Email this article Format for printing

Retailers in the Real World

A good way to get a handle on retailers is to go out to the local malls and see how the stores are doing in their "natural environment." Motley Fool Research Analyst Bob Fredeen relates his experience and thoughts from his recent field trip.

By Bob Fredeen (TMF Bobdog)
August 17, 2000

One interesting aspect of investing in the retail industry is the possibility for field trips -- trips to visit stores you're interested in and their competition. In fact, visiting malls is even more important when seasons change and retailers are putting out the newest fashions. As the fall back-to-school season has just started, now is the best time to see what retailers have for sale at our local malls. Important aspects to note during the visits are traffic in the store, customer service, and how much merchandise is marked down.

For this article, we went to the Tyson's Corner Center mall in McLean, Virginia, on a recent Tuesday afternoon. Among the stores visited were Gap, Banana Republic, Express, The Limited, Structure, Levi's, Polo Jeans Company, L.L. Bean, and Eddie Bauer. While I won't comment on every store we visited, I'll give some general impressions.

L.L. Bean
We'll start with L.L. Bean, which has been accorded "anchor" status at this mall. Generally, anchor stores are large department stores that the mall developers expect will bring in many customers. While L.L. Bean's store was not as large as Bloomingdale's, it seems to be doing its job of bringing in the shoppers. The "Treadwall," handholds and footholds mounted on a wall that moves down slowly, was very popular with children. There was also a fish pond and waterfall, though these were under repair at the time. On the upper level, customers were wandering through the outdoor department looking at camping and boating equipment as well as clothes.

Stores like this are important for the entire mall. An assistant manager at another store commented that traffic at her store has been stronger in the last few weeks, largely due to all the customers attracted to the L.L. Bean store. This kind of synergy is important for all of the stores in the mall.

With its outdoor-oriented looks and more advanced fabrics, the company didn't seem to be a direct competitor to Abercrombie & Fitch and Gap. Traffic at the store was not that strong relative to the number of sales staff, and there were no obvious sales promotions, probably because the store is only three weeks old. Service was strong in almost every area of the store with sales staff ready to help.

Structure
We visited Structure, a brand owned by the Limited (NYSE: LTD). This store focuses on younger men, and boasts a fairly preppy back-to-school lineup. This theme appeared to varying degrees in several stores, including Ambercrombie & Fitch and American Eagle Outfitters. One of the best aspects of this particular store was the clean, spacious design. Sales staff was helpful, though that could be related to the low traffic in the store on a Tuesday afternoon. Also, this store had few markdowns, indicating it isn't overwhelmed with old inventory.

Express
Sticking to Limited brands, we found Express to be one of the more exciting stores for the day. Traffic was fairly strong with quite a few customers buying. The big trend here seemed to be sweaters. We lost count of the sweater styles at 15, with the styles going from big, thick sweaters to thin, sleeveless sweaters. Sales staff were helpful in finding sizes for customers and explaining the nuances of different styles of blue jeans. The amount of merchandise on markdown was moderate.

American Eagle Outfitters
The American Eagle Outfitters (Nasdaq: AEOS) store was full of displays, as opposed to the open floor designs favored by the various brands under the Limited's umbrella. The store had a large variety of items marked down. Service was surprisingly good for a youth-oriented store, with a greeter and other members of the sales staff offering to help customers. Traffic was also fairly strong for this store.

Abercrombie & Fitch
The Abercrombie & Fitch (NYSE: ANF) store was one of the busier stores in the mall. The styles showed a definite preppy theme, with sweaters, cargo pants, chinos, and button-up shirts. Another interesting trend was lower prices than in past seasons at the store. While lower prices can be bad for a brand, these price cuts do not seem drastic enough to damage the Abercrombie brand. Abercrombie & Fitch was also one of the most visible brands while walking around the mall. Service was inconsistent, with a couple of the sales staff making some extra effort to help customers, while others were discussing their recent weekend, oblivious to the customers wandering by. There was a moderate amount of markdown merchandise available at the back of the store.

Gap
As readers of Motley Fool Research's Gap report know, Gap (NYSE: GPS) is continuing to make its stores more convenient and friendlier places to shop for basic fashions. Sales staff was generally helpful and several of them offered to help us find what we were looking for, possibly because of the lower traffic level at the time. While the Gap remains a mid-priced store with its basic lineup, one thing that was missing was a common theme or color scheme. This gave the store a somewhat jumbled appearance, especially for the women's collection, which went from leather up front, to big sweaters, to a hodgepodge of T-shirts. There wasn't an obvious fall color palette, as colors ran the gamut from black leather to red T-shirts.

Banana Republic
Mentioning the somewhat jumbled appearance of the Gap store is the perfect contrast to its sister brand, Banana Republic, which had a store a few steps away. Looking at the fall lineup, it was pretty obvious that the different designers were working from the same color palette. Overall, the store was very much like it always has been -- stylish, quality clothes for business and casual wear. Prices seem to be a bit lower, but not so much lower that the brand will be hurt by the lower prices. This was one the busiest stores we visited, and the sales staff was having trouble getting to every customer.

While looking at the stores in your local mall may not be a perfect indicator of the health of the retail industry, it can give you an excellent idea of how companies are doing over time. Beyond looking at the actual stores, it's also important to see what your fellow mall goers are wearing and where they have been shopping. So next time you're at the mall, be observant. You may even have fun learning about the companies you own.

Related links: