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The fashion vs malls showdown: The challenges of the changing tenant mix

Malls appear to be refocusing their tenant mix around hospitality, entertainment, and services, says John Lenihan.

This change od partly because traditional fashion tenants have expressed concerns about unsustainable rents and have also experienced declining performance within mall locations. Subsequently, they are shutting stores.

Baby boomers are the staple, but ageing mall customers.

They are not being replaced by younger generations who are instead shopping online, and spending more on hospitality and services, and also outside of malls.

The problem with hospitality and services for Landlords is that they have lower turnover and can’t pay the big rents. A $10 spend on coffee and a muffin doesn’t match up to a $150 dress, so with stagnating visitation, rental growth cannot continue without serious change.

Kiwi Income and Scentre Group who operate the major regional malls in New Zealand seem to be tackling the problem by bringing in new brands and pushing existing tenants to expand across their malls.

But retailers are pushing back.

Premier Investments who owns Smiggle, Peter Alexander, Just Jeans, Portmans, Jay Jays, Jacquie E, Dotti, and a big chunk of Myers have threatened to close more mall stores if landlords don’t give them cheaper rents and capital incentives. They simply want rents to reflect store performance and overall mall performance. They shut 80 existing stores in the last 5 years for this reason alone; this is despite them opening over 260 new stores, and having some very successful brands.

What seems key to both malls and retail stores is that an environment with a unique personality driven by design, research and innovation is key to attracting customers and driving sales growth. As the saying goes ‘you can’t keep putting lipstick on the pig’.

Sharewatch | Premier Investments

We’ve often written about ASX-listed Premier Investments, probably the second-largest fashion retailer in New Zealand (after Hallenstein Glasson Holdings). Their brands are represented across most NZ malls and high streets: Just Jeans, Smiggle, Peter Alexander, Portmans, Dotti, Jacqui E and Jay Jays.

In New Zealand, Premier has sales of around $140 million and seems to perform very well. Globally, Premier makes sales of AUD $1.1 billion a year. 

Premier expects to hit $100 million in online sales this year, or more than 10% of total group sales, with rapid year-on-year growth. As noted in our comments above, Premier are actively negotiating with their landlords to ensure that stores remain profitable. The NZ store network has changed little since 2011 – total store numbers have gone from 165 to 170, with Peter Alexander growing its footprint and the occasional closure for other brands. 

This story originally appeared on RCG.

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