Consumer Nation

A Rare Sign of Improvement in Retail Sector

So far retail sales in February are looking a lot better than in January, but that doesn't mean retailers are out of the woods yet.

The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index rose 0.6% in the week ended Feb. 21 from the prior week on a seasonally adjusted, comparable store basis.

Although retail conditions continue to be weak, there is a bright spot: this marks the fourth straight week that the index has improved or held steady.

"I wouldn't say that this is the beginning of any kind of resurgence in consumer spending," said Richard Hastings, a consumer strategist at Global Hunter Securities, in an interview on CNBC. (To listen to the full interview, watch the video above.) "But we do expect the industry to stabilize and for overall conditions to get better in mid 2010, which is a way off but probably better than some other sectors of the economy."

All-in-all, ICSC said it continues to expect February same-store sales to fall 1 percent to 2 percent in February from the year-ago period.

With consumer spending expected to remain weak for some time, Hastings expects to see more "Mom-and-Pop" retailers to go out of business. This will help shift business to the larger retail chains, and help them to stay afloat.

While this is good news for the national retail chains, it doesn't help owners of retail properties.

"If you and I had to look at which side of the story is something to worry about more, the retailers or the landlords, I would stay much more worried about the landlords," Hastings said.

The ICSC predicts that 148,000 retail stores were shut in 2008, and that another 73,000 stores will close in the first half of this year. If this occurs, the number of closures last year will likely be the highest since at least 2001.

Adding to the troubles, a large number of these expected store closures are for anchor tenants that often help to drive traffic to the rest of the shopping center.

Already there are plenty of signs of trouble among the mall operators. General Growth Properties has been trying to hash out a new deal with its lenders and avoid bankruptcy.

Late Monday, the Chicago company posted a 7.7 percent decline in funds from operations after factoring out one-time items such as advisory fees and lawsuit settlement cots. General Growth is suffering from lower fees from overage rents, which are tied to retailers sales growth, and from a decline in occupancy.

The company fared only slightly worse than Simon Property Group , which shows that these problems aren't tied solely to General Growth's operational abilities.

To help manage through these tough times, mall operators are trying to cut costs by reducing operating hours. They also are thinking outside the "Big Box" to attract new tenants.