Which Retailers are Right-Sized for the
New Era of Consumerism?
􀂄 Which retailers stand to benefit from rent reductions and store closures?
Retailers are focused on survival and cash preservation in this challenging
environment, with some of the weaker players already shuttering stores. As
closings accelerate, key questions include: who will benefit from consolidation
(already underway in hardlines and staples, with specialty at the cusp), who is most
leveraged to rent expense, who has operating flexibility (lower rents or ability to
close stores) from lease renewals, and who is most exposed to weaker malls?
􀂄 Analyzed rent structures, lease renewals, and proprietary REIT data
We examined store footprints, possible store closures, lease renewals, and potential
EPS benefit from renegotiated rents. We also identified the overlap between our
retailers and a proprietary list of the “bottom 300” US centers (>500K square feet).
􀂄 Key findings: consolidation winners, rent reductions small, value exposed
1) Hardlines have consolidated; earlier inning for specialty/staples with potential
winners being niche-y and boomer retailers as well as larger operators in drug and
discount. 2) A 20% rent reduction for stores with leases expiring had a minimal
impact on EPS, but likely understated by relief from breaks in co-tenancy rules and
those that can leverage new stores. 3) CBK, ARO, and PSUN in specialty and
SHLD in staples (but not material) are most exposed to the “bottom 300” centers.
􀂄 Prefer stocks with strong brands, balance sheets, and real estate discipline
Specialty: URBN, ARO; Hardlines: HGG, DKS; Staples: WMT, CVS, KR.

Contents page
Executive Summary 3
Store Capacity 8
— Specialty Retail: Over-Stored and Now Overburdened.........................................8
— Hardlines Retail: Consolidation Taking Shape....................................................16
— Consumer Staples Retail: Regional Opportunities..............................................19
Rent Analysis: Expenses, Lease Expiration, and EPS Impact 25
— Specialty Retail: Big Burden, Big Opportunity.....................................................25
— Hardlines Retail: Macro Struggles Beget Rent Opportunity ................................32
— Staples Retail: Minimal EPS Impact, Easing Trend in Rents & Doors Are Opening
..........................................................................................................................37
UBS Retail REIT & Retail Teams’ “Bottom 300” Center Analysis 42
— Methodology ......................................................................................................42
— Key Takeaways: Specialty Retail........................................................................43
— Key Takeaways: Staples Retail ..........................................................................49