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    Default Economy Watch - CRE Valuation Takes a Thrashing in First Half '09

    U.S. commercial property valuations have dropped more in the first six months of 2009 than all of 2008, according to a report by the Investment Property Databank. The IPD US Annual Property Index for last year showed an annual capital return of minus 12.2 percent; during the first half of 2009, the return was about minus 17 percent.

    Office and industrial properties took hardest hit, tumbling 18.2 percent, while (somewhat counter-intuitively) retail properties dropped less, 14.1 percent. "But the outlook is not entirely gloomy," noted Simon Fairchild, managing director at IPD US, in a statement. "Pressure on market values appears to be easing, though [are] not necessarily at an end."

    Everyone knew that retailers were facing a tough year after the industry's collective drubbing last Christmas seasons. But the lesson has taken longer to sink for some than others. Last winter, teen fashion specialist Abercrombie & Fitch Co. seemed fairly sure than teens were going to keep paying a premium to wear Abercrombie & Fitch. What's a recession to teens, anyway?

    If Abercrombie & Fitch's sales numbers are any indication, quite important. For the company's most recent fiscal quarter (ended August 1), net sales dropped 23 percent to $648.5 million, compared with the same period last year, while comp-store sales declined 30 percent.

    Lately the company has been adjusting some of its pricing strategies to deal with the new normal, but it's also looking long-term to growth outside the United States to bolster its fortunes. "Our future is tied to the international expansion of our brands," noted Mike Jeffries, Abercrombie & Fitch chairman & CEO, during Friday's conference call, citing the company's efforts to establish itself in the U.K. as successful in spite of a weak retail market in that country.

    Even companies that deal in more basic clothing, such as American Apparel Inc., are having a tough time of it. For its second quarter (ended June 30, 2009) sales were up 13.4 percent compared with a year ago, but that was because of additional stores; com-store sales declined 10 percent.

    The company is still opening new stores, however, though at a much slower pace than in pervious years. By the end of this year, it will have opened 30 new locations.

    "We are confident that all our newer stores opened in 2009 will benefit in being early in the maturity curve next year which, when combined with a controlled number of new store openings in 2010, should help us rebuild our top-line momentum," said Adrian Kowalewski, American Apparel CFO, during Thursday's conference call, sounding an optimist note that looks forward to some kind of recovery in 2010.

    American Apparel also has the distinction of being the only major retailer to settle a lawsuit with filmmaker Woody Allen during 2Q09. The company paid Allen $5 million in May to settle a suit he brought against it for using an image from Annie Hall for American Apparel ads without his permission.

    Wall Street ended last week in a down mood, perhaps because consumer confidence seems to be in a down mood as well. The Dow Jones Industrial Average lost 76.79 points, or 0.82 percent, while the S&P 500 and the Nasdaq lost 0.85 percent and 1.19 percent respectively.



  2. #2
    Join Date
    Sep 2009


    The decrease of annual capital return proves that economy of USA is going down day by day. As the company says they keep opening new stores that mean they don't give up. That is very hopeful news.


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