The challenge for the property industry following Christmas 2008 is to choose the right retailers to back in 2009. Many retailers need to open new shops in 2009 but will require landlord support. Retailer Risk and Retailer Fit are two critical guides for all shopping centre asset managers.
The risks for landlords can be divided between the general and the particular. Retailer Risk measures the general risk of retailer failure, an outcome that is usually signalled in advance. Retailer Fit measures the risk of failure in a particular location.
First reports of Christmas sales performance can be misleading. Retailers who have performed well are keen to tell the world. Others are happy to get lost in the crowd or just keep quiet. This pattern is reflected in the changing list of retailers who publish their figures from year to year.
This year, FSP thinks the early like-for-like sales over Christmas are again mainly drawn from the top half of the performance league. Reported like-for-like results against last year have generally fallen by single percentage figures for non-food retailers. Value retailers, such as Peacocks, have done better than average. The grocers also have done better, with like-for-like sales against Christmas 2007 up in single digits.
There has been money around. Many shoppers, from across the social spectrum were attracted by the discounting in late December. John Lewis did as well as the value retailers. In their Sales, retailers who anticipated this situation produced very good figures at budgeted margins. The expectation is that some retailers, rattled by the amount of stock to clear, have performed less well.
On average, 2007 Christmas like-for-like sales for non-food were up on the previous year by 4.9%. It seems likely that performance over Christmas 2008 will take sales levels back to 2006 levels or lower and the pattern of reduced like-for-like sales will continue for some months. The consequent pressure on retailers to control costs is therefore likely to be intense. One solution, already pointed out by Peacocks, will be to open new shops. Many will look to get the capital cost from the landlord. This will raise a critical question for landlords - which retailers to support? FSP has developed Retailer Risk and Retailer Fit to answer exactly this question. I look forward to the opportunity to explain them to you in more detail.
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