Status Update: Foot Traffic, Retail Sales and Bankruptcies

Value-priced retailers, grocers and fitness centers saw the strongest year-over-year growth in foot traffic during the first quarter, according to Placer.ai. This suggests consumers are prioritizing essential goods and wellness activities amid economic uncertainty.

U.S. retail foot traffic increased modestly by 3.9% year-over-year in the first quarter. However, discount stores led the pack with an impressive 11.2% surge in traffic, driven in part by a 21.5% jump in visits during the last week of March as shoppers stocked up for Easter. Grocery stores also saw healthy growth of 6.1%, followed by fitness centers’ 5.4% and superstores’ 4.4%.

Conversely, restaurants and home improvement stores underperformed the average for the quarter. Restaurant foot traffic increased 2.3%, and home improvement stores dipped the same amount. However, there were bright spots within these sectors. Coffee shops and fast-casual restaurants both outpaced the overall trend with year-over-year traffic gains, coffee shops at 5.6% and fast-casual restaurants at 4.1%. Additionally, traffic at Harbor Freight stores picked up toward the end of the quarter, potentially indicating a growing interest in DIY home projects despite a sluggish housing market, according to Placer.ai.

In March, specifically, retail and food service sales excluding gas and auto climbed 4.9% year over year and 1% month over month, according to the U.S. Census Bureau. “These figures again show a healthy and resilient consumer as a result of a sizzling hot labor market and continued wage growth,” said ICSC research manager Matthew Panfel. “[The] report is another that is likely to complicate the Fed’s decision on when to start cutting interest rates.” Online retailers and the miscellaneous retail category posted the biggest month-over-month sales gains. In contrast, stores specializing in sporting goods, hobbies, books and music saw the weakest sales.

Midsize Chains Offering Generic Goods Are Most Vulnerable to Bankruptcy

After a period of relative calm in 2020 and 2021, retailer bankruptcy filings surged in the latter half of 2023, reaching a total of 24, including an Assignment for the Benefit of Creditors, according to accounting organization BDO USA. An ABC is a liquidation process that’s generally faster and cheaper than a Chapter 7 bankruptcy filing. These 24 retailers mark a significant increase compared to the previous two years and align more closely with pre-pandemic trends.

So far in 2024, retail bankruptcies include 99 Cents Only, Joann and The Body Shop, reflecting a struggle to adapt to changing consumer habits. Pandemic-driven hobbies like crafting have waned, while value-conscious customers display shifting loyalties. Additionally, smaller retailers like Shoes for Crews and Careismatic Brands have succumbed to financial pressures this year.

Experts predict a further uptick in bankruptcies as retailers grapple with evolving post-pandemic shopping patterns. Year-over-year store sales have continued to grow, but the pace of growth has weakened consistently over each of the past six quarters, and online sales growth has stagnated, as well, FTI Consulting global co-leader of corporate finance and restructuring Michael Eisenband wrote in a blog post. Investors that expect stores to function as experiential hubs and distribution centers but neglect core profitability are putting pressure on some companies to overexpand, he warned.

The biggest threat lies with midsize chains offering generic or nonessential goods, according to Eisenband. These retailers often lack a strong brand identity or robust omnichannel presence, making them expendable to customers. “These are fungible businesses,” he wrote in an investor note. “They lack a distinct value proposition and fail to generate excitement for customers or adequate returns for investors.” This sector, he argued, is most likely to experience further distress in the coming years.

2 Shopping Tech Updates: JLL Virtual Shopping Assistant and Amazon Just Walk Out

After JLL launched a virtual shopping assistant named Cindy across 13 shopping center websites last month, the number of sessions at those websites has jumped 500% and new users have leapt 1,000%. Developed by marketing agency Imaginuity, Cindy uses artificial intelligence to provide fashion tips, highlight trends and share information about upcoming events. See Cindy in action here.

Shopping Center and Retailer Help Police Make ORC Arrest

Primestor Hires COO

Primestor has appointed Allison Lynch, former president of Watt Properties, as COO. Lynch brings more than 25 years of experience in asset and property management across property types.