Los Angeles: Dollar General Corp., Saks Inc.'s Off 5th and Chipotle Mexican Grill Inc. are among the discounters and fast-food chains set to expand in 2010 as US consumers embrace a "new frugality," according to commercial property broker Colliers International.
Low-cost restaurants and retailers, including Papa John's International Inc. and TJX Cos., are planning to add stores following the loss of more than 4 million US jobs last year and a reduction in consumer spending, Boston-based Colliers said in its 2010 "Retail Trends & Opportunities" report.
"The ‘New Frugality' is here for at least five years," Garrick Brown, national retail research director for Colliers, said in the report. "Necessity and off-price retailers will continue to fare best."
Unemployment
Last year's rise in unemployment, which followed a loss of 3.1 million jobs in 2008, hurt retailers and their landlords as consumers curtailed spending. The National Retail Federation predicts that retail sales, excluding automobiles, gas stations and restaurants, will increase 2.5 per cent this year following a 2.5 per cent drop last year. Job losses likely will bottom out this quarter, Colliers said.
The bankruptcies of Circuit City Stores Inc., Linens 'n Things Inc. and Gottschalks Inc. in 2008 and 2009 contributed to rising retail vacancies across the US, sending rents down 25 to 40 per cent, depending on the market, Colliers said. Lower rents have been "a huge factor" in the expansion of Dollar Tree Inc.; TJX's T.J. Maxx and Marshalls stores; and Ross Stores Inc.'s Ross Dress for Less chain, Colliers said.
Retailers such as New York-based Saks are expanding their discount chains. Saks opened four new and two replacement Off 5th stores last year. It is planning a new location in Dallas and may add as many as four other Off 5th stores this year, while opening just one or two or its Saks department stores annually through 2013, Colliers said.
Saks will open one Off 5th in Mebane, North Carolina, this year and may add two or three others, Julia Bentley, a spokeswoman for the company, wrote in an email. It has no plans for a new Saks Fifth Avenue, she said.
Dollar General, based in Goodlettsville, Tennessee, plans to open 600 stores in 2010 and remodel or relocate as many as 500, following the addition of about 500 stores in 2009, the company said in December. The retailer likely will expand on the West Coast and in New England, where it has little presence, Colliers said.
Fast-food
Among fast-foot restaurants, Chipotle, the Denver-based burrito chain spun off from McDonald's Corp. in 2006, added 121 locations last year, and plans to open 120 to 130 more in 2010, according to a February 11 conference call. Louisville, Kentucky-based Papa John's recently dropped a $25,000 franchise fee and expects to have a net increase of 40 to 80 locations worldwide this year, the company said in a regulatory filing.
"As part of the 'new frugality,' fast-food and fast casual operators with lower price points have fared better and will be in expansion mode - albeit mostly franchise-driven," Brown wrote. "The strongest concepts will face little problems finding strong private capital groups to achieve their growth plans."
