Social Icons Superfish

Consumer Spending in Retail Strong

11/15/2011 | By Carisa Chappell

Consumer spending has been strong despite challenges in the economy,according to retail REIT executives during a Nov. 15 session at REITWorld 2011: NAREIT's Annual Convention For All Things REIT in Dallas.

From back to school spending to positive holiday spending forecasts, David Henry, president and CEO of Kimco Realty Corp. (NYSE: KIM), said consumers are still spending and sales are holding up well despite what appears to be a general softening in the economy. Sandeep Mathrani, CEO of General Growth Properties Inc. (NYSE: GGP), echoed similar concerns.

"Even in the month of October, retails sales have been up compared to 2010," said Mathrani, who added that the unemployment rate among GGP's consumers is usually 4.2 percent, which is lower than the national average.

"They are educated consumers with bachelor degrees," Mathrani said. "When you start dissecting who that shopper is, luxury has continued to sell and mall sales have grown because this market is educated."

However, the panelists agreed that performance in the retail sector appears to be similar to a "barbell." In other words, the high-end retailers and discounters are doing well, while the middle groups are searching for the right business model in today's environment.

"Saks and Nordstrom's are doing fine, and discounters are doing fine, but the middle is searching for the right place to be," Henry said.

Steven Tanger, president and CEO of Tanger Factory Outlet Centers Inc. (NYSE: SKT) said consumers like bargains in these kinds of markets, but they also gravitate to brand names.

"We've been very fortunate that our consumers, on a macro basis, have seemed to fix their own balance sheet over the last three or four years," Tanger said. "Outlets are the place where they like to go."

When it comes to the threat of internet sales, Henry said that while it is a concern among mall owners, he added that the shopping center industry is alive and well.

"We have an entire segment of tenants that aren't impacted by internet sales, such as Home Depot and restaurants," Henry said. "In fact, people are going out to eat more."

Henry and the other panelists agreed that it may not be long until online retailers like Amazon have stores, similar to those run by Apple, to display their products.

Mathrani said he believes there's room for both online and mall retail.

"We'll figure out how to make it work together," he said.

Jeffrey Donnelly of Wells Fargo Securities, LLC, moderated the panel.