Retail Chains Must Take Immediate Action to Avoid the Watch List and Bankruptcy

In today’s fiercely competitive retail landscape, chains struggling with declining sales and foot traffic must prioritize immediate action. Failure to do so could lead them to the ominous 'watch list' of troubled retailers, a place no company wants to be. According to Andy Graiser, Co-President of AG Real Estate Partners, the time for decisive measures is now, particularly to avert the burdensome expenses associated with Chapter 11 bankruptcy filings.

The pitfalls of delay are significant. Retailers often hesitate to optimize their real estate portfolios, missing the critical window to enhance their situation before being forced into reorganizations. Graiser emphasizes that understanding the dynamics of one’s portfolio is foundational. Retailers must be clear about their supply chains, identify underperforming stores for potential closures, and engage landlords in discussions about lease restructuring or terminations early on.

Furthermore, consumer behavior trends should not be overlooked during this process. Major changes in bustling areas—like the exit of key co-tenants—can have ripple effects, questioningly the viability of existing stores. Graiser notes, “In some cases, individual stores decline not due to internal mismanagement but because of external factors like nearby closures.” Everything from landlord relationships to local area viability plays a role in whether a chain remains competitive.

As retailers evaluate their assets, they should not only focus on leasing agreements but also consider downsizing, relocating, or even selling off non-store assets, including warehouses and office spaces. A comprehensive review allows for a clearer understanding of both market and operational strategies. “What will happen to logistics, fulfillment, and customer service without that asset?” Graiser poses, urging brands to think critically about their overall business framework.

Identifying market trends is one of the first important steps in reviewing portfolio performance. Understanding sales trends and box sizes, market rents, and occupancy costs can reveal hidden opportunities for optimizing the existing portfolio. With robust information at their fingertips, retailers can navigate through their problems more efficiently.

Graiser's firm has achieved remarkable success in optimizing portfolios on behalf of both struggling and healthy clients, claiming over $13 billion in tenant savings through meticulous lease restructuring and selling additional assets worth more than $12 billion.

“The strategic engagement of third-party real estate advisors can further bolster this process,” Graiser suggests, as they can assist retailers in obtaining real-time data to support their decisions. Effective partnerships give retailers access to expertise in analyzing current positions and creating informed strategies.

Mitigating risks through strategic planning is imperative. Graiser warns that minor issues like management problems, inadequate signage, and maintenance neglect should not be disregarded. Knowing when and where to act, alongside understanding the nuances of leasing agreements, can mean the difference between survival and bankruptcy for many chains.

In conclusion, the modern retail landscape demands swift, informed actions to mitigate financial distress. Graiser encapsulates the essence of timely interventions: “Yes, information is power, but timing matters, too.” Maintaining awareness of market shifts coupled with proactive portfolio management may just hold the key for retailers attempting to navigate through turbulence ahead.

For those interested in a deeper dive into these strategies, Graiser's full insights can be found at Chain Store Age Online.