Is Daytona Retail In Danger? | An Analysis Of Local Retail

Two retail giants have announced closures and other chains have announced a drop in sales. Could this trend spell danger for Volusia?

Posted

Daytona Beach, FL - The last thing any worker would want after the holidays is to find out that their store is closing.

Unfortunately, that's the case for employees at 19 Macy's locations and 450 Pier 1 Imports locations nationwide after both companies announced closures just a week into the new year.

Macy's, a mainstay department store at many malls around the nation, announced that four of those 19 stores are in the state of Florida. One of them is Daytona's neighbor to the west, the Seminole Towne Centre location in Sanford. Other Florida stores included Pompano Beach, Vero Beach, and a Bloomingdales in Miami.

News Daytona Beach reached out to one Macy's employee, but they said they could not comment. News Daytona Beach also reached out to Macy's Inc. for more information. But, Jacqueline King, the Director of Media Relations for Macy's South Region, said in an email that they are "not facilitating any colleague or customer interviews."

The news is also confusing for some, especially after Macy's released the results of their holiday shopping season (November/December). According to the company, stores performed well and show a trend of improving sales.

“Macy’s, Inc.’s performance during the holiday season reflected a strong trend improvement from the third quarter. Our digital business and Growth150 stores performed well. Additionally, customers responded to our gifting assortment and marketing strategy, particularly in the 10 days before Christmas,” Jeff Gennette, chairman and chief executive officer of Macy’s said in a prepared release. “The entire organization committed to delivering Holiday 2019, and it showed up in our execution. I want to thank all of our colleagues – full-time, part-time and seasonal – for their hard work and dedication to serving our customers.”

Comparable sales were up 0.6% through the November/December holiday season, according to an investor relations press release from the company. Macy's also has an investor day at the New York Stock Exchange on February 5th, according to the release.

Pier 1 Imports, which is losing more stores nationwide and also operates a location in Daytona Beach, released an investor relations statement on Monday (January 6th) outlining their third quarter fiscal 2020 results. The news looked bleak.

The company announced that comparable sales decreased 11.4% over the third quarter of fiscal 2019, citing that a shift of certain holiday selling days negatively impacted the quarter by 650 basis points.

Net sales also decreased by 13.3% to $358.4 million, with a net loss of $59 million or $14.15 per share.

The CEO and CFO of Pier 1, Robert Riesbeck, said in that release, "Fiscal third quarter sales and margins remained under pressure as we completed our efforts to clear out non-go-forward merchandise. Looking ahead, we believe that we will deliver improved financial results over time as we realize the benefits of our business transformation and cost-reduction initiatives."

According to their year-to-date results, net sales for 39 weeks ending on November 30th, 2019 were $977.3 million, which is 14.3% down compared to the $1.14 billion for the same period of fiscal 2019.

Operating loss was also $222.9 million in that same period, compared to the operating loss of $122.8 million seen at the same time last year.

In order to better operate with their current environment, Pier 1 intends to shrink its store footprint by 450 locations. And, to reflect the smaller footprint, the company will also close certain distribution centers.

Other mainstay department stores in Daytona Beach, Dillard's and JCPenney, show a similar trend to others in their third-quarter and last 39 weeks results, a decrease in sales.

Dillard's cited in a press release that they saw 26% decrease in net income after it dropped to $5.5 million compared to the net income of $7.4 million for the prior year's third quarter. Their highlights from their 39 week period ending on November 2nd show a net income of $43.4 million, which is down from their previous $85.1 million net income seen in their last 39 week period.

JCPenney noted a drop of 9.3% in comparable stores and a 6.6% drop in adjusted comparable sales. They also announced that their inventory declined 9.0 % to $2.93 billion.

Local Analysis

No closures have happened in Daytona Beach as of yet, but with stores closing around the nation, some residents are wondering if something like this could hurt Volusia's economy?

To find out more, News Daytona Beach reached out to Robert Mara, Investment Director at Holland Financial and Financial Analyst for WNDB.

According to Mara, there are some positives when it comes to store closures in an area. With some leaving, others can come in and create job openings. Mara cited that the Florida Department of Economic Opportunity released a report showing the state's unemployment rate at 3.1%, which is under the national average of 3.5%. Similarly, Volusia's sits at 3.1% Over 12,000 jobs were also added in the month of October, and over 200,000 added over the past year. So while there are some negatives, there shouldn't be too much of an impact.

"It's worrying that we have store closures, but we also have to focus on the businesses that are coming into our community and the jobs that are opening up there as well," said Mara.

The other element people have to observe is the shift shoppers are making from brick and mortar stores to online shopping or "eCommerce."

"There's a shift in how the new generations are doing their shopping, they're moving online," said Mara. "This isn't only an issue for the Daytona Beach area and the Volusia Mall, but the entire retail industry across the United States itself."

Some of the world's biggest eCommerce giants are already stepping foot in Central Florida and Volusia County. Back in September, Amazon opened a brand new last-mile delivery station in the Daytona Beach area. Just a couple of months later, a mysterious 1 million square foot project in Deltona was revealed to be a new Amazon distribution center situated on I-4.

Mara said that when stores are met with problems such as losing business to eCommerce, they often have to adapt to the new conditions. Some companies like Walmart and Target, who have operated brick and mortar stores for decades, have adapted to the new online shopping world and began to take part in the eCommerce industry.

However, when sales aren't happening, the projections are usually to cut costs. And, the easiest way to cut costs is to layoff employees and cut underperforming stores.

"Yes, Macy's is closing stores, but they're doing it to become more profitable," said Mara.

Now, let's continue to use Macy's as an example. 19 stores are closing, meaning they're implementing new cost-saving measures to stay profitable. How long can they stay profitable? That's another question that shoppers and analysts ask. The obvious answer is as long as people shop. But are they?

News Daytona Beach took to Facebook and Twitter and asked readers on both platforms how they prefer to shop, in-store or online. On Facebook, 258 people voted while only 15 voted on Twitter. Altogether, 273 people voted. On Facebook, the in-store category won by 53% of the vote, which is the same story for the online category on Twitter. When all results are pooled together, in-store wins the majority with 145 to 128. (A personal survey conducted in the offices at Southern Stone Communications – our parent company –  actually yielded 50/50 results, including who preferred both equally)

With this, we see that shoppers still prefer the in-store and in-person approach over shopping online. That still leaves one question open. If people prefer shopping in-person, why are stores still closing down? It all depends on where they're shopping.

In the past few years, Daytona Beach alone has had a major influx in new stores and businesses setting up somewhere along International Speedway Boulevard or off of LPGA Boulevard and I-95. The two biggest examples, the Tanger Outlets/Tomoka Town Center and One Daytona. These locations are still very young to the area and provide new ground for businesses to set up shop. Both locations feature modern stylings and new looks that give Daytona an updated appearance. To put it simply, it looks newer.

According to Mara, this is one thing that can take some shoppers away from places like malls and department stores. Which brings us back to a previous question. If department stores shut down because they're not getting enough shoppers, will it hurt the area? While you may lose one store, you have many others that can offer either the same service or a different service that can match or exceed the one offered previously. I.e., you have many other options that are also new to the area. So while one business may shut its doors, it brings money to another.

On the topic of "modern and fresh stylings," where does the Volusia Mall come into play? We ask this because one common theme we found among some voters and residents is that they prefer shopping in-store, but they prefer shopping somewhere that feels new, not the same place they've shopped for however many years. But, does that put the mall in danger? While some may feel the mall needs an update, don't count it out just yet.

The Volusia Mall, despite its new competitors, still plays a major role in Daytona Beach retail. Unlike some, the Volusia Mall thankfully sits in a town that has back-to-back busy seasons at different points in the year. For example, look at the end of the year to the beginning of the year. First, you have the holiday shopping season in November and December. Then after Christmas, the Rolex 24 comes back to Daytona in January, bringing in visitors from across the globe. Once the Rolex is over, there's a slight lull until one of Daytona's "main attractions" comes into play, Speedweeks and the Daytona 500.

All of this isn't even counting Daytona's bike rallies – Bike Week and Biketoberfest – or Spring Break. Daytona also has to consider their newest event, Welcome to Rockville, which will feature a star-studded lineup of some of rock's biggest names, including Metallica.

Now, we're left with our final and most important question. Is Daytona retail in danger? As we see it, no. Unfortunately, some businesses will come and go throughout time as the city enters this sort of pseudo-renaissance. But, the area is still left with plenty of new talent that still drives shoppers to local businesses and new businesses. Daytona also has a lot on its plate, and more is coming as the city continues to develop. As long as the people come, Daytona retail has nothing to worry about.

Comments

No comments on this story | Please log in to comment by clicking here
Please log in or register to add your comment