At a time when so many people have been stuck at home, you'd think personal care would fall by the wayside. But actually, self-pampering is making a comeback, especially now that coronavirus vaccines are in circulation and there's reason to believe (small) social gatherings may soon be more viable.
In fact, a number of skincare and beauty lines are making plans to open stores, while an existing makeup powerhouse is gearing up to expand its footprint. All of this is very good news for malls and shopping centers alike.
An influx of beauty shops
While there's been a waning need for makeup during the pandemic -- eye shadow doesn't exactly pop over Zoom (NASDAQ: ZM) -- now that more companies are making plans to return staff to the office and more people are making plans to just plain go out, we could see a surge in cosmetics sales. Plus, one thing that's been touted throughout the pandemic is the need for self-care, which sets the stage for some new players to enter the retail field.
Skincare company Heyday is one retail start-up planning to open physical stores. After securing $20 million in funding, Heyday announced plans to scale to hundreds of stores in the next five years. Another service-based beauty startup, Madison Reed, is also planning to enter the retail space via franchise locations. In 2019, it announced plans to open 600 of its Color Bars by 2024.
Meanwhile, Sephora, a popular shopping mall mainstay, says it will open over 60 freestanding stores this year alone. Interestingly, 85% of them won't be located in malls. These stores are in addition to the store-in-store shops that Sephora will be opening as part of its recent partnership with Kohl's (NYSE: KSS).
Great news for real estate investors
At a time when so many stores have been shuttering at a rapid clip, news that beauty and skincare store openings are coming should give mall and shopping center REIT (real estate investment trust) investors reason to breathe a sigh of relief. Even though Sephora plans to open most of its new stores in off-mall locations, that's still good news for shopping centers, which, like malls, are desperate for tenants. And we could see Heyday or Madison Reed shops start to pop up in malls as their expansion takes hold.
Both shopping centers and malls could use new tenants, given the number of retailers with planned closures this year alone. The coronavirus pandemic zapped retail revenue significantly, while virus-related fears led many consumers to switch their shopping habits from in-store to online purchases.
But while it's one thing to order socks or books online, beauty and skincare items tend to require a more hands-on approach, so consumers may be more willing to revert to in-store shopping for these purchases in particular. If foot traffic picks up in beauty shops, it could lead to further expansion -- and a much-needed uptick in leasing activity for the malls and shopping centers that could really use new tenants.