Going to the mall is a liberating — if occasionally stressful — experience. However, a Morningstar research report makes it clear that behind large automatic doors lies a stressful $48 billion problem.
The retail industry is in a period of transformation, with the burgeoning e-commerce market leading the charge. It’s led to considering whether Amazon.com (ticker: AMZN) Prime membership could be hurting Costco Wholesale Corp. (COST) and added further speculation that Sears Holdings Corp. (SHLD) could shutter retailer Kmart (which CEO Eddie Lampert recently denied).
The e-commerce boom, plus a retreat in apparel and accessory consumer spending, have contributed to the closure of hundreds of shopping malls, reports Business Insider.
That said, the market continues to be “oversaturated” in the U.S. — so much so that $48 billion worth of mall property-funded loans are at risk, per Morningstar analysts.
Sears, Macy’s (M), and J.C. Penney Co. (JCP) have been combating the changing retail industry by closing unprofitable locations. This is having an adverse affect on shopping malls.
“Properties in secondary and tertiary markets, anchored by department-store chains that have shuttered locations, such as Macy’s, Sears, and JCPenney, are particularly susceptible to dramatic devaluation,” analysts wrote.
These so-called anchor stores closings could lead to “co-tenancy clauses,” reports Business Insider, which means that other stores in the mall could either lease or seek a change in the agreement (i.e. lower rent). This would go into effect until the mall finds a new anchor, tricky given the industry’s shift from physical stores.
Sears stock is down about 44.9 percent on the year, while Macy’s is up about 7.3 percent and JCPenney up 36 percent.
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Why Shopping Malls Are Losing Major Retailers originally appeared on usnews.com
