Good News: Retailers Grow Despite Pandemic

Economists expect retail sales to increase approximately 1.9 percent this month. While any increase is good news, it’s a significant drop off from June’s increase of 7.5 percent. Not all hope is lost, however, at least not for some major retail tenants. Today, we take a look at some of the retailers who are making moves and shattering records, even amidst a global pandemic.

7-Eleven

7-Eleven recently entered into a definitive agreement with Marathon Petroleum Corp. (NYSE: MPC) to purchase the Speedway convenience store chain for $21 billion in an all-cash transaction. The arrangement is expected to conclude in the first fiscal quarter of 2021 and includes a 15-year fuel supply agreement for 7.7 billion gallons per year associated with the Speedway business. This large-scale deal includes approximately 3,900 convenience stores. These additional stores will bring 7-Eleven’s retail footprint to roughly 14,000 locations throughout the United States and Canada.

At Home

At Home’s CEO recently told CNBC that the company has been slowly expanding its store count by roughly 20 percent per year over the past seven years. The home décor and furnishings retailer currently has 219 locations but may expand to as many as 600 thanks to record-breaking net sales in its second fiscal quarter. Thanks to its listing as an “essential retailer,” At Home boasted net sales of $515 million in its most recent quarterly filing. What’s behind the increase? At Home is a one-stop-shop for a broad range of home goods, and the store’s open, spacious layouts and the brand’s omnichannel platform allowed the company to easily accommodate COVID-19 regulations.

Chili’s and It’s Just Wings

Brinker International, Inc. (NYSE: EAT), the parent company of Chili’s and Maggiano’s, recently introduced a delivery only-service called “It’s Just Wings.” Since launching in late June, this concept is now on track to exceed $150 million in sales during its first year. So, how does It’s Just Wings work? Brinker International is utilizing what it calls “ghost kitchens”—restaurants with a delivery service instead of a dining room. The “ghost kitchen” concept involves setting up kitchens that only make food for customers who order online, through mobile apps or via third-party delivery services. Instead of using independent kitchen space, It’s Just Wings now operates using separate, dedicated kitchen areas in 1,050 of Brinker’s U.S. Chili’s and Maggiano’s restaurants. This new concept—along with the established pick-up and delivery services already in place under the Brinker International umbrella—have generated strong bottom-line results.

CVS and Publix

Both of these leading retailers have seen a marked increase in year-over-year sales. Both companies benefitted from their status as “essential retailers” during the COVID-19 pandemic. CVS Health Corp. (NYSE: CVS) reported a 35.2 percent increase of $634 billion in the company second fiscal quarter of 2020. The company’s net income also rose to $5 billion (a 48 percent increase). Although CVS plans to close 22 underperforming stores, the remainder of its locations have remained open since the pandemic was first declared a national emergency on March 13, 2020. Publix has also remained open throughout the pandemic. Within its second quarter earnings report, Publix announced that sales have increased by 21.8 percent. Publix estimates that its second quarter sales increased by $1.5 billion due to the pandemic.

Starbucks

Although Starbucks Corp. (NASDAQ: SBUX) saw a decline in U.S. comparable store sales during its third quarter, the company still opened 130 net new stores. This marks a five percent year-of-year unit growth. The company currently operates or licenses approximately 15,243 locations in the United States and 32,180 worldwide. As of late July, Starbucks has opened roughly 97 percent of all its company-operated stores, both in the United States and China. Temporary closures affected locations in airport and college and university locations within North America.

Navigating These Uncertain Times

Ground + Space is a leading commercial real estate firm that specializes in single-tenant and retail NNN investments. We have several listings available featuring retailers that are in a prime position to succeed in a post-pandemic economy. We are committed to providing up-to-date information and best-in-class services to clients during the COVID-19 pandemic and beyond. The market changes daily, so please contact one of our brokers for specialized guidance during this time.

Stay Healthy and Safe

The Centers for Disease Control and Prevention (CDC) offers daily updates and other information about COVID-19 symptoms and testing in the United States. Johns Hopkins University (JHU) has created a resource to help inform the public and advance comprehensive understanding of the novel coronavirus and its effects backed by experts in global public health, infectious disease and emergency preparedness. Additionally, the World Health Organization (WHO) continues to track the number and location of confirmed cases of the virus across the globe.


Coronavirus Update: State of the Market

The month of July shattered records for new coronavirus cases, hospitalizations and deaths. Unlike in the months of March and April, the epidemic is affecting both urban and rural areas in equal measure. The effects of social distancing, store closings and high unemployment have led to an economic downturn, which has impacted even the strongest segments of the commercial real estate sector.

Commercial Real Estate Prices Wane

As expected, prices for commercial real estate assets weakened in the second financial quarter of 2020. Properties with a smaller price tag (between $1-$4 million) fared better than their higher-priced counterparts, which saw a decline in activity of around 38 percent. Sales totals are also down when compared to previous years. However, this pricing weakness was not felt in every sector. The industrial sector was the only property type index to post gains. This is due in large part to the accelerated adoption of e-commerce, which has in turn supported industrial demand for warehouse space.

GDP Declines in Second Quarter

The United States saw the sharpest decline in its gross domestic product (GDP) in the second fiscal quarter of 2020 since the federal government began tracking this data in 1947. From April to June 2020, the GDP fell at an annualized rate of 32.9 percent. This was due in large part to the widespread shutdown measures imposed by governors across the country as COVID-19 began its resurgence.

To put things into perspective, the GDP only fell by 8.4 percent during the worst three months of what is now called “The Great Recession” in 2008. Economists expect GDP growth to return in the third financial quarter, but the rate is largely in question as more states are pausing or reversing their lockdown orders.

Retailer Spotlight: Wawa

Although the list of retailers filing for bankruptcy grows larger on an almost daily basis, some popular retailers are taking proactive steps to provide long-term solutions for a post-coronavirus world. One such retailer is Wawa. The Pennsylvania-based convenience store chain recently announced plans to build its first-ever freestanding drive-thru location in Township, Pennsylvania. This will be the brand’s first store focused solely on drive-thru and curbside pick-up services for its customers.

According to Terri Micklin, Wawa’s Director of Construction, the company hopes to “learn from the layout, workflow and traffic flow at this location” as Wawa explores multiple alternatives to its traditional store formats. At least one other Wawa property currently under construction—this one in Westhampton, New Jersey—will benefit from a drive-thru feature.

Ground + Space is Here to Help

Ground + Space is a leading commercial real estate firm that specializes in single-tenant and retail NNN investments. We have several listings available featuring retailers that are in a prime position to succeed in a post-pandemic economy. We are committed to providing up-to-date information and best-in-class services to clients during the COVID-19 pandemic and beyond. Are you looking for advice on whether to sell one of your assets? Please contact one of our brokers for specialized guidance during this time.

Stay Safe and Informed

The Centers for Disease Control and Prevention (CDC) offers daily updates and other information about COVID-19 symptoms and testing in the United States. Johns Hopkins University (JHU) has created a resource to help inform the public and advance comprehensive understanding of the novel coronavirus and its effects backed by experts in global public health, infectious disease and emergency preparedness. Additionally, the World Health Organization (WHO) continues to track the number and location of confirmed cases of the virus across the globe.