![]() ![]() This makes Simon Property's malls an important location for post-Pandemic consumers. This luxury experience is especially important as consumers are less likely to spend $200 on a pair of jeans or $500 on a wallet without seeing it first. By carefully curating each storefront within a mall, rather than only focusing on the anchors, Simon created a comprehensive luxury experience. Additionally, the company shifted their portfolio to focus on "middle of the mall" stores. As part of this model, the company spun-out its B-malls and focused on enhancing their high end properties. Their "anchors" to attract consumers to their properties were luxury goods that consumers wanted to feel before making a big purchase. What is unique to Simon Property Group is that they shifted their operating model years ago to focus on more luxury products. As a result, foot traffic, even as the world returns to normalcy, remains extremely low. While this was an effective strategy before the Pandemic, consumers are less likely to visit a mall for these basic needs. These stores often centered around everyday clothing and medicines (nothing like having a customer roam a mall for an hour as their prescription is filled). Unfortunately for most mall operators, they focused on building a core set of stores that brought consumers to their properties. The result is that malls are becoming more of a "luxury" experience in which consumers are looking for uncommon goods and seeking their next shopping inspiration. (This is in large part due to the moves that Amazon, and to a lesser extent Target and Walmart, made over the past year.) This makes traditional malls less effective as the foot traffic from the purchase of these essentials becomes negligible. Today, as the Pandemic draws to an end, consumers generally have the convenience of having their groceries, clothes, and medicines delivered to their doorsteps for "free" and with little more than a day's wait. Compelling Returns from the Depths of the Pandemic Unfortunately for malls, which at their core are a collection of smaller retailers, this shift was not as easily achieved. Thankfully for investors in Walmart ( WMT) and Target ( TGT), the companies were able to shift their focus from in-store to on-line shopping. For big box brick-and-mortar retailers, they were forced to change their business models to survive. For core online retailers, like Amazon ( AMZN), this was a huge windfall for their business. The inability for consumers to go to stores during the Pandemic has accelerated the move to online shopping. The end of physical retail as we know it is rapidly approaching. Source: Simon Property Group 1Q 2021 Supplemental. This positions Simon to benefit greatly from the change in consumer shopping habits. While many other malls have entered their death spiral, Simon boasts a more than 90% occupancy rate. Interestingly, one of the major mall operators, Simon Property Group, has bucked this trend. While the end of physical retail has been a topic for more than a decade, the Pandemic clearly accelerated this trend. Simply visit your local shopping mall and count the number of vacant storefronts to confirm this view. Many investors and pundits are heralding the end of brick-and-mortar retail as the world returns to normalcy. We continue to find great value in this operator as the company's stock still trades at an attractive discount to its 2019 levels. Adding in the company's recent strong financial performance and raised guidance for the year, the assumption that all malls are dead may be premature. The decision years ago to only focus on A-malls and create a more luxury experience for consumers has resulted in a portfolio of properties that is still very much in demand in the post-Pandemic world. While Simon Property Group ( NYSE: SPG) has been one of our favorite contrarian calls during the pandemic, the shifting retail landscape creates a new opportunity for the company. Photo by shironosov/iStock via Getty Images
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |