The US's biggest mall operator says the mall of the future 'doesn't need department stores'
- Simon Property Group, the biggest US mall operator, has been under pressure in recent years due to the rise of e-commerce.
- Sears, once America's most iconic retailer - which has numerous stores in Simon Property Group's malls, recently filed for bankruptcy.
- CEO David Simon said the department store closures are good for the whole industry and the mall of the future doesn't need big-box department stores.
- Watch Simon Property Group trade live here.
Simon Property Group, the biggest mall operator in the US, said Thursday that the mall of the future doesn't need department stores.
The mall operator has been searching for ways to turnaround business after the rise in online shopping contributed to shares plunging as much as 36% from their July 2016. Simon Property Group was hit with another blow earlier in October when Sears, once America's most iconic retailer, filed for Chapter 11 bankruptcy and announced plans to close 142 stores by the end of the year.
The mall operator said it has 33 Sears stores that have been closed or are in the process of closing in 2018, including 17 stores it absolutely controls, five stores Simon controls through a joint venture, and 11 stores owned by Sears. Sears' restructuring will provide a "unique opportunity" for Simon to redesign the mall brand.
The mall of the future "doesn't need department stores," CEO David Simon told investors Thursday, during the company's third-quarter earnings call.
He added that the 17 Sears storefronts controlled by Simon will be either converted to other uses or be replaced by smaller, more appropriately sized retail groups.
"We're going to redevelop this," he said. "We're going to generate positive momentum with the properties due to this. We're going to reinvest in the communities. We're going to be able to drive traffic from this box, put all of that aside."
Simon said the company has already closed some department stores this year, and has seen sales getting the benefit from the closures.
"Our industry got just too carried away with having all these big department-store boxes," Simon said.
"We don't need all of those. We don't really get much of an economic benefit from those boxes...There'll be a couple of losses on the scoreboard for us. But at the end of the day, this will be a good thing for us and likely our entire industry."
The company reported third-quarter earnings on Thursday that edged out Wall Street expectations. Simon earned $3.05 a share on revenue of $1.409 billion, beating the $3 and $1.407 that analysts surveyed by Bloomberg were looking for. Simon said it sees full-year earnings in the range of $12.09 to $12.13 per share. Analysts were expecting $12.10.
Simon Property Group was up 3% following the earnings report and 4% this year.
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