Dallas-Fort Worth: Healthy economy added 100K jobs in 2017
The Dallas-Fort Worth market is projected to continue to have a robust economy in 2018, with broad-based job creation driven in part by the state’s oil wealth.
The market added more than 100,000 jobs last year, and unemployment remained below the state level of about 4%.
The Dallas-Fort Worth metropolitan area’s economy is the fourth largest in the country in terms of nominal gross domestic product at $577.5 billion, according to the U.S. Bureau of Economic Analysis. That represented economic growth of nearly 13%, the strongest in more than a decade.
The Dallas-Fort Worth Metroplex, as the market is called, is the fourth-largest metropolitan area in the United States, with a population of more than 7.2 million, and in 2016 was the fastest-growing major metro area in the United States in terms of population.
The area is home to one of the largest concentrations of corporate headquarters of any metropolitan market in the United States, and as a result, business management and operations represent an important component of the economy.
CVS Pharmacy and Walgreens have fairly even market shares in the Dallas-Fort Worth Metroplex, according to a 2015 research report from Barclays Capital. Rite Aid does not have a presence in the market. CVS Pharmacy was reported last year to be gearing up to open the only drugstore in downtown Fort Worth, a two-story location that was scheduled to open this year.
The area also is Walmart country. According to Metro Market Studies data reported in the Dallas News, Walmart captured 28% of the grocery market in 2017 with 135 stores, nearly double the market share of the second-largest grocer, Cincinnati-based Kroger, which garnered 14.3% of sales from its 93 locations in the market. The chain added seven stores in the market between 2016 and 2017, and added more than a full percentage point to its market share, according to the Metro Market Studies data.
Albertsons also has a significant presence in the market through both of its namesake Albertsons stores and its Tom Thumb chain, acquired in the Safeway merger, along with the Market Street format, a division of Lubbock, Texas-based United Supermarkets, which Albertsons acquired in 2013.
Other chains that have been growing in the Dallas market include local operator Brookshire/Super 1, which added seven new stores for a total of 34 and a 2.5% grocery market share; Fiesta Mart, with five additional locations and a 4.1% share; H-E-B, which operates both traditional stores and its upscale Central Market banner in the Dallas area, for a total of 11 locations and a 2.5% share.
Austin, Texas-based Whole Foods Market also has a 2.5% share with its 13 locations, three more than in 2016, according to Metro Market Studies. Phoenix-based Sprouts Farmers Market added two stores and captured 2.1% of the grocery market.
One of the biggest changes in the food retailing landscape is coming from Boise, Idaho-based big-box discount retailer Winco, which now has nine stores in the market and 3% market share, up almost a full percentage point over a year ago.
The market also is one of a handful where Amazon launched same-day grocery delivery from its Whole Foods banner through its Amazon Prime Now service.
According to a recent report from Weitzman, a Dallas-based real estate brokerage firm specializing in retail space, many consumables retailers are finding locations in existing retail centers rather than building new centers.
“Due to the lack of development options in built-out markets, grocers such as Winco Foods, Tom Thumb and Central Market are adding stores by backfilling vacancies in existing community centers,” Weitzman’s report said.
St. Louis: Value in focus in vie for Gateway City shoppers
A declining population in the St. Louis metro area is exacerbating a competitive retail marketplace dominated by Schnuck Markets, Walmart and Walgreens. Meanwhile, no-frills discount chain Aldi is ramping up the pressure on traditional grocery retailers. Lidl, a similar German-owned chain, is rumored to be opening stores in the area soon.
Analysts said a declining population could mean everything from price wars to declining sales potential to flat growth, which may lead to operational changes and sometimes even store closures. Certainly, St. Louis is not a robust market for building or remodeling stores — unless the retailer is Aldi.
The German discount chain is renovating dozens of its stores in the St. Louis metro area. About $49 million is being spent to spruce up stores and become more of a retail factor through a nationwide remodeling program.
Since the discount chain’s calling card is lower prices, its stepped-up presence will apply considerable pressure on traditional grocers Schnucks and Dierbergs Markets. The former controls a 28.6% market share, while Dierbergs stands at 10.4%, according to ARM Insight. Walmart has a significant share with 27.4%.
And then there is Amazon.
The dot-com giant — always a market disruptor — will open its first fulfillment center in St. Peters, Mo., in May 2019. The warehouse’s legendary robotic technology will efficiently give Amazon Prime customers in the St. Louis area next-day, and perhaps even same-day, delivery of thousands of products.
“Stores that are most vulnerable to online competition will likely feel more pressure and may be the first retailers squeezed out of the market,” said Douglas Munson, principal at MTN Retail Advisors, said. “Declining population will eliminate current struggling chains and force the surviving chains to reconcile their existing store network.”
Lari Harding, vice president of product strategy and marketing at Inmar, doesn’t believe that a declining population and decreased foot traffic will automatically result in a store closure. Changing marketing conditions could first lead to other less dramatic responses, such as limiting labor hours.
“If sales do dip enough to make closing a store a serious consideration, it will not be a quick decision,” Harding said. “Retailers will consider several important factors, including real estate and unionized stores, as part of the decision-making process. For real estate, do they rent or own the land? What are the conditions of the lease? When is the lease up? In the case of unionized stores, closing is further complicated by the likelihood that the retailer may have to offer senior, higher-paid employees jobs at another store — potentially shifting labor costs to other stores that may be facing similar challenges.”
In the drug channel, independent pharmacy’s market share is almost gone. Walgreens has more than an 80% share of the drug store business in St. Louis, while CVS has a 14% share.
Inmar’s Harding urges supermarkets to open in-store pharmacies to give the drug chains some competition. Inmar’s 2018 Shopper Behavior Study found that more than 44% of shoppers rate the ability to shop for groceries at the same location as “important” or “very important” in selecting a pharmacy to fill their prescriptions.
Schnucks operates pharmacies in two dozen stores in St. Louis. Dierbergs Markets operates pharmacies in its half-dozen urban stores.
“These retailers, responding to the growth of retiring baby boomers, will have to execute an assortment change that recognizes and enables the shopping habits and preferences of this group,” Harding said. “ “This change represents an opportunity for retailers to drive additional sales in a number of categories, particularly in health care and personal care where retailers can elevate OTC medications and beauty aids.”
Houston: Booming oil industry drives economic engine
Higher oil prices and investments to recover from Hurricane Harvey are buoying the Houston area’s economy, which is projected to continue to expand in 2018.
Houston itself is the largest city in Texas and the fourth largest in the United States with a population of more than 2.3 million, and the metro area is the sixth largest with a population of nearly 6.5 million.
The Houston metro area had the sixth largest nominal gross domestic product of any metropolitan area in the country in 2017 at $526 billion — an increase of about 10% over 2016 levels, according to the U.S. Commerce Department’s Bureau of Economic Statistics.
Oil is quite literally the fuel of the Houston-area economy, and local forecasts call for a robust year amid higher energy prices. If the price of crude oil remains above $60 per barrel, the area will add about 75,000 jobs this year, according to a recent report in the Houston Chronicle.
An economic forecast from Waco-Texas-based research firm the Perryman Group recently projected job growth in the Houston metropolitan area will exceed the rates of both the United States and all of Texas in the next five years. The firm said the region should be able to recover relatively quickly from the damage caused by Hurricane Harvey last fall, in part because of the robust energy industry.
“When [Hurricane Harvey] hit the Texas gulf coast, it hit a vibrant, rapidly growing area,” Ray Perryman, president and CEO of The Perryman Group, said during a presentation earlier this year to the Houston West Chamber of Commerce.
Retail expansion in the Houston area continues to be robust, although some retail projects that had been slated for completion in 2017 have been pushed back to 2018 due to the hurricane, according to a recent report from local real estate firm Wulfe & Co.
According to the firm’s 25th Annual Retail Survey, the greater Houston area will add 3.3 million sq. ft. of new retail shopping center space in 2018. While this represents a decline from the average of 4.4 million sq. ft. per year added in 2016 and 2017, it is more typical of the market’s growth.
“This year’s square footage projection is realistic and appropriate when considering that the square foot average over the previous 10 years was 3.0 million per year,” Ed Wulfe, chairman and CEO of Wulfe & Co., said.
Wulfe said that many of the retailers in the area have been focused on reconfiguring existing stores to more efficiently provide pick up and delivery of items ordered online.
San Antonio-based H-E-B, which is the largest supermarket operator in the market with 91 stores and a 26.6% share, is planning six new stores in the market in 2018, according to Wulfe & Co., which cited
market share data from the Shelby Report.
Walmart is No. 2 in the market with 101 stores and 25.1% share, followed by Kroger with 112 stores and 22.5% share. Kroger is planning to add two of its 100,000-sq.-ft. plus Marketplace stores in the market this year, according to the Wulfe & Co. report.
Walgreens currently holds the lead in market-share among drug stores in the market, with 13 of its locations featuring in-store Boots Beauty departments. The stores feature beauty consultants who can explain the attributes of Walgreens’ Boots line of skincare and makeup products. CVS Pharmacy also has a strong presence in the market, where Camp Hill, Pa.-based Rite Aid does not operate.
Forthcoming retail openings include 10 new small-format, limited-assortment stores from Batavia, Ill.-based Aldi, and one store each from Sprouts Farmers Market, Costco Wholesale and Korean food retailer H Mart.
Neither Target nor Walmart have openings planned for the market in 2018, according to Wulfe & Co. dsn