Saturday, June 21, 2008

Steve & Barry's: The Mall Vacancy Answer? Probably Not.

by Bill McBride on 6/21/2008 12:35:00 AM

The WSJ has an article about fast growing retailer Steve & Barry's facing possible bankruptcy. This story has an interesting twist: Steve & Barry's Faces Cash Crunch

[S]ome of the forces pushing Steve & Barry's growth were not tied to end-consumer demand, but the needs of mall owners in a softening commercial-real-estate market. Much of the company's earnings came in the form of one-time, up-front payments from mall owners. Those payments were designed to lure the retailer to take over vacated sites, say several people familiar with the company.

Without these payments, the stores are barely profitable, if at all ...
So the mall owner pays the tenant to take retail space that the the tenant can barely afford unless other mall owners pay the tenant to take additional space. And on and on.

This shows just how tough the mall leasing environment currently is.