About a year ago Walter Bialas, then with Madison Marquette, prepped a look at various retailers to gauge their relative risk of bankruptcy or other major restructuring.
Now Bialas, a retail real estate pro with more than 25 years experience in the industry, is on his own and is sharing his thoughts at a new blog. He's also prepared a sequel to last year's report and updated his findings on the relative risks of various retailers. His latest report is embedded after the jump.
Overall, Bialas concludes--not surprisingly--that the broader economic improvement has eased the outlook for many retailers. There are still risks and some sectors remain under continued stress. But generally the picture is brighter. As he summed up the findings at his blog:
There are no real “downgrades” since last year, other than Blockbuster and Zales. In general, the video and jewelry categories remain under continued stress.
Retailers with an improved “risk rating” include AMC, Chico's, Foot Locker, Fossil, Game Stop, Home Depot, J. Crew, and Lowes. While there are only a handful showing a notable financial improvement that changes their “risk rating”, the significant take-away is that the majority of the retailers covered are now seeing greater stability in terms of their operating metrics. Depending on the retailer, some are seeing improved net sales, higher comp store sales, or better margins. Many of the retailers have been successful in reducing costs and adapting to the challenges the recession brought.
Unfortunately for real estate, broad-based store expansion is still not in the cards. As such, the shopping center industry will likely remain under pressure for the foreseeable future in terms of challenges to occupancy and rents. There will also continue to be a split in the market, with class A and B+ centers seeing high demand and centers with less than ideal locations and tenant line-ups struggling.
What is important here, however, is that the worst is over and most of the retailers that are still standing can be considered survivors. In addition, looking to the upside, the improved operating metrics achieved by many of these retailers (like Chico's or Home Depot) should position them to take advantage of increasing top line sales as the economic recovery gains momentum.