Retailers plan expansion

Stores

January 24, 1999|By Lorraine Mirabella | Lorraine Mirabella,Sun Staff

Retailers are expected to continue pushing their way into Maryland and the Baltimore market in 1999, mostly filling gaps, but shoppers could well see some of the more established chains close their doors for good.

"The real theme of what's going to happen this year is still infill," said Tom Maddux, a principal with Towson-based commercial real estate brokerage KLNB Inc. "I don't think there are going to be a whole lot of new faces."

Still, "everyone came out of Christmas feeling good and the economy is good," he said. "I would suggest anybody that hasn't reached a point of saturation in the market is a candidate for expansion."

In 1998, retail sales for major chain stores rose 5.8 percent, according to the Bank of Tokyo-Mitsubishi Ltd., thanks to a strong job market, a booming stock market and lower interest rates. But many retailers' futures hinged on their performance during the crucial holiday season, which companies count on for as much as a quarter of annual sales and, in some cases, half their profits.

Chains such as Caldor, Service Merchandise and Toys R Us appeared to have uncertain futures.

Last year Caldor closed all of its Washington stores and two in the Baltimore area and has since suspended payments to suppliers.

Toys R Us struggled, posting a $475 million loss in the third quarter amid a costly restructuring that included closing 90 stores and eliminating 3,000 jobs.

Retail experts also questioned the long-term viability of Montgomery Ward, which has closed 48 stores nationwide as part of its bankruptcy reorganization and plans to close another 39 by the end of May.

However, "Baltimore is still seen as an opportunity for retail investment," said Bruce Van Kleeck, vice president of member services for the National Retail Federation.

Chains expand with caution

Chains that continue expanding will likely do so cautiously, said Susan Anderson, a vice president of H&R Retail in the Baltimore-Washington market.

"I don't think there are any chains that have done any wild and crazy expansion, just taking sites to get sites, the way it happened in the '80s," Anderson said. Plus, "the availability of locations for tenants is tighter and tighter, unless you go to the outer markets, like Hagerstown" or recycle properties once used for industry or housing.

Retail experts said they expected some shifting in malls early in the year as weaker tenants vacate space. A couple of chains that specialize in women's apparel are looking to open their first Baltimore-area stores in 1999 but have not completed plans, Anderson said.

"There are still retailers that are not in the market, for whatever reason, who are thinking of coming into the market," said Rene Daniel, president of the Daniel Group, a Baltimore-based shopping center consulting company.

Some in the last group to break into the market, such as Target, Wal-Mart Stores Inc. and Kohl's, plan further expansion. Wal-Mart will open a store this month in Hunt Valley Mall. Additional sites are likely for Kohl's, which has an Ellicott City store.

Shifts in shopping patterns will likely continue fueling the growth of the discounters as consumers increasingly seek value, said David H. Nevins of Nevins and Associates, a Baltimore marketing and retail consultant.

"One would never have assumed that Hunt Valley, surrounded by upscale communities, would have a Wal-Mart, but that is evidence of clear change in attitudes and thinking among consumers, who are willing to shop wherever they get the best value," Nevins said.

Another chain likely to increase its presence is Gap Inc. The chain, now in 50 states, will launch a major expansion in 1999, opening more than 400 new stores under the Old Navy, Banana Republic and Gap banners.

"We want to be everywhere where our customers expect us to be," said Kristy VanKoughnet, a spokeswoman for Gap Inc., although she would not release specific plans for Maryland.

Last year, home improvement retailer Lowe's Cos. Inc. began challenging dominant chain Home Depot in earnest, starting to build stores in Glen Burnie and White Marsh to add to one in Westminster. The retailer also was considering the former Caldor building at Westview Mall.

"We have aggressive expansion plans for the entire Baltimore-Washington market," said Brian Peace, Lowe's spokesman. "We see it as a large, multi-store market. The demographics certainly support additional growth, and our research indicates that it is under-stored."

Home Depot is not sitting idly by, planning stores for late this year in Timonium, Bowie and Waldorf.

Large card stores, such as Party City and expanded Hallmark stores, are also expected to be a hot category, as well as stadium-style movie megaplex theaters.

Food, drugs a battleground

The grocery wars are expected to heat up. Large chains like Metro Food Markets, Safeway Inc. and Super Fresh Food Markets and the newest large player, Food Lion, are all opening new stores or remodeling old ones to challenge the dominance of Giant Food Inc.

Giant, which was purchased last year by Dutch food retailer Royal Ahold NV, plans four new stores for 1999, including one in Maryland, near Gaithersburg. Metro has four stores under construction and two remodelings planned. And Super Fresh introduced its new superstore format in Ellicott City last month.

A similar battle is being waged by drugstore chains, with Walgreen Co., one of the nation's leading drugstore chains, planning to take on both Rite Aid and CVS in the fiercely competitive Baltimore region. It plans to begin opening stores by 2000.

Some of the toughest challenges likely lie ahead for independent retailers, analysts predict.

"Those that remain are going to be incredibly squeezed -- the neighborhood hardware store, the neighborhood bookstore, and even the neighborhood restaurant," Nevins said. "They certainly face a battle for survival the likes of which they've never seen before."

Pub Date: 01/24/99

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