Department stores are in decline in the United States, shopping centre magnate Frank Lowy says, and his global Westfield chain is responding by shrinking their presence in many locations.
Westfield Corporation has being buying back department store space in the US and replacing them with new and more “productive” retailers, the global retail giant’s chairman told shareholders in Sydney.
Mr Lowy, speaking at Westfield’s annual general meeting in Sydney, said the decline in US department stores has been happening since the mid-1980s.
“It is now generally accepted that retailers in the US, including the department stores, need less physical stores to service the markets in which they operate,” Mr Lowy said.
“Recognising this trend, in recent years we have bought back department store space and repurposed that space to introduce new and more productive retailers – retailers who have greater capacity to attract shoppers to our centres.”
Mr Lowy said it was the group’s expectation that this trend will continue in future years.
This comes at a time when department store giants Myer and David Jones are up against stiffer competition in Australia as online shopping grows and more overseas speciality retailers, including H&M, Sephora and Zara, open local stores.
Westfield, which is listed on the ASX and owns shopping centres in the US, UK and Europe, has been in the US since 1977.
Westfield shopping centres in Australia are owned by Scentre Group following a spin-off from Westfield Corporation in 2014.
Mr Lowy said department stores were closing in some locations while opening at Westfield’s flagship centres (centres with higher rent, higher occupancy rates and strong sales).
He said the US has too much retail space and this has put pressure on shopping centres which was why Westfield, since 2010, has been focusing on its flagship centres, which now represent 82 per cent of the group’s portfolio.
Nordstrom department store opened at the Century City centre in Los Angeles and another at in San Diego, while Bloomingdales opened a new store at Valley Fair in Silicon Valley.
France’s biggest department store, Galleries Lafayette, will open their first store in Italy at Westfield’s new centre in Milan, and John Lewis will have a new store at Westfield London.
Co-chief executive Steven Lowy said the group recently acquired a small Broadway production company to “create even better experiences in our centres.”
He said businesses that were never regarded as retailers were now opening stores in their centres, including car makers Ford, Citroen and Tesla.