BRADENTON — In the face of a deepening recession in retail real estate, Beall's Outlets has quietly signed deals to open 22 new stores in five Southeastern states by year's end. They'll probably do it again next spring.
What gives? Unlike previous downturns, the Bradenton-based off-price apparel retailer is one of only a handful of chains doing well enough to capitalize on the opportunity created by so many other retailers' misfortune.
Beall's snapped up Goody's department stores — vacant after filing for bankruptcy — from Mississippi to North Carolina at 20 to 30 percent below market rent.
"The surprising thing was how little competition we encountered," said Conrad Szymanski, president of the 440-store budget apparel unit of Beall's Inc. "We only had to bid here and there against PetSmart, TJMaxx or Marshalls."
It's no different in the Tampa Bay area. The recession has forced shopping center rent down 8 percent, and real estate brokerage Marcus & Millichap forecasts that a rising vacancy rate will cross 10 percent this year. So filling gaping holes in empty shopping centers is unleashing the biggest renter's market in decades.
With 200 stores already in Florida, Beall's isn't looking in the Tampa Bay area. Only a few chains are trying to kick start their growth by filling big vacancies left in this area by a rash of shrunken retail chains, the carcasses of abandoned supermarkets and the demise of Circuit City, Linens 'n Things, Steve & Barry's and Sound Advice. Big Lots and consumer electronics newcomer HHGregg are scouting for deals, and desperate landlords have had some success trying to recruit expansion-minded dollar stores, limited-selection grocers Save-A-Lot and Aldi, and workout spots like LA Fitness and Planet Fitness.
"Some chains like a Michael's or Bed Bath & Beyond will look at centers they couldn't get into before. But if retailers aren't convinced they will do well there, it doesn't matter how cheap the rent is," said Ron Wheeler, chief operating officer of St. Petersburg's Sembler Co., one of biggest shopping center operators in the Southeast.
Michelle Seifert, vice president of retail services for Grubb & Ellis in Tampa, said that so few retailers are looking for new locations that landlords have weighed transforming the space into something else. She recently helped convert part of a former Big Lots in Ruskin into a trustees office for the U.S. Bankruptcy Court.
"It means you really have to sell harder and be sure your center exactly fits a store's criteria," Seifert said. "And the pickings among retailers are so slim you have to consider nonretail tenants from the start."
Once known for opening stores as fast as they can, today's chastened retailers are far more deliberate. At Beall's the decision to land dozens of vacant Goody's was hatched more than a year ago.
"If you'd have asked me in 2007 where we would grow next, I would have said Texas, not filling in our presence in the Southeast," Szymanski said. "But we now have a strategy for what we want to be when we grow up, and it's bigger stores.''
To reverse a sales slump three years ago, Beall's Outlets upgraded the quality of its goods and the look of its threadbare outlet stores. Business perked up after closing 60 of the oldest, smaller stores, which doubled the size of its standard store to 25,000 square feet. It also traded up to more prosperous centers. With only a quarter of the chain now switched to the bigger stores, the liquidation of Goody's 200 stores presented an opportunity that matched the outlet chain's new look — at a bargain price.
Beall's Inc. diverted capital for growth from its chain of 80 moderately priced department stores to the budget-priced outlets as soon as the economy turned south.
Of the 22 added outlet stores — as far west at Corinth, Miss., and as far north as Mount Airy, N.C., — 10 are in new markets. The rest replaced smaller stores in states where Beall's already had a beachhead.
The preference: rural counties across the street from Wal-Mart Supercenters, which draw up to 40 percent of all retail sales in each county. Beall's waited until the Goody's sites cleared bankruptcy proceedings, then negotiated directly with hard-pressed landlords. The company gathered location and market intelligence partly from managers it hired away from Goody's.
With the average apparel item selling for $6 and the average customer buying four, the outlet chain's deals on familiar brands help it succeed even in Wal-Mart's shadow. The outlet chain has needed only a few tweaks to the Florida selection to appeal to more rural customers in Mississippi, Alabama, Georgia and the mountains of Tennessee and North Carolina.
"More Levi's denim. Izod, Nike and Chaps. Carharrt and Dickies work clothes," Szymanski said. "Silk-screen T-shirts are less fish and more ducks, dogs and deer."
Mark Albright can be reached at [email protected] or (727) 893-8252.