Gallelli Gazette_June 7, 2023

THE GALLELLI GAZETTE Retail Roundup

QUOTE OF THE WEEK:

be much more certain—and much more negative. But it’s not—which means the near-term outlook is nowhere near as certain, though it could be far more positive.

Last week we got another jobs report that stumped economist; over 339,000 new jobs were added in May. Meanwhile, the Labor Department’s JOLTS (Job Openings and Labor Turnover) report, that came out just a few days earlier showed another shocker; job openings in April (this report lags the unemployment report by one month) rose unexpectedly. The number of available jobs climbed for the first time since December to 10.1 million, up from 9.8 million.

WILL WE, WON’T WE?

We are now solidly fourteen months into the will we or won’t we saga on a potential recession ahead. For most economists, the big alarm bells were first set off when the yield curve inverted in March of last year. Normally when you invest in short-term bonds (a 3-month treasury bill) they will provide you with significantly lower yields than the returns you could expect to earn with a longer-term bond (like a 20-year treasury bill). But when those long-term yields suddenly fall below the short-term ones is when you have an inverted or negative yield curve. It is a big deal because in eleven of the past 12 times that the yield curve has inverted, a recession has followed anywhere within six to 18 months following.

By March of this year, the inversion had reached its deepest point since 1981, when it preceded one of the deeper recessions in our history—in the wake of aggressive interest hikes looking to stem double digit inflation (it had peaked above 14% in late 1980). Of course, there was another major challenge at the time, which was that unemployment was already elevated—by 1982 unemployment would reach 10.8% which was, at the time, the highest rate that the US had experienced since the Great Depression.

The Fed moves, as painful as they were, did tame inflation (it was in the 3% range by the end of the 1980s) and helped usher in an economic boom that began to take off by 1983. Unemployment would continue to fall from 1983 onward, reaching the low 5% range by 1989.

There are many who look to the early 1980s economic situation as being a good predictor of what we are facing ahead. But unemployment was in the high 8% range when the Federal Reserve began to aggressively raise interest rates in 1981. That situation, where both unemployment and inflation are high, is the classic “stagflation” economy and, frankly, is a dismal situation. The good news is that our current situation is nowhere near that—if it were, the near-term outlook would

TOP TEN RETAIL STORIES OF THE WEEK

1 They Said We Were Getting a Recession, Instead We’re Getting a Bull Market CNN 06.04

2 What to Expect from June’s CPI Report Forbes 6.4

The irony of the past year is that economic news that usually we would welcome, suddenly has become likely bad news, because it means that the Federal Reserve’s attempt to cool the economy (at least if you’re looking at rising unemployment) aren’t fully working. It means more interest rate hikes. The new inflation report for May will be out in a few days, and though the US saw inflation drop below the 5% range (it was 4.9%) for the first time in two years last month this is still a way off from the Fed’s stated target goal of 2%.

There is hope that the Fed will pause their rate hikes despite the continued strong jobs data at their next meeting on June 13th. Clearly the inflation report coming out later this week will be the primary factor in whether they will or won’t. Frankly, it should be, as opposed to job numbers right now simply because we are in the midst of what Business Insider recently declared, “The Forever Labor Shortage.” Between declining birth and legal immigration rates and the massive baby boomer generation retirement trend, I don’t think that looking at the labor market through traditional lenses makes a lot of sense currently. There have been no economic precedents for much of what has occurred since the pandemic.

It’s possible (if not likely) that the Fed will continue to see a strong job market as evidence for further rate hikes, despite the stress it has already created in key sectors, and the fact that with each hike the certainty of recession increases. I suspect we may already be there, and that we may be living through a rare occurrence… a recession (negative GDP growth) where job creation continues to occur. But if we are, a downturn is likely to be brief and shallow because of that job market resilience. This is not a repeat of the early 1980s.

If this was shared with you and you would like to receive the Gallelli Gazette Retail Roundup weekly in your email, email me directly at gbrown@gallellire.com and get on my mailing list.

3 Economy Added 339,000 Jobs in May; Better Than Expected New York Times 6.2

4 Bidders Reportedly Interested in BuyBuyBaby Chain Store Age 6/2

5 Top Retail Trends of 2023 Chain Store Age 5/31

6 Job Openings Increased in April to 10.1 million Yahoo! Finance 5/31

7 ICSC Las Vegas Report: It’s a Landlord’s Market Chain Store Age 5/31

8 Consumers to Spend Record Amount for Father’s Day NRF 6/1

9 H.E.B. to Remove Pandemic Era Plexiglass From its Stores Supermarket News 5/31

H. Brown Gallelli Real Estate gbrown@gallellire.com

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10 Collapse of Unremarkable Middle—What’s Going Wrong for Some Retailers Business

“History doesn’t repeat itself, but it often rhymes.”

“The only function of economic forecasting is to make astrology look respectable.”

–John Kenneth Galbraith

–Mark Twain

THE GALLELLI GAZETTE Retail Roundup

Issue No. 3 | June 7th, 2023

RETAIL AND CONSUMER TRENDS

Boomers and Gen Z have Different grocery habits in times of inflation

Supermarket News 6/4

Most Consumers Think Retail Crime is Up

Chain Store Age 6/2

Consumers More likely to Cut Back Restaurant Visits Rather Than Trade Down CNBC 6/2

Survey Shows Back to School Shopping Should Remain Robust Despite Inflation Retail Brew 6/1

Restaurants Expect Strong Sales This Summer. Consumers Aren’t so Sure CNBC 5/29

TOP ECONOMIC STORIES

Alarm Bells Were Ringing About Potential Recession, but Then Jobs Report Landed

CNN 6/3

Dollar Stores Sound the Alarm on Inflation

Winsight Grocery Business 6/2

Wage Hikes May Have Been a Key Driver of Inflation—Now Fueling Layoffs

CNBC 6/1

Global Economy Likely Spared a US Debt Default but Faces Mountain of Risks

CNN 6/1

Survey of Experts Say CRE Growth to Slow, Return Stronger in 2025

Globe Street 5/30

TOP RETAIL REAL ESTATE TREND NEWS

The Benefits & Challenges of Second-Generation Retail Space

Globe Street 6/5

Here’s One Way Simon Plans to Redevelop Malls Across the Country Costar 6/1

Landlords Urged to Embrace Flexibility in Face of Bankruptcies

Globe Street 5/31

ICSC Las Vegas Report: It’s a Landlord’s Market

Chain Store Age 5/31

Green Street: Retail Sentiment: Overwhelmingly Positive Globe Street 5/30

BUILDERS & BUYERS NEWS

Red Robin Completes $29M Sale Leaseback of Nine Units

FSR Magazine 6/4

A&G Real Estate Auctioning 49 David’s Bridal Leases in Bankruptcy

Costar 6/2

LA Billionaire Rick Caruso Wants to Build Another Resort, Apartments & Retail Costar 6/1

Grocery Portfolio of 27 Stores Across 11 Provinces & Territories Hits Canadian Market Costar 5/31

Ground Broken for Mixed-Use Project, the District at 15fifteen, in Parsippany NY Chain Store Age 5/30

SUPPLY CHAIN/ECOMMERCE/OMNICHANNEL/TECH

Retailers are Shrinking Logistics Operations in Changing Consumer Market Wall Street Journal 6/4

$400M+ Pizza Robot Startup Shuts Down Nation’s Restaurant News 6/4

McKinsey: Online Beauty Sales in US to Hit $45B by 2027

Chain Store Age 5/31

Who Will Lead Retail AI?

Retail Customer Experience 5/30

Wendy’s Testing Underground Tunnels to Parking Lots for Pickup Orders

Business Insider 5/28

ARE YOU EXPERIENCED? EXPERIENTIAL RETAIL NEWS

Puttshack Opening in Pittsburgh’s Strip District TribLive 6/2

Friendship Heights Food Hall Could Open This Month DC Urban Turf 6/1

13-Unit Bocci Ball Concept Pinstripes Gets New Investor; Back in Growth Mode

Nation’s Restaurant News 5/31

There’s a new Food Hall in Rhode Island; RhodeHouse Go Local Providence 5/30

New Vegas Food Hall, Sundry Food Hall, Announces Opening Date

Las Vegas Review Journal 5/30

RETAIL CHAIN STORE OPENINGS AND GROWTH

CA Lifestyle Brand Aviator Nation Opens 17th Store in the Hamptons; 3 More on Way Chain Store Age 6/2

Five Below on Track to Open 200+ Stores; Convert 400 to Five Beyond Chain Store Age 6/2

Apple Plans Major Store Push in China, Upgrades Here Bisnow 6.2

Maverik Building First Store in Montana (Helena)

CSP Daily News 6/2

Hobby Lobby Taking Vacant JC Penney in Brainerd MA Brainerd Dispatch 6/2

THE GALLELLI GAZETTE Retail Roundup

Issue No. 3 | June 7th, 2023

Ethically Focused Brand Retailer The Canvas Expands to Miami’s Wynwood

Miami Community News 6/2

BJ’s Sets Opening Date for First Store in Tennessee and 238th Store; 3 More on Way

Chain Store Age 6/1

Dollar General Stock Plunges; May Pull Back on Openings

CNBC 6/1

Petco Unveils Experiential Flagship in NY

Chain Store Age 6/1

Parker’s Opens 61st C-Store in Georgetown SC

CStore Decisions 6/1

Houston Farmers Market to Mix Fruits, Veggies… and Pickleball

Costar 6/1

Saks Fifth Avenue Opening Styling Suites in Hotels & Resorts

Chain Store Age 6/1

FoxTrot Opens in DC’s Navy Yard Neighborhood

CSP Daily News 5/31

243- Unit Nordstrom Rack to Open 23 Stores Over Next Two Years

Costar 5/31

9- Unit Luxury Retailer The Webster to Open 3 New Stores w/Simon

Chain Store Age 5/30

Abode Home Décor Adds Second Store in PA’s Lehigh Valley

The Morning Call 5/30

BlvdHome Opens 5th Unit: 90k SF Store in Vegas

Furniture Today 5/30

C-Store Concept Thornton’s Opens 46th Store in Louisville KY

Petrol Plaza 5/30

Outdoor Sports Retailer Feral Opens West Michigan Store

Crains Grand Rapids 5/30

Dick’s House of Sport Preps for Johnson City TN Opening

WNBF 5/30

RETAIL CHAIN STORE CLOSINGS AND CONTRACTION

Cineworld Seeks to Exit 25 Leases With its Second Largest Landlord

Costar 6/4

IHOP Pulling Plug on 4-Unit Fast Casual Spinoff Flip’d FSR Magazine 6/2

Time Out Shuts Down Miami Beach Food Hall Abruptly

Miami New Times 6/2

Watch Retailer Invicta Declares Bankruptcy; Blames Landlords

Bisnow 6/1

Journeys to Close 100 Stores as it Looks to Grow Off-Mall

Chain Store Age 5/28

THE GROCERY AISLE

New H.E.B. in Georgetown TX Filled with Amenities; Bar & 2-Story BBQ Restaurant

Progressive Grocer 6/4

Tops Closing Erie PA Grocery Store

Erie News Now 6/4

27-Unit Foxtrot Opening Largest Location Yet in Austin TX

Chain Store Age 6/2

Asian Grocer T&T Supermarkets Continues Growth Across Canada

Progressive Grocer 6/2

Wegman’s Closing One of its Largest Stores (in Boston area Mall) Business Insider 6/2

130-Unit Fareway to Open at Least 3 More Iowa Stores; Likely More Winsight Grocery Business 6/1

Three Reasons for SpartanNash’s Strong Q1 Growth Supermarket News 6/1

New Whole Foods Opens in DC Supermarket News 6/1

BJs to Open First Tennessee Club in June Winsight Grocery Business 6.1

22-Unit Indiana Grocer Strack & Van Til Automates Fresh Food Operations Chain Store Age 5/31

FOOD & BEVERAGE & ENTERTAINMENT

9-Unit Bay Area-Based Asian Box Back in Growth Mode After a Decade Nation’s Restaurant News 6/4

Ike’s Love & Sandwiches Opens in Brentwood CA QSR Magazine 6/4

Speakeasy Concept, Space Banana, Heading to Boise Idaho Statesman 6/4

21-Unit Original Chop Shop Opens Second ATL Store

QSR Magazine 6/4

200+ Unit Clean Juice Opens Fifth CA Store

QSR Magazine 6/4

The Eight Most Anticipated Restaurant Openings of Summer 2023 Bon Appetit 6/3

Wetzel’s Pretzels New Concept Opens Second Twisted by Wetzel’s Unit (in AZ) RestaurantNews.com 6/2

Scooter’s: This 600-Unit Coffee Concept Wants to be the Biggest in US

QSR Magazine 6/2

18-Unit Chip City Looking to Open 40 Units by Year End RestaurantNews.com 6/2

Dickey’s BBQ Heads North; Opening Two Stores in Alberta RestaurantNews.com 6/1

9-Unit Capital Tacos Opens in Jacksonville; Six More to Open Soon

FSR Magazine 6/1

Crave Hot Dogs & BBG Hits Louisville KY RestaurantNews.com 6/1

90+ Unit TOUS les Jours Opens in Richfield MN

QSR Magazine 6/1

Big Dave’s is Ready to Outgrow its Humble Origins

QSR Magazine 5/31

Employee-Owned Rreal Tacos Ready for Takeoff

FSR Magazine 5/31

130-Unit JINYA Ramen Bar Inks Deal to Grow in New York

FSR Magazine 5/31

Chicken Salad Chick Expands Further in VA; 14 Units in the Works

FFXnow.com 5/31

THE GALLELLI GAZETTE Retail Roundup

Issue No. 3 | June 7th, 2023

5-Unit H&H Bagels to Expand Outside NYC; Sells Franchise Rights to 25 National Units Chain Store Age 5/30

Nick the Greek Hits 60 Units; Should be at 80 by Year End RestaurantNews.com 5/30

Crisp & Green Eyes 1,000 Unit Expansion Chain Store Age 5/27

LOCAL MARKET RETAIL NEWS

Arizona Blocks New Homes in Phoenix Due to Lack of Water Globe Street 6/4

Chicago Bears Suburban Stadium Complex Site No Longer Singular Focus for New Stadium Costar 6/2

What’s the Future for shopping malls in New York Spectrum News 6/1

Atlanta’s Retail Market Remains Robust for Investors, Tenants & Landlords| REBusiness Online 6/4

Columbus OH Retail Sector Continues to Attract Investment Costar 5/28

CULTURE CORNER: BAD WEATHER & CREEPY STORIES

I have always gotten a kick out of “Butterfly effect” stories and speculation. In case you aren’t aware of what the butterfly effect is, it is a term from chaos theory in which a miniscule, localized change in a complex system can end up having immense effects elsewhere. In popular culture, you know it through the scene in Jurassic Park where Jeff Goldblum says, “It simply deals with unpredictability in complex systems… A butterfly can flap its wings in Peking, and in Central Park, you get rain instead of sunshine.” Of course, you may know this theory through the bad 2004 Ashton Kutcher movie of the same title which somehow made his earlier film, “Dude, Where’s My Car,” look like a masterpiece. But I digress…

There is a good explanation/exploration of the phenomena the Washington Post did on the topic a few years ago here. But what got me going on the topic was a great History Channel podcast on an airplane a few days ago commemorating the coming June 10, 1816, anniversary of when, holed up in a Swiss villa in a surprisingly (and historic) cold and dreary summer, the poet Lord Byron challenged his housebound guests to a contest to see who could write the best ghost story. Byron at the time was one of the most famous living writers, and most scandalous. His guests were the up-and-coming poet Percy Shelley, his lover Mary Wollstonecraft Shelley and her half-sister, Clara Clairmont. The winner of this contest was not either of the two male literary heavyweights, but the 18-year-old Mary Shelley who wrote Frankenstein. Her story (click here) is arguably ten times more fascinating than the gothic novel she produced—and a must listen if you like great, weird stories from history.

This was a groundbreaking work at the time and a huge leap forward for women in a space dominated by men. But let’s face it… most of us are more familiar with Mel Brooks’ Young Frankenstein more than the 200+ year-old work it parodies and celebrates.

What does this have to do with the butterfly effect? The only reason that Mary Shelley and her companions were holed up in a Swiss summer resort chalet in summertime was because 1816 was the year without a summer. On April 5, the year before, the largest volcanic explosion in recorded history happened on the other side of the earth—on Mount Tambora in Indonesia. At least 100,000 people died in the blast—which ejected so much ash and aerosols into the atmosphere that parts of Asia reported the Sun being blocked from view for days. This cloud eventually covered the globe, dropping the Earth’s global temperature by roughly 7 degrees Fahrenheit.

M&A MANIA

Global Partners Completes Deal to Acquire 64 Landmark Group C-Stores CSP 6/4

Authentic Brands Group Acquires British Lifestyle Brand Hunter Chain Store Age 6/2

32-Unit Gen Korean BBQ Files IPO; Looking to Grow FSR Magazine 6/1

Bowlero Buying Lucky Strike for $90M, Expanding National Reach Bisnow 5/31

The Running List of Major Retail Deals Chain Store Age 5/31

There were blizzards in the American Midwest and Northeast into summer 1816. Global crop failures followed, as did cholera outbreaks and famine that killed millions. China and India both experienced massive famines and weather disruptions that resulted in deadly flooding and the aggravated spread of cholera spurring a global epidemic. Mass migrations that would later help support the industrial revolution saw rural families moving to cities in search of food. Food riots and looting would break out in dozens of European cities as a result. Major typhus epidemics would break out and spread over the next three years. In the US, blizzards were recorded well into May and June 1816 in some midwestern and northeastern cities. New England had freezing temperatures in all 12 months of the year in 1816 and experienced food shortages. Over 15,000 people fled Vermont, including the family of an 11-year-old Joseph Smith—a move that may have made possible his eventual publication of the Book of Mormon.

Oh yeah, and Frankenstein was written. Anyway, a volcano isn’t quite a butterfly—but you get the idea.

Bowlero Bowling Alley