increase in spending
31% of consumers state they will cut back to essential purchases only if tariffs bring on another round of inflation
Tailwinds include a strong job market and an expected easing of monetary policy Read More >>

The Checkout Lane

Source: Retail Dive, Chain Store Age, Progressive Grocer

Amazon announced that Whole Foods CEO Jason Buechel will take on responsibility of heading Amazon’s entire grocery business now overseeing both Amazon Fresh and Amazon Go as they each try to turn the tide following a less than stellar rollout.

Best Buy is launching a third party marketplace on its website this summer. Sellers can integrate their products with Best Buy’s website and mobile app. The company hopes that the marketplace will help bolster sales that have been declining in recent quarters.

JCPenney has merged with the Sparc Group to create a new company called Catalyst Brands. Catalyst will be a joint venture between JCPenney and Sparc’s owners: Simon Properties, Brookfield, Authentic Brands, and Shein. In addition to JCPenney, Catalyst will also cover Aeropostale, Lucky Brand, Brooks Brothers, Eddie Bauer, and Nautica. The headquarters of the new company will remain in Plano, Texas with regional offices in New York, Los Angeles, and Seattle. Combined, the new company has over $9 billion revenue, $1 billion in liquidity, 1,800 stores, and 60,000 employees.

JoAnn has been forced into bankruptcy less than 12 months after emerging from an earlier filing that saw the retailer keep its entire store fleet open and operating. While CEO Michael Prendergast said he hopes that the crafts retailer can continue as a going concern, the company will put all of its assets up for auction in mid-February. Liquidation firm Gordon Brothers is a stalking horse bidder, and they would likely wind down JoAnn’s operations if another firm or retailer cannot come up with a more attractive offer.

Kohl’s announced it will close 27 locations by April of this year, though the company’s downsizing may not be complete. Wall Street analysts noted that at least 300 stores have not been reinvested in during recent remodeling programs. With a new CEO set to take office, more changes are likely to come in the months ahead.

Macy’s said it will not bow to activist pressure to spinoff Bloomingdale’s and BlueMercury as standalone brands. CEO Tony Spring stated that the company feels that all three brands drive synergies that make each stronger as part of a multibrand portfolio. Macys also announced the closing of 66 stores in the coming weeks. While the majority are mall anchor stores, the company curiously also is closing a number of small format and off-price stores as well. The company offered no further comment on the future of its small store strategy, which had announced a plan of 30 new stores in 2023.

Party City has filed for bankruptcy for the second time, but unlike their last filing which resulted in a streamlined company, Party City’s owners have decided to liquidate all 695 remaining stores. Leases will be auctioned in early February.

Sephora has embarked on a program to redesign all of its 700 stores in North America. While the changes will be customized based on the age and condition of each store, every location will see some form of upgrade over the next five years.

Target has reshuffled its C-suite to start off 2025. Adrienne Costanzo will become the new Chief Stores Officer, while digital operations will be split between Prat Vemana (as Chief Information & Product Officer) and Sarah Travis (as Chief Digital Revenue Officer). The announcement comes as Target previewed its Q4 earnings by noting Holiday sales beat expectations with traffic up 3%.

Walmart has opened the first phase of its new headquarters in Bentonville, Arkansas. The complex sits on 350 acres and will house 12 buildings which will open throughout the year. The campus will also feature retail & restaurant spaces that will be open to the public, in addition to a food hall, auditorium, rooftop lounge, and conference center.

Wegman’s announced it is planning to enter the Pittsburgh market with a new store under development in nearby Cranberry Township. The store will be part of a large mixed use development known as Cranberry Springs. Wegman’s recently was named the number 1 Workplace in Retail for the 9th year in a row.

The Big View

Retail returns have been a hot topic in the industry for the better part of the last decade. The liberal return policies that were ushered in with the age of e-commerce have led to retailers having to process nearly $1 trillion worth of returned merchandise. Not all of it can go back on store shelves, so now these items increasingly end up in “bin stores” that buy a truckload of returned merchandise every week and sell at deep discounts. For landlords with hard to lease spaces, bin stores have provided a win-win. But how long will this trend last? Read more in this article from ICSC >>

While brick and mortar shopping isn’t going away anytime soon, there is still a disruptive change having a big impact on the shopping landscape. The growth of the biggest players in the industry has only accelerated since the pandemic, and that’s meant trouble for once stalwart formats like supermarkets and dollar stores. As grocery prices climbed in 2024, Walmart was 9% cheaper than stores like Dollar General. The combined capital expenditures of the 3 largest retailers: Walmart, Amazon, and Costco was over $47 billion in 2023, making it hard for smaller competition to keep up. Find out more in this article from the Wall Street Journal’s Jinjoo Lee >>

Video of the Month: Many retailers in challenged sectors have tried to reinvent themselves only to close stores and file for bankruptcy a few years down the line. However, Barnes & Noble beat that trend and is back to being a major player in retail expansion. Watch this video from PBS News to find out more >>

By the Numbers

Walmart, Amazon, and Costco's revenues as a share of total U.S. retail sales

From the Research Desk

The holiday season provided some optimism around consumer spending, with the total coming in well above forecasted levels despite weakening consumer sentiment. However, for many retailers, 2024 was a pretty difficult year. In 2024, we saw 51 Chapter 11 bankruptcy filings, nearly double the amount there was in 2023.

So how could both things be true? Looking over the list of brands that filed from JoAnn to Party City to Container Store, they all share one thing common, which is that they are mid-price specialty stores that are facing enormous pressure from e-commerce and value oriented retail, without offering high-end luxury . As this month’s By the Numbers chart above shows, there are three retailers that account for a whopping 17% of all retail spending in the US: Amazon, Costco, and Walmart. That is an enormous amount of concentration in an industry that sees almost $6 trillion in spending.

It's clear the “mushy middle” is not the place to be these days. If you can’t differentiate your service or your product, customers will gravitate towards convenience and value every time. Our Video of the Month highlights the remarkable turnaround story for Barnes & Noble. Perhaps the first time I’ve seen a tenant on a bankruptcy watch list pivot back to growth, with nearly 60 new stores planned this year. However, books are personal and not easily commodified; while Amazon can offer a deeper catalog, they can’t offer a personal experience.

The good news is that we should see fewer bankruptcies in 2025, with many of the most distressed retailers falling off last year. The other silver lining is that the type of space 2024’s casualties occupied is in high demand from retailers like TJX, Burlington, Ulta, and the aforementioned Barnes & Noble. Big V’s portfolio is in prime position to benefit from this trend with our convenient, value-centered retail offerings.

Mike Jordan

RETAIL MEME OF THE MONTH

SONG OF THE MONTH

Listen to the Song of the Month

Will Oldham has been one of the most prolific artists of the past 30 years, with over 30 albums & dozens of singles released under a variety of names (including Palace Brothers and Bonnie Prince Billy). The Louisville, Kentucky native draws inspiration from old Appalachian folk melodies, outlaw country, and experimental music. His songs have been covered by everyone from Johnny Cash to Bjork and we haven’t even covered his acting career which began as a 16 year old alongside Oscar winners James Earl Jones and Chris Cooper in the 1987 movie Matewan. For his new record, Oldham teamed with producer Dave Ferguson (Sturgill Simpson, Tyler Childers) and worked with many of Nashville’s finest session players to produce the most mature and accomplished record of his very illustrious career. The album features guests like country legend John Anderson and mandolin maestro Tim O’Brien who lends his hands to “Our Home”, an uplifting affirmation of community and simpler living Listen Here >>