COVID-19’s toll on the retail sector has been drastic. But some retail chains have been uniquely well-positioned for a recession in which many people are spending a lot of time at home.
While some retailers are closing thousands of physical stores and cancelling expansion plans due to sharp increases in online shopping and widespread shutdowns to curb the spread of the coronavirus, other brands are still growing their bricks-and-mortar footprints.
In fact, some are planning to add dozens and even hundreds of stores in 2020 and beyond.
“There are definitely tenants on my radar who are actively expanding despite current market conditions,” says Lanie Beck, Director of Corporate Research at Stan Johnson Company, which specializes in net lease investments.
Convenience store growth is fairly robust and other essential retailers, including grocery stores and some quick-service restaurant (QSR) concepts, continue to expand, Beck notes.
“All growth is being done very strategically though,” she says. “Location and demographics will continue to play a very important role as retailers consider their expansion plans, and we’re seeing a lot of creativity as tenants rethink their traditional concepts, roll out new prototype store designs, and figure out the right omni-channel strategy.”
Are there deals on real estate in a down market?
“Now is the time where retailers who are expanding are looking for better deals,” says James Cook, Americas director of retail research with real estate services firm JLL. “It has been a mixed experience out there, because some landlords are not yet ready to lower asking rents, but it’s starting to change.”
Cook also points out that retail spending is back to pre-COVID-19 levels. People are spending as much as they were before the pandemic, but in a different way and in different categories. “And the categories they’re spending [on] are expanding. Basically, it’s categories like casual takeout restaurants and delivery and value retail.”
There’s a “renaissance in the categories of food, pet, home, beauty, and arts and crafts, which is creating a proverbial requiem for retail,” notes Burt Flickinger, managing director of consulting firm Strategic Resource Group.
There’s a tremendous opportunity for well-located shopping centers and malls owned by enlightened landlords to undergo transformation with these concepts, he says. Other hot categories to watch, according to Flickinger, include consumer electronics and office, gaming/e-sports, clinics and health, big- box, sporting goods, warehouse clubs and food and fuel.
Here are 14 retailers that are expanding their bricks-and-mortar footprints in 2020 and beyond.
14. Ulta Beauty
Due to the uncertainty and disruption around the pandemic, Ulta cut back its expansion target from 75 to 30 stores in 2020, but the beauty retailer is still expanding its store fleet.
New store activity was temporarily paused in the first quarter due to COVID-19, and openings were expected to resume in August 2020. Ulta plans to add 225 stores over the long term and opened 86 locations since February 2019, according to Stan Johnson Company’s National Tenant Expansion Trend report.
13. Burlington Stores Inc.
Off-price retailer Burlington has 37 new store openings listed on its website scheduled to open between August and October. The Stan Johnson report says the retailer has plans for 51 to 54 stores to open in 2020 and its long-term goal is to reach 1,000 stores.
Two weeks before the chain’s stores were forced to close in mid-March due to the pandemic, the retailer dropped its e-commerce platform, saying it would focus on in-store sales growth and store expansion. At the time, e-commerce sales accounted for only 0.5 percent of its revenues.
Since store reopenings, the retailer has bounced back. During times of economic uncertainty, shoppers are more focused on value, and off-price players like Burlington are expected to benefit.
Discount bare-bones grocer Lidl has plans for 50 new stores along the East Coast and 1,000 new jobs by the end of 2021. The German grocer will invest more than $500 million in the new locations. The expansion will bring Lidl’s total number of U.S. stores to around 150. The discounter plans to give rival Aldi a run for its money.
11. Hobby Lobby
Arts and crafts store Hobby Lobby reportedly plans to open 55 new locations in 2020 and relocate 24 stores, according to Stan Johnson’s report. According to Hobby Lobby’s website, 24 new stores opened through August.
Arts and crafts experienced a boom in popularity during the pandemic as people have more free time to tackle hands-on projects.
German discount grocer Aldi is on a tear with plans to open more than 70 new stores by the end of 2020 as part of a national expansion. The chain will enter the Phoenix market for the first time and also add more stores in states including New York, Texas, California and Kansas.
The chain, which has surpassed 2,000 stores, is undergoing a five-year, $5-billion growth initiative to open new stores and update existing locations. The company aims to become the third-largest U.S. grocery retailer—behind Walmart and Kroger—with more than 2,500 stores by the end of 2022.
Experts say Aldi, which has a cult-like following, is well-positioned as the low-priced grocery leader.
“Shopping at Aldi vs. shopping at a conventional [grocer] for a family of five with a rescue pet or two can literally save anywhere from $3,000 to $5,000 a year,” notes Flickinger.
Flickinger adds Aldi will have a “record amount of expansion” both in freestanding stores and those located “within the four walls of Kohl’s stores.” Aldi and Kohl’s announced a partnership where Aldi will open locations in select Kohl’s stores around the United States.
9. Tractor Supply Co.
Outdoor sporting/equipment and home improvement retailer Tractor Supply Co. announced plans to open 75 to 80 new stores in 2020.
The chain, deeming itself the country’s largest “rural lifestyle retailer,” is one of the few big-box operators to expand in the past few years. Its growth is fueled by significant sales in lawn care, hardware products, tools and pet supplies.
The chain is “expecting the home renovation sales spike to stay as consumers continue to ditch city living and invest in lawnmowers and kayaks,” Business Insider reported.
The company’s same-store sales were up 30.5 percent in the second quarter.
“They were categorized as essential, so they stayed open through the closures,” JLL’s Cook says.
“They’re a real beneficiary of multiple trends,” he continues. “They were deemed essential… and also there’s this whole exodus from the city right now. Tractor Supply’s target is really the outer-ring suburbs.” (Although Cook believes this exodus is a very temporary trend).
8. Five Below
Discount chain Five Below, aimed at tweens and teens, has opened 40 new stores to date in 2020 and expects to open 100 to 120 new stores this year.
The company operates 900 stores in 36 states and has long-term plans of reaching 2,000 locations, according to Stan Johnson Co.’s report.
7. O’Reilly Auto Parts
O’Reilly Auto Parts opened 123 new net stores in the first six months of 2020 and a new distribution facility in Lebanon, Tenn. The company anticipates opening a total of 150 to 165 new stores this year.
“People are not buying new cars, but keeping the old one up and running,” Cook says. During recessions, people hold on to their automobiles longer.
Twice-bankrupt Payless ShoeSource Inc., which closed around 2,500 stores, announced it is re-entering the market with plans to open 300 to 500 new freestanding stores in North America over the next five years. The first new store is slated to open in Miami.
The chain formally dropped “ShoeSource” from its name and is unveiling a new e-commerce platform.
Although Starbucks plans to close up to 400 locations in the U.S. and Canada over the next 18 months, it’s adding new carry out and pick-up only locations, as it builds on the strength of its digital customer and convenience of its Starbucks app.
The chain said it expects to eventually open roughly 300 new North American stores that specialize in carryout and pick-up options. Even before the pandemic, Starbucks officials said more customers were ordering coffee to go, and they were working to add more pick-up locations.
4. Dollar Tree/Family Dollar
Dollar stores traditionally have performed well during times of economic uncertainty and high unemployment. Now the pandemic is offering dollar stores chains significant opportunity as they move forward with aggressive store expansions, including a bigger focus on food.
Dollar Tree, which also owns Family dollar, has plans for 500 new stores in fiscal 2020. That includes 325 Dollar Tree and 175 Family Dollar locations. Also, the chain is undertaking 750 Family Dollar H2 store renovations with more coolers and consumables. Capital expenditures for fiscal 2020 are expected to be approximately $1 billion.
Same-store sales for Family Dollar increased 11.6 percent in the second quarter and Dollar Tree’s same-store sales increased 3.1 percent.
3. At Home
At Home, a big-box retail chain specializing in home décor, is aggressively expanding its store fleet.
“At Home is reporting strong sales growth and looking to expand its total store count to about 600,” Stan Johnson’s Beck notes. (It currently has 219 locations).
At Home CEO Lee Bird said the retailer’s sales are booming during the pandemic. He credits the stay-at-home trend for the growing business as more consumers are seeking to purchase items like office furniture/accessories and outdoor furniture.
2. Dollar General
Dollar General—the nation’s biggest dollar store chain—plans to open 1,000 new stores by the end of 2020. It also plans to remodel 1,670 stores and relocate 110 stores in fiscal 2020.
The company’s same-store sales soared 18.8 percent in the second quarter ending July 31, 2020. The chain targets primarily low- and middle-income consumers in rural areas. The company’s aggressive expansion is anticipated to continue as economists warn of a looming recession. Most Dollar General stores are located in towns with populations of fewer than 20,000 and miles away from a grocer or big-box retailer. The chain has opened roughly 1,000 stores annually for the past three years.
Massive convenience store chain 7-Eleven plans to expand its footprint to 20,000 stores following its $21 billion acquisition of Marathon Petroleum Corp’s Speedway. The deal included Speedway’s 3,900 stores, bringing 7-Eleven’s total store count to about 14,000 in the U.S., Beck notes.
7-Eleven is planning to add 1,100 stores, according to Stan Johnson Co.’s report. In 2019, it reportedly opened a new store every three and a half hours, the report noted.
In response to the pandemic, the chain expanded its delivery app called 7NOW to offer customers the option to order and pay for items ahead of time.