A new study by Simmons College of Boston suggests that when retailers close anchor stores in malls becuase of bankruptcies or mergers, the impact on shopping center profits "staggering."

Retailers that shuttered large stores between 1990 and 1997 left shopping center owners with an estimated $807 million in lost profits, according to the study, conducted for the International Council of Shopping Centers and directed by Susan Sampson, professor of retail management.

Sampson, who surveyed 55 shopping center owners nationwide, also found periods of bankruptcies are followed by periods of mergers and acquisitions, as "cherry pickers" gobble up bankrupt retailers' leases, or in some cases the retailers themselves.

There is some light in the tunnel -- bankruptcies among retailers have slowed in the past two years, after some devastating losses in the mid-1990s. Bradlees, Caldor, Rich's Department Stores, Child World and Herman's Sporting Goods were just some of the retailers that filed for Chapter 11 bankruptcy protection or liquidated between 1992 and 1996.

But experts say the retail environment is ripe for a bankruptcy surge in the coming year.

"Over the last 18 to 24 months, you haven't seen the bankruptcies that you saw before that," said David Ellis, chief operating officer of Buxbaum Group, an Encino, Calif.-based liquidator.

In New England, for example, Montgomery Ward followed up its 1997 Chapter 11 filing by shutting its Lechmere stores. Consumer electronics chain Nobody Beats the Wiz, music retailer Strawberries Inc. and bookseller Lauriat's Inc. have all filed for protection and closed stores.

In Dallas-Fort Worth, self-proclaimed retail capital of the South, the annoucenment by Sak's Fifth Avenue at the well-located Prestonwood Center mall lead to a domino effect that resulted in the first shuttered major mall in Dallas history.

Still, in a strong economy, retailers have had relatively easy access to credit, allowing them to expand. Ellis and others say the pendulum may be swinging in the other direction as retailers amass debt and lenders tighten up.

An easy majority, 87 percent, of shopping center owners surveyed by Sampson said they'd lost an anchor tenant to bankruptcy or liquidation since 1990.

Changing habits among consumers are partly to blame, she said.

People are busier today and spend less time at the mall. Online reatil growth was another dart, as was the strength this year of discount retailers like Wal-Mart, Target and K-Mart.

Mall owners and their tenants began the fourth quarter settling back into the steady sales pattern they had followed throughout much of 1998, according to ICSC.

Sales per square foot for non-anchor mall tenants increased 3.3% in October from the same month last year, with a 10.5% gain in total sales exceeding a 7.0% expansion in square footage, according to ICSC's proprietary database.

The monthly increase surpassed the 3.0% sales-per-square-foot upturn for the year to date. The results encouraged owners and merchants to believe that consumers weren't becoming overly cautious on the brink of the holidays.

Published: January 6, 1999

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