This weekend we ventured to western Pennsylvania to visit my in-laws, and the trip is never complete without a stop at the nearby outlet mall which has been a huge draw since it opened. Strategically located off I-79, about 60 miles north of Pittsburgh, this Simon Property (SPG) owned outlet mall is typically packed. It certainly was the last time we visited in September, when the pandemic was still in full swing. During that visit, it was hard to find a parking space, and folks seemed to be in a spending mood.
It was a completely different story this time around, and not what I expected to see on a sunny Sunday afternoon, with the pandemic seemingly near its end. It was no problem finding parking, in fact, there was plenty of room. The place simply was not busy, and there were no lines outside stores, as there typically have been in the past, COVID or no-COVID. What was most noticeable, however, was the number of empty stores. At one point, I simply stopped counting. When we were done, my wife had one word to describe the experience: depressing.
The site of the former Gap (GPS) store, which sat in a very prominent location, was still empty as it had been back in September. Also gone was Fossil (FOSL) , Harry and David, and several others. In many cases, I could not remember what had previously occupied the shuttered stores, and there was no way to tell.
Now, this is not a piece proclaiming that retail is doomed. It certainly is facing challenges, there's no doubt there. But what we saw at the outlet mall may just be the continuation and acceleration of trends that were already occurring. Companies are continuing to focus on their online business, and scaling back brick and mortar locations. The pandemic merely added fuel to that fire, as businesses cut costs, and sought to increase online selling. Consumers seemed to prefer that as well, in fact, during part of the past year, they may not have had a choice, especially when the pandemic forced stores to physically close.
The question is whether the preference for online shopping will continue to grow. It's a question that is similar to the one about the extent to which employees will return to offices, or continue to work from home.
For their parts, GPS (up 57% YTD, and 160% over the past year) and FOSL (up 63% and 225%), have made decent recoveries. Both also saw huge increases in online sales - Q1 online sales for GPS grew 82% Y/Y, and represented 40% of total revenue. For FOSL, Q1 online sales also grew 40%, and represented 41% of total revenue.
The pandemic may have just accelerated what was already happening, and time will tell whether brick and mortar will take back what it has lost in terms of revenue.
