Ditching the mall has become a badge of honor as the COVID-19 crisis leaves retailers scrambling to promote safety at stores

• Retailers are saying that staying away from the mall is a major advantage.
• Executives at apparel and department stores have highlighted their off-mall locations in earnings calls over the last several weeks.
• "As you can imagine, stores that are in malls are harder to get people to shop at," Katrina O'Connell, executive vice president and CFO at Gap Inc., said in the company's June 4 earnings call.

These days, having your store located away from the mall is almost a badge of honor for retailers.

In earnings calls over the last several weeks, executives at apparel and department stores have said their off-mall locations are best-positioned for the future.

"95% of our stores are off-mall," Michelle Gass, CEO of Kohl's, said in the company's May 19 earnings call.

"And we believe that this is really an advantage, especially in a kind of COVID or post-COVID environment where customers are not only looking for the convenience that [Khol's] always offers but also a really safe environment."

Health experts have suggested that, as the US moves to reopen businesses, outdoor activities pose a lower risk of spreading the novel coronavirus, which causes the respiratory disease COVID-19.

Some retailers seem to be reasoning that shoppers will be more confident going into stores that are located in strip malls or other places where they can wait in line outside before entering. Though many states are requiring retail stores to limit how many customers can enter, there is a lot of confined indoor space inside malls, and it's not clear when people will feel comfortable coming back.

"As you can imagine, stores that are in malls are harder to get people to shop at," Katrina O'Connell, executive vice president and CFO at Gap Inc., said in the company's June 4 earnings call.

She added that, when comparing recent sales trends at reopened Gap, Old Navy, Banana Republic, and Athleta stores, the company is seeing "a meaningfully better trend in productivity at our Old Navy stores," which are generally located away from malls.

O'Connell added that contactless services like curbside pickup are easier to achieve at stores that are not located in malls.

Not just a pandemic era problem

But, even before the pandemic brought health and safety concerns to the fore, foot traffic to malls and their anchor stores has been declining. Many chains have opted to shut down locations in underperforming malls, including JCPenney, which on Thursday released a list of 154 stores that it would close in the coming weeks.

These closures have ripple effects. When an anchor store like a Macy's or a JCPenney closes in a mall, it often triggers co-tenancy clauses that allow other mall tenants to end their leases or renegotiate the terms until a new tenant moves into the anchor space, Business Insider's Hayley Peterson reported in May.

In its earnings call on May 28, Nordstrom said it is no longer considering itself a true mall brand. It has invested heavily in its off-price and e-commerce offerings while closing 16 full-line stores.

"As retail continues to evolve, our flexible model supports a continued shift from what was predominantly a mall-based business toward a more diversified model that includes digital and off-price," CEO Erik Nordstrom said during the earnings call.

Plus, there are now significantly more Nordstrom Rack stores than there are Nordstrom department stores.

"We didn't announce any store closings for Rack stores. Our Rack stores are very profitable," Nordstrom said.

"Almost all of them are in non-mall locations. They have shorter leases. We're able to, when those leases come up, usually move around to either invest in that building again or relocate to a better situation."