The shoe retailer has generally been a safe bet as a tenant since not only will customers always need to replace their shoes, but they will generally need in-store visits to ensure a proper fit. Though this still rings true, COVID-19 has closed access to many shoe stores within enclosed malls and made germ-wary customers skittish to enter stores. In addition, the new normal work-from-home trend has reduced the need for customers to purchase formal/dress-up shoes and increased focus on casual and athletic-oriented footwear. National fiscal uncertainty has boosted discount shoe trends, as seen with the resurgence of the Payless (formerly Payless Shoe Source) store brand. Look for Payless, Nike, Skechers, Foot Locker, Shoe Carnival, Allbirds and Rothy’s to increase their retail footprint over the next three years. JackRabbit, Cole Haan and DSW are poised to expand but will be cautious and not pounce for the next year or so unless a great opportunity arises.
Continued mandated gym closures has boosted athletic shoe sales, as customers require efficient footwear for outdoor jogging, walking and hiking activities. Consequently, popular real estate space for athletic shoe brands are now street-front, lifestyle center and strip mall sites in both suburban and urban locations, rather than indoor mall spaces, as brands such as Nike and Foot Locker focus on becoming local community gathering spots.
The shoe retailer with the most ambitious expansion plans is Payless, which hopes to come out of bankruptcy and open up to 500 of its new store prototypes by 2025. Payless will open its first store in Miami before the end of 2020, and then expand into Texas with approximately 35 new stores in 2021. From there, Payless will continue expanding throughout the South and then open new stores throughout the rest of the country. With a new CEO hired late last year to oversee retail growth, Payless’ future leases, at least through early to mid-2021, will be percentage rent deals and not traditional lease deals. The brand feels that now is the time to open stores because the fiscal impact of the coronavirus has made shoppers eager for discount-priced footwear.
The new Payless units are expected to be up to 5,000-s.f. standalone stores which will also sell apparel. The prototypes will utilize more technology such as smart mirrors and touchscreen panels for additional product selections and ship-to-home assistance. Through Payless’ partnership with Zappar, the new stores will also offer an augmented reality process that allows customers to measure their shoe size via their smartphones.
Nike anticipates opening approximately 100 of its “Nike Live” stores over the next two years, each of which average about 5,000 s.f., in urban storefront retail shopping district areas and neighborhood regional centers. Upcoming units will be in major metropolitan hubs throughout the U.S., as well as suburban neighborhoods to gain more of the family demographic for its latest merchandise geared toward women and children. The Nike Live stores will be community-centric, offering products catered specifically to the particular neighborhood. Although Nike has recently laid off up to 500 employees at its headquarters, this year the brand has been consciously eliminating many of its wholesale distribution accounts in order to focus on its own stores.
Though Skechers has been concentrating on its franchise expansion overseas, the brand will continue to grow its warehouse footprint in the U.S. Its stores range from 4,000 to 30,000 s.f. in regional malls, and are found where the retailer does not already have a strong presence within middle-market cities and regions in the Northeast and the South. The brand hopes to open approximately 25 to 30 new stores per year in the U.S. over the next three years beginning in 2021.
Expect Skechers to take advantage of space made available by recently-bankrupt retailers that were economically impacted by the pandemic. Its warehouse outlets will be a perfect way for Skechers to sell its excess unsold merchandise that resulted from the coronavirus closures.
Due to Skechers’ success with its 32,100-s.f. superstore format prototype that opened in Shenyang, China in 2019, the brand hopes to continue with the larger-format prototype in future U.S. spaces. In addition to concentrating on warehouse outlets, the brand will also seek out tourist-destination upscale mall space and inline high-traffic street-front space after the coronavirus threats have abated and malls are once again open and thriving. Skechers’ 2020 warehouse outlet openings have been taking advantage of retailer closings, such as its opening in August in the 5,908-s.f. former Olympia Sports inline unit space next to a Kohl’s at the Pembroke North River Center in Pembroke, Mass., and its July opening of a 10,760-s.f. inline unit in the former Pier 1 Imports space at the RK Taunton Crossing Plaza in Taunton, Mass. In January, the brand opened a 4,512-s.f. standalone unit in a former Mattress Firm within a Lowe’s outparcel space in Winston-Salem, N.C. Skechers has a wide range of merchandise that appeals to a diverse demographic, from children to teens to adults, covering all income levels.
Foot Locker had been a mall staple with its average 2,800-s.f. space. Due to the success of its larger community and neighborhood-located “power stores,” which average 10,000 s.f. and debuted last year in Eastpointe, Mich., Washington Heights, N.Y., and Philadelphia, look for Foot Locker to roll out about 15 to 20 more of these power stores per year over the next three years. The brand makes the occasional exception for these power store sites, such as its upcoming unit due to open this October in the soon-to-be-reopened American Dream mall in East Rutherford, N.J. In August, the retailer opened its first West Coast power store in a 12,800-s.f. former One United Bank unit in the Renaissance Plaza regional strip mall inline space in Compton, Calif., with Burlington as a co-tenant. These power stores are intended to become hyper-local “hubs” for the community, with special merchandise exclusive to the particular location, and even employees hired from within a five-mile radius of the store. Future stores will be in neighborhoods with a high concentration of families and female shoppers, as the brand is focused on capturing more women shoppers. These power stores will have in-store space dedicated to community meeting events, such as Foot Locker-hosted neighborhood clean ups.
Shoe Carnival expects to expand with eight to twelve new stores per year until the end of 2021. The retailer will focus on its current 35 states mainly within the Midwest, Northwest and South where it already has a presence. Shoe Carnival seeks suburban and rural regional mall inline spaces with such co-tenants as Marshalls, Ross, Burlington and TJ Maxx. Potential areas of growth include upstate New York, New Jersey and Arizona. The brand has a lot of flexibility with its space requirements and can open units as small as 4,000 s.f. for less populated markets, and up to 26,000 s.f. for more densely populated regions. The retailer seeks neighborhoods with a large concentration of families.
Digitally-native Allbirds, with stores that average 2,500 s.f., hopes to open 15 to 18 new units by late 2021. Future stores are expected in Atlanta, Miami, Dallas, Minneapolis, Denver and Portland, Ore., as well as a second unit in New York City. The brand, known for its sustainably-made, eco-friendly comfortable shoes, seeks space in major metropolitan areas with high foot traffic and a large concentration of millennial-aged residents.
Preferred space can include retail street front (including ground-floor mixed-use space), lifestyle centers and upscale open-air malls. The brand is receptive to opening multiple units in the same city, as it has done in San Francisco. Allbirds is in a healthy position for growth, having raised $75M from investors such as Fidelity, Tiger Global Management, Maveron and T. Rowe Price. Allbirds expects to raise an additional $75M from new investors, including potentially Franklin Templeton. Its most recent opening was in August with a 2,891-s.f. inline street-front space, formerly occupied by Timberland, in between a bluemercury and Stuart Weitzman in Philadelphia’s Rittenhouse Square retail district. In June, a unit opened in the upscale Westfield UTC open-air mall in La Jolla, Calif., next to a Lacoste store. In February, a 1,902-s.f. unit opened at a former Ben & Jerry’s in the Georgetown section of Washington, D.C. In January, Allbirds opened a 2,400-s.f. ground-floor unit in a mixed-use project, called Music Lane in Austin, sharing space with similar health and wellness and sustainability-conscious co-tenants such as Reformation, Everlane, Sweetgreen and Equinox.
Rothy’s is another digitally-native shoe brand focused on sustainability, which began expanding into the brick-and-mortar realm last year and now has five stores, with the hopes of opening approximately five to 10 new units over the next two to three years. The brand prefers small street-front inline space in upscale retail urban districts that range from 400 to 800 s.f. in size. Rothy’s may open additional stores in cities where it already has a presence, as those markets have proven to have a reliable base of customers. Potential new units could be in other major metropolitan areas such as Palm Beach, Fla., Houston, Scottsdale, Ariz., Raleigh-Durham, N.C., Atlanta, Chicago, Seattle and Santa Clara, Calif. The brand currently has locations in New York City, Los Angeles, Boston, San Francisco and Washington, D.C. Rothy’s is flush from a $35M Goldman Sachs investment and is not interested in wholesale distribution, so its future focus will be on slowly growing more stores. The brand is known for its comfortable, environmentally-conscious shoes, which are made with practically zero waste and manufactured with special yarn developed from plastic bottles.
Shoe Brands With Growth Potential
Other brands are consciously holding off on future expansion due to COVID-19 concerns. JackRabbit, a retail store specifically catering to runners that is owned by CriticalPoint Capital, has expanded via acquisitions of other retail stores, its latest being the northeastern chain Olympia Sports. Previous acquisitions include Rhythm Running in 2018 and Rogue Running in 2017. Last October, JackRabbit acquired 52 of the Olympia Sports’ locations and the remaining 77 stores will permanently close. JackRabbit does not intend to rebrand the stores, but is considering “shop-in-shop” sections of the store’s layout to incorporate its own products. In light of its slow store re-openings after the coronavirus shutdowns, the retailer is taking a wait-and-see approach to future expansion but is optimistic the outdoor fitness/running trend will continue to flourish. The brand is always open to new growth opportunities, especially in the western states—most notably Colorado and Utah. Its preferred retail site is street-front neighborhood inline space that averages 3,500 s.f., ideally with fitness/health related co-tenants such as Jamba and Planet Fitness. Close proximity to outdoor running trails and parks is a plus, as JackRabbit stores host classes and running events.
Shoe retailer Cole Haan had been perfectly positioned for major expansion just before COVID-19 hit, as the brand was about to announce its IPO in March and had hoped to raise $100M. The shoe brand also premiered its new concept store in March, called Cole Haan GRANDSHØP, which, befitting of the new coronavirus social distancing trend, utilizes in-store screen technology to virtually try on items and look up product information. The 940-s.f. GRANDSHØP unit is at the Westfield Valley Mall in Santa Clara, Calif., next to an UNTUCKit. The retailer appears healthy to withstand the mandated store closures, as its digital commerce sales had accounted for 30% of its sales pre-pandemic. Cole Haan also has 77 outlet stores nationwide.
Designer Brands’ Designer Shoe Warehouse (DSW) has opened recent stores, such as its 15,616-s.f. outlet store that opened in August in the Fashion District Philadelphia mall, but is also in the midst of massive restructuring. DSW is cutting 1,000+ jobs and deferring future new store openings until it raises capital by permanently closing poor-performing stores, as well as its Canadian Sole Society stores. DSW worked out a “shop-in-shop” branded deal with the Midwest supermarket chain Hy-Vee in April, and will pilot test the concept in 120 Hy-Vee grocery stores. Future DSW spaces, which average 10,000 s.f., may feature in-store manicure/pedicure services through its partnership with W Nail Bar. The retailer first tested the concept out in 2017 in an Ohio unit, and DSW now has the manicure/pedicure services at nine units in three states: Ohio, Virginia and Texas.
