The Real Deal New York

New York retailers trim expansion plans amid weak sales

December 01, 2008 04:09PM
By David Jones

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New York-based retailers said they plan to cut back expansion plans and renegotiate store leases as the economic slowdown has cut into same-store sales.

Tiffany & Co. said it plans to reduce the number of new store openings in 2009, as the jewelry retailer’s same-store sales during the third quarter fell 14 percent in the U.S., and 6 percent in its nine New York stores. Sales at the company’s flagship store at Fifth Avenue and 57th Street fell 5 percent during the quarter, but a whopping 17 percent in October.

Tiffany said worldwide sales fell 1 percent to $618.2 million during the third quarter, and the company is now projecting full-year earnings of $2.30 to $2.50 a share, based on annual sales that are expected to be flat or down by as much as 2 percent, worldwide.

Prior to the stock market diving in September, Tiffany was among several luxury retailers benefitting from the weak U.S. dollar, which attracted millions of free-spending foreign visitors.

In October 2007, Tiffany announced plans for a major expansion in the U.S., with plans to more than double the number of stores to 170 over a 10-year period, by opening eight to 12 locations per year. The company now plans to open five U.S. stores in 2009.

Cushman & Wakefield recently predicted that retail rents will come under pressure during the next three quarters, as additional space comes back onto the market.

New York-based bookseller Barnes & Noble said it will cut the number of new store openings to 15 in 2009, from between 20 and 25. The chain said same-store sales fell 7.4 percent during the third quarter, compared with its prior forecast of a “low single-digit” decrease.

Barnes & Noble now expects same-store sales to fall between 6 percent and 9 percent in the fourth quarter. The company operates a total of 728 Barnes & Noble stores and 71 B. Dalton stores.

“This year we’ve renegotiated 77 leases that are coming due and I can tell you almost each and every one of them [will be] be paying less rent in the out years than we were currently paying,” said Barnes & Noble COO Mitchell Klipper, during a third-quarter conference call.

He declined to give specific numbers, but said during the call that the bookseller had planned to negotiate very short-term renewals on leases, in order to gain more flexibility. For example, on a 10-year lease, the chain would have an option of 2 to 5 years.

Within the past year, Barnes & Noble decided not to renew its 41,700-square- foot-space at 675 Sixth Avenue and 21st Street, which it leased for 15 years.

Saks said same-store sales fell 11.5 percent in the third quarter, adding that the Manhattan flagship store did only slightly better than the company average. The retailer plans to complete the previously announced shutdown of its Club Libby Lu outlets. Officials said they would not hesitate to close underperforming stores if conditions called for it. Saks operates 53 Saks Fifth Avenue stores nationwide.

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