Consumers continue to find places other than the mall for their shopping, and that’s having an impact on restaurant chains.
Several retailers in recent earnings calls have noted declining mall traffic, particularly when compared to their stand-alone counterparts. That echoes similar comments from restaurant chains that have in recent years noted declining performance of mall locations.
“Our mall-based traffic is trending significantly below outlet traffic quarter-to-date, which is leading to a pretty big disparity in top-line trend in our mall stores versus our outlet stores,” said Jane Elfers, CEO of children’s clothing retailer The Children’s Place, last week, according to a transcript on financial services site Sentieo.
“We experienced continued traffic decline in line with overall macro mall traffic, in the low single-digit percent versus the same period last year,” said Michael Prendergast, interim CEO of women’s apparel company Francesca's Holdings Corp., last week, according to Sentieo.
Build-A-Bear Workshop, meanwhile, said that sales of Disney’s “Frozen 2” merchandise were not enough to offset lower overall mall traffic.
Retail traffic has been a challenge for years as more sales shift online or to different types of retailers. Thanksgiving shopping traffic this year declined 0.8%, according to ShopperTrak, and Black Friday traffic declined 4.4%.
Restaurant chains have been noting challenges with their mall locations for some time. Red Robin closed 10 mall locations in the second quarter. Its 66 remaining mall locations underperformed regular units by 370 basis points last quarter, according to a Sentieo transcript.
Many malls have turned to restaurant chains such as Dave & Buster’s to fill empty spaces. But the Texas-based food and games chain hasn’t necessarily thrived lately, either.
The chain’s same-store sales declined 4.1% last quarter, and it is seeing softer amusement sales, which it blamed in part on more intense competition.
The declining mall traffic is the primary reason so many retailers have closed locations this year—retailers have closed 5,000 more locations this year than they’ve opened, according to Coresight Research.
It’s notable that brick-and-mortar retail is far from dead, and a lot of companies are thriving, even inside of malls.
Dick’s Sporting Goods has seen similar sales at its mall and stand-alone locations, though executives say that’s likely due to the retailer’s status as a destination concept.
Same-store sales at Target rose 4.5%. At Walmart, they rose 3.2%.
Low-cost retailer Dollar General, meanwhile, plans to add another 1,000 locations next year.
All of this suggests retail consumers are changing. They are shopping online more, and when they do go out, they visit destinations rather than go on longer, more general excursions.
Still, it’s become clear that the industry is losing a major source of traffic, and the weak restaurant sales in recent years have coincided with the weakening mall environment.
Many chains grew up around shopping centers, depending on nearby mall traffic to help them generate sales.
This is forcing chains to find new sources of sales and adapt to the shifting market. Casual-dining chains have focused on more discounts and takeout sales. Other mall-based concepts are opening more stand-alone locations and food trucks.
Auntie Anne’s is providing incentives for delivery drivers to convince them to make deliveries of the chain’s pretzels from mall-based locations.
The weakening traffic inside of malls will continue to present challenges for restaurant chains in the coming years. And the opportunities aren’t necessarily there, either, as Dave & Buster’s results demonstrate.
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