The wave of bankruptcies that has swept the retail industry this year may be letting up — that’s an observation made by Simon Property Group’s David Simon, who serves as chief at one of the largest mall owners and operators in the United States.
In the firm’s third-quarter earnings call, the chairman, CEO and president said that the sector is nearing the end of 2019’s Chapter 11 casualties, which counts luxury retailer Barneys New York and fast-fashion chain Forever 21 — which notably owes an estimated $8 million to Simon Property — among its victims.
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“I think we’re flushing through most of the dudes,” Simon told analysts on Wednesday. “We’re kind of reaching bottom in 2018 … or 2019 on that stuff. It’s wilding, what happened in 2017, so it’s not like something that we haven’t experienced before.”
So far this year, U.S. retailers have announced 8,642 store closures — already far exceeding 2018’s 5,844 shutterings, according to advisory firm Coresight Research. It also predicted that store closures could reach 12,000 by the end of 2019. (Payless ShoeSource, Sears and Charlotte Russe were among the bigger names to shutter stores over the past several months.)
For the third quarter ended Sept. 30, Simon Property Group’s reported retailer sales per square foot were up 4.5% to $680, while total occupancy dropped from 95.5% last year to 94.7%.
“We are having a high bankruptcy year. I mean, there is no denying that,” Simon said in today’s call. “But as we put together our plan for next year, I think we’ll be okay. And we’re hustling — we are finding new tenants.”
Last quarter, Simon Property Group had mused about the possibility of investing in retailers in order to rescue them from going out of business, citing the firm’s $6.8 billion in liquidity. It had previously thrown money behind the once-bankrupt Aeropostale at a time when landlords’ purchase of stakes in their own tenants was virtually unheard of.
The company’s potential stake in struggling chains comes amid the growing convenience of e-commerce and a shift toward experiential spending. More recently, Simon Property Group launched its online outlet marketplace, ShopPremiumOutlets.com, as part of a new multi-platform venture with flash sale pioneer Rue La La’s parent, Rue Gilt Groupe.
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