McInerny, Penney void isn't likely to last
By Andrew Gomes
Advertiser Staff Writer
Two longtime retailers will begin the new year on a somber note by leaving the Hawai'i market after a combined 180 years of doing business in the Islands.
The departure of department store chains McInerny and JC Penney & Co. will create a void in the local retail market — but one that is expected to be largely filled during the year.
Meanwhile, for other merchants who were able to hang on following challenges brought on by the 9/11 terrorist attacks, 2003 appears to be one of resuming growth or getting back to normal.
"Everyone's trying to rebuild now," said Walter Watanabe, general manager of Shirokiya at Ala Moana Center. "Iraq or bin Laden or North Korea ... this is what we really are afraid of."
This year, the lingering aftermath of 9/11 took a toll on Hawai'i's retail industry, which employs about 20 percent of the state's work force and generates $17 billion in annual sales.
The number of retail employees dropped by about 4,000 and had yet to rebound as of October, the most recent month for which data were available. Economists expect many of the lost jobs will return in 2003.
Sales made a quicker comeback last year, standing $162 million higher through September after being down almost $600 million in the first half of the year.
Part of the revenue increase was attributed to new-home sales, but many store merchants report improvements in business especially leading into the key holiday season. Barring any military or financial conflicts that hurt Hawai'i's economy and consumer confidence, more growth is expected.
Much of the opportunity will involve the 13 locations vacated by McInerny, and JC Penney's 470,000 square feet of space at four stores.
Waiiki's Royal Hawaiian Shopping Center, where McInerny was the largest tenant, should have major new additions, mainly dining and entertainment, by year end.
As for JC Penney space, Macy's parent company has an agreement to purchase the Maui store, but the rest remains available for lease by other owners.
Douglass Smoyer, chairman of local consulting and leasing firm Retail Strategies Inc., expects companies such as Crate & Barrel, Pottery Barn, Restoration Hardware and Bed, Bath & Beyond to move in and satisfy strong demand for home accessories.
"It's the biggest void in the market," he said.
Burlington Coat Factory also is still hunting for a spot, another sign Hawai'i still attracts national chains.
Some retailers are expected to continue their struggles, such as DFS Hawai'i, the duty-free retailer serving outbound international travelers — mainly Japanese tourists, who are spending less and visiting in smaller numbers.
The new year will be more of a test for the new luxury retail development 2100 Kalakaua — which opened late this year — and whether shops there such as Gucci, Tiffany & Co. and others can achieve high enough returns on their investments as consumers increasingly weigh high-end purchases.
Under construction and scheduled to open in the year ahead are electronics retailer Best Buy in Pearl City, and Lowe's home improvement in Kona on the Big Island.
A double-decker Wal-Mart and Sam's Club near Ala Moana Center also is under construction but is not anticipated to be open in 2003.
Of more uncertain timing — but both of which might be unveiled in the year ahead — are the announcement of a location for the Islands' first full-line Nordstrom department store and the redevelopment of Waikiki's three recently-shuttered theaters.
General Growth Properties, owner of Ala Moana Center and the Victoria Ward complex — has said it is continuing to negotiate with Nordstrom for a spot on its properties.
Meanwhile, theater owner Consolidated Amusement Co. has said it will redevelop the theater site, and the plan may include retail.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
