Retail industry prepares for tough times across Wiregrass

Even the best window dressing can’t pretty up the gloomy 2009 retail picture.

Analysts predict 25 percent of more than 180 big-box retailers are at significant risk of filing for bankruptcy or facing severe financial distress in 2009-10.

Although the early stages of a recovery could begin by the third quarter of 2009, that date is too late — way too late — for some.

While the national recession didn’t reach Dothan until mid- to late-2008, the Wiregrass is in a downturn. Houston County unemployment is at 5.6 percent, which is high for the area, and sales tax collections fell 7 percent in December, continuing a trend of declining figures.

Troubled national retail chains have affected Dothan, as Goody’s and Circuit City announced earlier this year they would close.

Dothan Area Chamber of Commerce President Matt Parker remains optimistic, saying Dothan is not suffering to the extent other areas are, due in part to the area’s diversity.

“While some of the companies that did once occupy retail space are no longer here due to national structure, many of them that were here did well,” Parker said. “A lot of them just got nailed when the corporation went out of business.”

Nonetheless, the closed doors bring job losses, and the sight of empty retail space in new developments like the Dothan Pavilion make for an uncertain future and beg the question: Have developers over-built?

“It’s scary,” Mayor Pat Thomas said. “There is going to be a lot of retail space available, which is not unique to Dothan. It is nationwide. Still, we are better off than a lot of communities.

“Dothan is usually toward the latter end of any store closing and we continue to try to be business friendly in Dothan so small business can grow here.”

Retail centers like The Pavilion, and the Dothan Village, an 80-acre development planned for U.S. 84 East, will be waiting for someone when the economy rebounds, Thomas said.

“I do not believe we are overbuilding,” Parker said. “With the financial and economic environment being what it is today, lending institutions are not going to do many deals that do not have tenants for projects unless they are funded out of third party arrangements or other financial mechanisms.”

And as those projects come to Dothan Planning Director Todd McDonald and his staff, McDonald said the city never seeks to judge the possible success or failure of that project.

“We do have a lot of retail space,” McDonald said, “but that’s not something we want to tell you. On the political end, we are not going to say we don’t want this because we have enough. But there is no doubt in my mind; we will be over-built on space.”

Yet McDonald points to successful retail corridors like Montgomery Highway, where nearly every available property is filled, as a sign that the market remains strong but is not so good for high-end retail space.

With around 700,000 square feet of retail, The Dothan Pavilion remains more than a quarter empty, even though the center offers good exposure.

“Retail lives and dies by being seen,” McDonald said. 

Being seen and deciding how much to stock for show, are two issues facing retailer Eagle Eye Outfitters.

The lease on the building in Hillcrest Shopping Center is up this year and what might have been a good time for an expansion, is not looking so promising.

“Mark and I are worried,” owner Susan Anderson said. “We are trying to decide if we are going to move into a larger location or stay where we are. We have no room, but at the same time, we have made a conscious effort to cut back.”

Seasonal help has left and normal after-Christmas hiring has been postponed. The Andersons are also being conservative in their buying.

“We are scheduling shipments where we can scale back and can do fill-ins if we need to. We are buying less,” she said.

Sales at Eagle Eye Outfitters were up slightly in December, Anderson said, but dropped off dramatically in January.

“It seems everybody tried to keep Christmas normal but people tried to be practical, and buy jackets and useable things,” she said.

One of the few bright spots on the horizon is an expected increase in sales due to the Dothan City Schools’ new uniform policy. Anderson said February sales have picked up, but only with significant mark down on fall and winter inventory. As they look around, Anderson said she knows things aren’t good.

“It is concerning how many open buildings we are seeing,” she said.

In the meantime, other large projects, like two Publix locations, are moving forward. McDonald said construction plans are being drawn up and the Cottonwood Road development is expected to be submitted first. A second Publix complex on John D. Odom Road, will most likely be constructed at the same time.
Just as the chamber works to recruit industry, Parker said retailers are also sought.

“We promote the Dothan area for various business sectors at various shows,” he said. “We have participated at International Shopping Center events in the past to lure projects where there are gaps in our market, like we do for various target industries tied to aviation, building product manufacturing, and distribution.”

The lack of consumer spending is affecting the service sector too. Restaurants suffer because there is less disposable income as consumers pay down debt and sock away money for harder times.

Bobby Snellgrove, who owns the Prop Shop, a boat propeller service center, said as people stop buying and using luxury items like boats, his business suffers.

“Business is down; 2008 was not a very good year for the marine business,” he said. “The economy went downhill and the price of gasoline really got the marine industry. Fishing and boating are a luxury and people seem to cut these luxury items out first.”

Snellgrove said 2009 shows hope.

“People are doing more repairs,” he said. “They are not buying new stuff. We see a lot of people selling their boats as well.”

Retail industry sales – excluding automobile, gas stations and restaurant sales – are expected to decline by one-half percent this year, according to the
National Retail Federation. This marks the first time the trade group has projected a decline in annual retail sales since it began tracking in 1995.

The NRF’s quarter-by-quarter outlook calls for a 2.5 percent sales decline in the first half of the year. It estimates sales to decrease 1.1 percent in the third quarter followed by a 3.6 percent increase in fourth quarter ’09.

“All we can do is try to ride out these economic times and hope we will come back stronger,” Thomas said. “Those are not wonderful words for anybody who has lost a job. However, we entered the recession last so perhaps we will emerge first. That is our hope.”

Consumer spending accounts for 70 to 75 percent of the Gross National Product.