Malls face another sudden hurdle
Malls and department stores faced an uncertain future long before “social distancing” entered the popular vernacular, as the rise of online retailers, big-box competitors and private equity owners squeezed sales, piled on debt, shuttered stores and pushed some companies into bankruptcy.
The twin shocks of the novel coronavirus pandemic and the oil bust will likely compound those challenges facing Houston’s retail industry, analysts said, forcing more layoffs and bankruptcies and delivering another blow to the local economy.
“Even before the coronavirus, retailers with a lot of debt were already in trouble,” said Reshmi Basu, a restructuring editor with Debtwire, a New York publication focused on distressed companies. “This coronavirus, coupled with the oil collapse, is going to put anyone over-leveraged into more trouble.”
Retailers that rely on foreign suppliers from coronavirus hotspots such as China and Italy, as well as luxury department stores that rely heavily on international tourists, will likely face the brunt of the fallout. Retailers that don’t
have a large e-commerce presence will also likely suffer the most from declining foot traffic, which is estimated to fall as much as 40 percent, said Venky Shankar, research director of Texas A&M University’s Center for Retailing Studies.
“No doubt, brick-andmortar retailers will be affected significantly,” Shankar said. “People are avoiding going out in public places, especially malls. The industry is going to go through a severe period of pain.”
However, the coronavirus will hurt debt-addled retailers the hardest. Stage Stores, the Houston-based department store chain that has been looking to refinance
more than $365 million of debt, will likely find it difficult to find new lenders after the stock market plunge, raising the risk of bankruptcy. Company representatives did not respond to requests for comment.
“It’s become increasingly difficult for Stage Stores to find financing,” Basu said. “The primary markets, for the most part, have completely closed up.”
Reduced hours
The impacts, particularly from the coronavirus, are already being felt at malls, department stores and small shops across Houston.
Shopping centers, normally bustling with buyers, diners and moviegoers, were less crowded over the weekend as many consumers stayed home following
public health recommendations. The coronavirus, which causes a respiratory disease called COVID-19, has sickened more than 168,000 people and killed more than 6,600 people worldwide, according to the World Health Organization.
On Monday, at least nine local malls began cutting their hours in response to the coronavirus. Baybrook, Deerbrook, First Colony, Galleria, Houston Premium Outlets, Katy Mills, Memorial City, Willowbrook and The Woodlands malls will operate Mondays through Saturdays between noon and 7 p.m. The malls were previously open most days between 10 a.m. and 9 p.m.
Mall owners have taken action to reassure shoppers who are venturing out. Indianapolis-based Simon, which owns the Galleria,
Katy Mills and Houston Premium Outlets; Houstonbased MetroNational, which owns Memorial City; and Chicago-based Brookfield, which owns the other major malls, said they have increased the frequency and intensity of their cleaning schedules, focusing on high-traffic and high-touch areas, as well as installing more hand-sanitizing stations and signs encouraging proper hygiene.
Malls are also closing amenities and canceling events that in recent years have been used to draw consumers increasingly shopping online. MetroNational has temporarily closed its ice skating rink, children’s play castle and carousel rides at Memorial City Mall. Events, such as Easter egg hunts, have been canceled at other malls.
“We are closely monitoring
the COVID-19 outbreak, in particular the potential impact within our local community,” Brookfield said in a statement. “There is nothing more important than maintaining a safe environment, and we will be taking all necessary precautions for the well-being of our entire shopping center community.”
‘Another dagger’
Retailers nationwide are temporarily closing stores in response to the coronavirus. They include: American Girl, Apple, Abercrombie & Fitch, Chico’s, Disney Store, Fossil, Hollister, Lush, MAC Cosmetics, Nike, Morphe, REI, Rockport, Steve Madden, Tumi, Vans, Warby Parker and White House Black Market.
Gyms, including Equinox, Gold’s Gym and Lifetime, are also temporarily
closing locations, some of which are in malls.
The temporary closures and declining store traffic will put pressure on retail operations, said Thuy Nguyen, a Moody’s retail analyst covering Brookfield.
“It’s possible we could see some occupancy and rent concessions to help tenants temporarily,” she said.
Ultimately, retailers’ biggest fear is that the coronavirus will fundamentally change the way consumers shop, Basu with Debtwire said.
“Coronavirus has just compounded an already challenging situation,” Basu said. “It’s another dagger to the brick-and-mortar model.”