The Power Center Opportunity – Old Habits Die Hard By: Kenton McKeehan and Mike Jordan
What might have been seen as risky in 2015, now seems primed for explosive growth in 2025 and in this month’s Insights on the Margin, Kenton McKeean and Mike Jordan explore multiple factors driving this opportunity and what’s steering the stability in power centers and why they remain a relevant format for today’s shopper.
2024 finished strong with core retail sales up 3.6% for the year
However, consumer sentiment fell 10% to its lowest level since 2021 as impact of tariffs and other policies remains uncertain amid persistent inflation Read More >>
Consumers also are indicating a preference for cheaper brands and less online shopping Read More >>
Target and Best Buy warn of price hikes from tariff threat Read More >>
The Checkout Lane
Source: Retail Dive, Chain Store Age, Progressive Grocer
Belk has announced plans to expand its outlet store concept with two additional locations in Gastonia and Raleigh, North Carolina. Both locations will continue to operate as a full-priced department store on the second floor, while the outlet concept will operate on the ground floor.
Dine Brands is opening at least 12 new dual-branded locations of its two brands: Applebee’s and IHOP. The first location will be in Seguin, Texas near San Antonio. The prototype hopes to boost sales for IHOP which performs better in earlier parts of the day. The concept has been tried overseas and typical revenues see a 50/50 split among menu items from each brand.
Being 21 might not last forever, after all. Forever 21 announced that it is closing its headquarters in Los Angeles and laying off over 700 corporate employees. The remaining staff will work remotely as the chain’s owner, Catalyst Brands, pursues strategic alternatives for the brand.
JoAnn stores has ended its second trip through bankruptcy court in less than 12 months with a total liquidation of the iconic 82-year old fabrics and crafts retailer. Going out of business sales have started with the hopes that all merchandise will be cleared out by May.
Kroger CEO Rodney McMullin abruptly resigned from his position following an ethics investigation that found his conduct was not consistent with the grocer’s policies. Kroger stated that the conduct was not related to the company’s financial reporting, operations, or other employees. The move follows the two year saga of Kroger’s attempted purchase of Albertson’s grocery chains which resulted in a $600 million fee Kroger paid to Albertson’s following a judge’s order blocking the transaction, while additional litigation by Albertson’s against Kroger is pending. Former Staples CEO Ronald Sargent will step in on an interim basis while the Board begins its search for the next leader.
The auction for the 695 former Party City locations has concluded with Dollar Tree coming out on top with 148 Party City leases, Five Below taking 44, and Cavender’s Boot City taking 15. Other auction winners include Rack Room Shoes, Books-a-Million, Barnes & Noble, and Burlington. In total over one-third of the stores found a bidder. The winning retailers will have time to negotiate with landlords and then accept or reject the lease.
Sprouts Farmers Market announced their plans for store growth in 2025. The natural foods store will open at least 35 stores this year with the first four all announced for Florida. In 2022, Sprouts opened 33 stores including its first ever store in Wyoming. The chain currently has 440 stores in 24 states.
Target has teamed up with Warby Parker to open five shop-in-shop optical departments at stores in Illinois, Minnesota, New Jersey, Ohio, and Pennsylvania. The shops will be staffed by Warby Parker employees and Warby eyewear will also be available on Target’s website. The two companies plan to open more locations in 2026. The company also announced plans to open 20 new stores in 2025.
Private equity firm Sycamore Partners is close to a deal that would see it acquire Walgreens Boots Alliance for a price of about $10 billion. Sources say that the drugstore chain would likely be broken up following the deal. Walgreens owns UK pharmacy Boots, health care provider VillageMD, and New York City pharmacy Duane Reade among other holdings.
Walmart surprised observers with their purchase of Monroeville Mall, near Pittsburgh. While Walmart’s exact plans are not known for the iconic filming location of Dawn of the Dead, they have announced a partnership with Texas-based developer Cypress Equities to evaluate redevelopment opportunities and to handle operations.
The Big View
Walmart CEO Doug McMillon sat down with Bloomberg Businessweek recently to discuss how the company is evolving in the 21st That includes a new corporate campus, investments in Northwest Arkansas, and a push to bring in more high-income shoppers, online and in-store. Read more here >>
As retail space continues to be in short-supply, retailers are having to come up with new strategies to meet their growth plans. Forbes’ Brin Snelling takes a look at the trends reshaping retail expansion in 2025 Read More >>
Video of the Month: Japanese retailer Uniqlo has been winning over American shoppers with well-made, affordable clothing. The company has surged to a market capitalization of $100 billion and made CEO Tadashi Yanai the richest man in Japan. With the brand set to expand to 200 US stores by 2027, what is the secret to their success? Find out in this video from CNBC >>
By the Numbers
Available space skewed older and lower quality
From the Research Desk
Ikea recently announced that they are opening 8 additional small format stores. Each store is about 8,000-10,000 square feet and is focused on large items such as furniture and room remodels compared to their typical locations that often exceed 200,000 square feet stuffed with everything from meatballs to king-size beds. Customers meet with the store team to help plan and order their selections which can be collected when and where its most convenient. It wasn’t long ago that having a full-size Ikea in an American city was a status symbol. Tina Fey’s character on 30 Rock once refused to move to Cleveland with her boyfriend because of my former hometown’s lack of an Ikea (spoiler alert: they still don’t have one). However, omnichannel shopping means retailers have more options to serve customers both in store and online.
Other retailers are going small too. Long ago when Burlington was known as a coat factory; you’d often find them in Class-C shopping centers taking up as much as 90,000 square feet. Now they are regularly scooping up locations in the 20,000-30,000 square foot range at liquidation auctions for bankrupt stores like Party City and Bed Bath & Beyond in some of the most in demand trade areas in the country. In addition to Burlington, we’ve seen Target get flexible with stores under 40,000 square feet in densely populated areas. Macy’s has gone off-mall with several locations under 30,000 square feet. Lastly, Best Buy is testing a 5,000 square foot store in Monroe, North Carolina and recently announced plans to open over 150 small stores in the sovereign nation of Canada.
While digital integration is one of the reasons retailers have become more flexible on store size in recent years, another driving factor is the lack of available retail space which we’ve extensively covered in these pages in recent months. Availability at open-air shopping centers is at an all-time low of 4%, while the list of expanding tenants keeps growing. We’ve seen a recent surge in retail liquidations in early 2025, however retailers like JoAnn, Big Lots, and Party City all have store footprints in that 15,000-30,000 square foot sweet spot. As noted above, Party City’s store auction resulted in an unprecedented level of bids, with retailers scooping up over a third of their locations. This is good news for retailers like Ross, TJX, Academy Sports, and more who are growing faster than supply can keep up. It might even be good news for the fine people of Cleveland to finally get that Ikea we’ve been dreaming of for over two decades!
In these dreary months between winter and spring, our song this month takes in the warm breezes of Spain with Rita Payes, a triple threat on guitar, vocals, and trombone. Here she gathers around a picnic table with friends and family (that’s her mom, Elisabeth Roma, with the masterful guitar solo!) to sing the bossa nova standard “Nunca vas a comprender” Listen Here >>
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