August 19,2016-
Visalia Mall Manager Richard Feder says his bosses at General Growth Properties and Macy’s are in talks about the future of the Visalia Macy’s location that General Growth owns.
Macy’s announced they would close up to 100 stores nationwide August 11 and now there is speculation the Visalia store may be on the chopping block.
Fueling fears the 174,00sf store could close was a report posted by Morningstar Credit Ratings LLC this week that around $3.6 billion in loans might be be affected by the closing of 28 stores that Morningstar identified as most at risk – a list that included Visalia.
Despite the report Feder tamps down the idea that the Visalia Macy’s store has poor sales per square foot. The report said the Visalia store had sales of $154 per square foot in 2014 – below a $169 per square foot standard.
“That sounds too low to me“ says Feder, disagreeing that Visalia would be on Macy’s ”underperforming list.”
“This store is not one of those.” The 2-story Visalia Macy’s was originally built as a Gottschalks in 1995 and opened as a Macy’s in 2009 after Macy’s acquired the lease of the bankrupt chain.
Double Digit Growth At Visalia Mall
Feder says the Macy’s store and entire mall is doing well, around 96% full.He says while he does not expect the department store will close, ”anything is possible.”
“Mall traffic has been going up since 2011.On a year-to-date basis sales at the mall are up double digits” says Feder, adding that the smaller stores are also doing well too.
Visalia Mayor Steve Nelsen notes that “this is a study done by an economist – not by Macy’s” and says all reports he has heard say that ”the store is doing well.”
”Look at the mall itself – it’s pretty much full.” Nelsen adds that Visalia Macy’s “serves a large regional area” that helps make it more viable.
That the mall owner and the tenant are talking makes it possible Macy’s,suffering lower sales companywide,might be seeking rent reductions as part of an overall strategy to reduce costs.
Nelsen suggests this all could be a “bargaining tool.”
As the largest department store in the area Visalia would feel the loss of the big retailer in many ways including its civic pride.
Nelsen offers other reasons for concern.“Number one – losing Macy’s would hit us hard on employment, and two – sales tax and then there is the effect on the entire mall.”
Then there is the downstream effect on city revenues, the general fund and public safety. Recent city figures show growth of sales tax revenues slowing based on a slow recovery from the 2008/09 recession. Sales tax is expected to grow by 3.5% in 15/16 in Visalia.
Not only are more people buying online but consumers are spending less of their personal income on taxable items.There used to be a music store at the mall but now you buy your music from iTunes.
For the Visalia Mall losing their largest anchor could be devastating as witnessed by what has happened to a number of malls around the US that went into a downward spiral after an anchor store closed and not replaced. Such a case is cited in the Morningstar report who watches out for debt issues at malls.”Loans for malls in Albuquerque, N.M.; Dover, Del.; and in Lakeland, Fla., now look vulnerable” wrote the Morningstar report.
Of course you can look just down the block to what happened when stores closed at Sequoia Mall.Today the new owner is still scratching his head trying to figure out what to do with it.
Macy’s with some 680 stores nationwide has seen a same store sales decline chain-wide in the past few years.Same store sales declined around 8% between 2014 and mid-2016 according to Macy’s financial reports.