Kohls to Sell/Lease Retail Space at 10 Retail Locations to Planet Fitness Gyms
In attempts to control the high costs of retail space and the declines in B&M traffic, Kohl’s has already been partnering with grocer Aldi for a while and, in the past year, has been working with Amazon to strengthen their e-commerce (relatedly, Amazon also just announced having to close 100 of their own retail pop-up stores… not their self-service stores).
Kohl’s smaller stores have been far more profitable, so Kohl’s will continue to reduce their retail footprint at 10 locations by selling or leasing space to (but not sharing front doors with) Planet Fitness gyms. They’ll cross-promote each other’s services and hope to benefit from each other’s foot traffic. Kohl’s may expand this partnership to more locations if things go well… and Kohl’s stock has increased nearly 8% since the announcement. Other retailers, like Target are opting to open smaller stores, especially in urban markets, instead of space sharing.
This week Charlotte Russe announced closing all 500 stores (not the recently announced closings of only some locations), and Diesel announced filing for bankruptcy in an attempt to salvage itself. All this on the heels of recent announcements of Payless Shoes stores going out of business, JCPenney closing even more stores, Family Dollar closing 400 stores (200 will be converting to Dollar Tree stores), Gap closing stores, the Sears fiasco etc. Yikes!
Seems to me that greedy landlords and developers also share a large part of the blame in the collapse of physical retail stores as exorbitant rents keep going up and up despite declines in already thin retail margins. For example, the last handmade fortune cookie company in the US may be forced to go out of business because their San Francisco rent went from $1,400 to $5,750 a month.
Is sharing retail space the way to salvage this mess? It seems to be buying time for some for Long John Silvers (that roommate with KFC). Will landlords allow it for those that don’t own their own properties (e.g., inside malls)… Can B&M chain stores save themselves, or is the writing already on the wall? Will laws be passed to curtail predatory price gouging landlords, robber barons purposefully bankrupting their own companies for self-enrichment, unfair tax exemptions and low salaries for mega-retailers, etc. Will the market just self-correct (landlords forced to lower rents or lose most/all tenants, soaring shipping rates drive traffic back to local stores, increased minimum wages increases online and local spending, ec.). So many factors at play… What’s the likely end game here?
I love online shopping, but if most retail locations eventually close and we’re forced to rely primarily on digital/online sales (from a much smaller selection of mega-retailers no doubt) and deliveries in order to just live and provide for ourselves, the social, financial, privacy, legal, economical, etc. consequences could be unprecedented, profound, and devastating. We seem to be hurtling towards a digital economy in every respect… or maybe I’m just reading too much into all of this.