Simon Property Group (SPG), the largest shopping center manager and developer in the United States, has had a favorable start to the year, as indicated in its first-quarter report on Tuesday, which presented gains across different metrics. However, one question remains: Are people still shopping at malls?
CEO David Simon declared during the call that the company was beginning the year on a positive note and that it was reinforcing that by making wise investments and proactive moves in the capital market. This would lead to enhancing its already robust financial flexibility. Furthermore, he mentioned that they had a favorable outlook for the remaining year, and as a result, they had increased their quarterly dividend and the mid-point of their full-year 2023 guidance.
“Tenant demand is excellent, and brick-and-mortar stores are where shoppers want to be,” Simon said.
Simon also noted the strong and diverse demand for retail leasing across various categories, and despite economic uncertainty, the company is ahead of its internal plan, and demand has remained consistent.
This sentiment is backed up by the numbers. As of March 31, which marked the end of Simon’s first quarter, the occupancy rate at its U.S. malls and premium outlet centers was 94.4%, an increase from the previous year’s 93.3%.
Additionally, Simon emphasized the significance of a long-term outlook for stores, such as the recently reopened Tiffany flagship store on 57th Street and Fifth Avenue in Manhattan. He noted the positive trend in the luxury retail sector and highlighted the steady opening of new stores by brands like Dick’s, Lifetime Fitness, Scheels and Lululemon.
According to UBS data, store openings during the quarter comprised of brands like Steve Madden, Five Below, JCPenney, Starbucks and Hollister.
With that, Simon stated that JCPenney has seemingly regained its momentum by introducing better brands, renovating stores and improving the beauty floors.
Over 85% of all retail sales in the U.S. still occur in physical stores rather than online, and that’s a finding SPG seemingly confirms.
Increasingly, brands such as Warby Parker, Hims & Hers Health, Care/of, and Beyond Yoga, which started as online retailers, are expanding into physical retail or strengthening their existing presence in brick-and-mortar stores.
See also: How Consumers and D2C Brands Like Warby Parker Are Embracing in-Store Shopping
Furthermore, to meet the demands of consumers, Skims, a brand established by Kim Kardashian that focuses on loungewear, underwear, and shapewear, has recently teamed up with luxury department store Saks Fifth Avenue to expand its retail presence.
Read also: Skims Taps Saks to Launch Shop-in-Shop Experience for Customers
The move follows consumer demand as they not only seek in-store experiences but also want to save on shipping and return expenses. Brands and retailers are becoming more stringent with their policies, resulting in additional costs for consumers.
See also: Amazon Charging New Fees on Some Returns
The “2023 Global Digital Shopping Index,” a collaborative effort between PYMNTS and Cybersource, found that in the U.S., 96% of shoppers examine return policies prior to completing a purchase.
Read also: Retailers Give In-Store Media an Interactive Twist to Boost Basket Size
As of Q1 2023, Simon’s most significant and prosperous properties include the Roosevelt Field Mall in Garden City, New York; the Woodbury Common Premium Outlets in Central Valley, New York, and the Mall at Short Hills in Short Hills, New Jersey.
Simon Property’s net revenue from lease income climbed by 3.3% to reach $1.25 billion in the quarter. This figure was marginally higher than the analysts’ estimated revenue of $1.24 billion.
In terms of the SPG’s plans, the company stated that it is focused on ongoing redevelopment and expansion projects at its properties in North America, Europe, and Asia.
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