Store closures were far from uncommon in 2020, when the coronavirus pandemic battered retailers without mercy. Those closures have, in turn, left malls and shopping centers with vacancies to fill and lost revenue to make up for. They've also caused many real estate investment portfolios to take a major hit.
But in an age when stores seem to be shutting down, one retailer is looking to expand its footprint. And that's something real estate investors ought to be happy about.
A boom in off-price retail
While many retailers struggled during the pandemic, off-price and discount retailers benefitted from the economic uncertainty that abounded. Many consumers were drawn to these more affordable shopping destinations at a time when the jobless rate was high and the trajectory of the pandemic was quite uncertain.
Now, it's those same off-price retailers that could revive malls and shopping centers and take the place of some of the stores that were forced to shutter permanently in the pandemic's wake. In fact, Ross Stores (NASDAQ: ROST) has already opened 30 new locations this summer -- 22 Ross Dress for Less shops and eight dd's Discounts stores. These new locations are part of the company's plan to add around 60 new stores -- 40 Ross and 20 dd's Discounts -- in the course of the 2021 fiscal year.
Ross currently operates a total of 1,896 stores across 40 states; Washington, D.C.; and Guam. The company's goal is to expand its reach to at least 2,400 locations.
All of this is great news for shopping centers in particular, which tend to house retailers like Ross. Expanding off-price retail stores can take the place of shuttered tenants and help drive revenue for the owners of these commercial spaces.
Incidentally, Ross isn't the only off-price retailer to be growing in the near term. Burlington Stores has plans to open 100 new locations in the course of the current fiscal year. And like Ross, it's looking to expand more substantially over time.
A number of big dollar-store chains are also planning to open new locations imminently. Dollar General, for example, has plans to open more than 1,000 stores this year.
Even though consumers may have a bit more spending power nowadays than they normally would -- we can thank stimulus checks and enhancements like the boosted Child Tax Credit for that -- many still tend to favor discount and off-price stores over higher-end retailers. This especially holds true given the uncertainty that continues to abound as far as the pandemic itself goes.
Earlier this summer, it seemed like things had turned a corner on the pandemic front. Now, the Delta variant is fueling a surge in cases, and if things get worse, shutdowns and other restrictions that lead to job loss could come back into play. It's not surprising that consumers would gravitate toward budget-friendly retailers at a time like this, which explains why Ross and many of its counterparts are primed to thrive at a time when so many other retailers are threatened.