how healthy is the outlet industry? | fsp

June 11, 2015

FSP RETAIL BUSINESS CONSULTANTS

How Healthy is the Outlet Centre Industry?

Kenneth Sinclair Gunn

Director, FSP Retail Business Consultants

Contents

European Outlet Centres Today

Current Position

Recent Expansion

Planned 2015 & 2016 developments

Development Cycle and Current Capacity

European Occupiers Today

Top 25 Occupiers

Expanding Occupiers

Evolving Markets

Consumer Feedback

International Brands

Communication

Conclusions

June 12, 2015 FSP RETAIL BUSINESS CONSULTANTS 2

Current Position


Source: FSP

201 outlet centres1 >3k m2

Total GLA 3.4million m2

2014 Turnover of €11.7bn

191 are over 5,000m²

161 are over 10,000m²

63 are over 20,000m²

Excluding Russia, 72% of

the European population

lives within 90 minutes’

drive of an outlet centre

http://www.fspretail.com/en/demo/interactive-outlet-centre-map/

1 Turkey is considered to be separate from the core European market, and is not included in this review










McArthurGlen: 23%

Value Retail: 15%

Neinver: 8%

Realm: 4%

Marques Ave.: 4%

Promos: 3%

Freeport: 2%

Fashion Hse.: 2%

Fashion Dist.: 1%

Advantail: 2% Others: 37%

Operators & Investors


Source: FSP

Share of Total Turnover

TH Real Estate: 18%

Value Retail & Ptnrs: 14%

IRUS: 7%

McArthurGlen & Ptnrs: 4%

VIA Outlets: 3%

Blackstone: 3%

Hermes: 3%

Resolution: 3%

AEW: 3%

Unibail Rodamco: 2%

Others: 40%

Outlet Centre Openings in 2014

Country Location Name Format Location Format GLA (m2)

Italy Brugnato Shopinn Brugnato Outlet Village Edge of Suburbs Medium - Upscale 22,000

Denmark Copenhagen Copenhagen DO Outlet Mall Suburban Location Medium - Midscale 17,500

Poland Lublin City Outlet Lublin Outlet Mall Edge of Suburbs Medium - Midscale 12,500

Germany Bad Munstereifel Eifel City Outlet Outlet Village Town Centre Medium - Midscale 12,000

United Kingdom London - Hackney Hackney Fashion Hub High Street Edge of Town Centre Small - Upscale 7,000

Netherlands Amsterdam UFO Akerpoort Department Store Suburban Location Minor - Midscale 5,000


Source: FSP

Planned Openings in 2015 & 2016

Country Location Name Year GLA (sqm)

Poland Bialystok City Outlet Bialystok 2015 13,000

Denmark Billund Billund Quality Outlets 2015 12,000

Germany Brehna Fashion Outlet Leipzig 2015 11,500

Germany Koblenz Montabaur Fashion Outlet 2015 14,500

France La Cavalerie Viaduc Village 2015 5,988

France Paris (Aubergenville) Marques Avenue A13 2015 12,900

Czech Republic Prague The Prague Outlet 2015 12,000

United Kingdom Solihull Resorts World at the NEC 2015 14,362

Russia St Petersburg Outlet Village Pulkovo 2015 13,024

Italy Torino Torino Outlet Village 2015 19,500

Spain Barcelona (Viladecans) Viladecans The Style Outlets 2016 19,800

Italy Bergamo San Pellegrino Outlet Village 2016 13,000

France Marseille (Miramas) McArthurGlen Provence 2016 16,000

Russia St Petersburg Fashion House St Petersburg 2016 13,000

Estonia Tallinn Gate Tallinn Outlet 2016 12,500

Finland Vaalimaa Zsar Outlet Village 2016 12,000

Russia Yekaterinburg Fashion House Yekaterinburg 2016 18,000

Czech Republic Zdice Bohemia Outlet Village 2016 16,000


Source: FSP

Outlet Industry Expansion


Source: FSP

0

50000

100000

150000

200000

250000

300000

350000

Flo

ors

pa

ce

Ad

de

d (

m²)

Central Europe Northern Europe Southern Europe Western Europe

Capacity for New Outlet Development


Source: FSP


The Occupier Market

The Occupier Market


Source: FSP

0

100

200

300

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500

600

700

800

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1,000

-10%

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10%

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15

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2015 Change 2015 vs. 2014

Top 25 Occupiers

Retailer Country of

Origin Merchandise Category FISH Price Position

# Outlet

Stores CE. Europe

Northern

Europe

Southern

Europe

Western

Europe

Nike USA Leisure YI Upper Middle 120 20 29 43 28

Levi Strauss & Co USA Clothing & Footwear AS Middle 112 16 18 37 41

Puma Germany Leisure AS Middle 75 20 3 28 24

Adidas Germany Leisure AS Middle 74 21 14 21 18

Tommy Hilfiger USA Clothing & Footwear AI Upper Middle 71 16 13 22 20

Desigual Spain Clothing & Footwear YI Upper Middle 68 4 1 32 31

Guess USA Clothing & footwear AF Upper Middle 62 11 4 26 21

Tom Tailor Germany Clothing & Footwear FS Upper Middle 62 19 1 4 38

Lacoste France Clothing & Footwear FS Upper Middle 61 8 12 18 23

Calvin Klein USA Clothing & Footwear AF Upper Middle 58 3 8 31 19

Lindt Switzerland Catering Upper Middle 57 4 8 25 20

Asics Japan Leisure AI Middle 56 8 11 19 18

Home & Cook France Household FS Middle 54 12 9 21 24

Samsonite USA Personal AS Upper Middle 53 9 10 17 17

Clarks UK Clothing & Footwear FS Middle 50 1 29 7 13

Gant USA Clothing & Footwear AI Upper Middle 49 9 6 12 22

Geox Italy Clothing & Footwear FS Upper Middle 48 8 1 22 17

Calvin Klein Underwear USA Clothing & Footwear AF Upper Middle 45 2 11 15 17

Hugo Boss Germany Clothing & Footwear AI Premium 45 2 10 15 20

Le Creuset France Household AI Upper Middle 44 3 17 4 23

Triumph Germany Clothing & Footwear FS Middle 43 14 5 6 18

Villeroy & Boch Germany Household CI Upper Middle 43 5 9 10 19

Timberland USA Clothing & Footwear AI Upper Middle 42 6 10 20 12

Mango Spain Clothing & Footwear AI Middle 42 11 1 20 10

Quiksilver USA Clothing & Footwear YI Middle 42 10 1 12 19


Source: FSP

Top Expanding Occupiers

Retailer Country of

Origin Merchandise Category FISH Price Position

Outlet Centre

Portfolio Extent

# New

Outlet

Stores

CE.

Europe

Northern

Europe

Southern

Europe

Western

Europe

Asics Japan Leisure AI Middle Global Brand 19 6 2 8 3

Home & Cook France Household FS Middle Global Brand 16 5 2 4 5

Guess USA Clothing & Footwear AF Upper Middle Global Brand 15 7 1 5 2

Levi Strauss & Co USA Clothing & Footwear AS Middle Global Brand 15 3 0 5 7

The Body Shop UK Personal FS Middle Super Regional 14 0 5 3 6

Tommy Hilfiger USA Clothing & Footwear AI Upper Middle Global Brand 14 4 2 8 0

Fragrance shop, The UK Personal FS Middle Local 11 0 11 0 0

The North Face USA Leisure FS Upper Middle Global Brand 11 0 4 2 5

Quiksilver USA Clothing & Footwear YI Middle Global Brand 11 2 0 4 5

Utd. Colors of Benetton Italy Clothing & Footwear AS Middle Global Brand 11 1 1 4 5

Desigual Spain Clothing & Footwear YI Upper Middle Super Regional 10 0 1 3 6

Pepe Jeans UK Clothing & Footwear YI Upper Middle Super Regional 10 3 0 3 4

Puma Germany Leisure AS Middle Global Brand 10 2 0 4 4

Superdry UK Clothing & Footwear YF Middle Global Brand 10 0 2 1 7

Vans USA Clothing & Footwear YI Upper Middle Global Brand 10 1 2 5 2

Villeroy & Boch Germany Household CI Upper Middle Global Brand 10 0 1 5 4

Watch Station USA Personal AS Middle Regional 10 0 5 1 4

Ecco Denmark Clothing & Footwear AS Middle Global Brand 9 4 2 0 3

Michael Kors USA Clothing & Footwear AF Premium Global Brand 9 1 1 2 5


Source: FSP

Expanding Occupiers in Key Markets

Rank France Germany Italy Poland Russia Spain United Kingdom

1 The Body Shop (+5) Michael Kors (+4) Liu Jo Man (+8) Bestseller (+6) Albione (+3) Charanga (+4) Fragrance Shop (+11)

2 Levi Strauss & Co (+4) Superdry (+4) Tommy Hilfiger (+7) Asics (+5) Paper Shop, The (+3) Skechers (+3) The Gift Company (+8)

3 L'Oreal (+4) Wellensteyn (+4) VB Store (+7) Italian Fashion (+5) Charuel (+2) Asics (+3) Ernest Jones (+7)

4 Home & Cook (+4) Coach (+3) Flavio Castellani (+6) Mountain Warehouse (+5) Cream della Cream (+2) Forecast (+3) Grape Tree (+6)

5 Le Coq Sportif (+4) Campus (+3) Kennet Street (+6) Symbiosis (+5) Econika (+2) Benetton (+3) Watch Station (+5)

6 Little Marcel (+4) Kneipp (+3) Asics (+5) Home & Cook (+4) Elena Shipilova (+2) The Body Shop (+2) Beauty Outlet (+5)

7 Jeff De Bruges (+4) Lambert (+3) Vans (+5) Bialcon (+4) Just Couture (+2) Home & Cook (+2) Musto (+5)

8 Karl Marc John (+4) Sanetta (+3) Bottega del Sarto (+5) Prochnik (+4) Kanz (+2) Rockport (+2) Suit Direct (+5)

9 Benetton (+3) Sterntaler (+3) Puma (+4) So! Coffee (+4) Marc Cain (+2) Zwilling (+2) Skechers (+4)

10 Puma (+3) Levi Strauss & Co (+2) Alberta Ferreti (+4) Reserved (+3) Milana (+2) Adolfo Dominguez (+2) The Body Shop (+4)


Source: FSP

Evolving Fashion Markets


Source: FSP

50 70 90 110 130 150

Luxury / Premium

Upper Middle

Middle

Price Position Index

C.E. Europe Northern Europe Southern Europe Western Europe

(100 = Existing Regional Provision) (100 = Existing Regional Provision)

50 70 90 110 130 150 170 190

Young

Assured

Family

Classic

FISH Lifestage Index

C.E. Europe Northern Europe Southern Europe Western Europe

(100 = Existing Regional Provision) (100 = Existing Regional Provision)


Consumer Feedback

Mixed Customer Reviews


“I went there fairly recently and frankly I was

disappointed. I can get the same items at the same

price in the sales here and I don’t have to travel that

distance. So there really is no incentive for me to go

any more”

“There are some brands there that just don’t look

or feel the right style or quality. It makes me

wonder just what their stock is”

“It’s a bit like a bazaar for some brands there”

“I used to come for the Reebok, but it closed and

the only option was Adidas, but if they closed that

then I wouldn’t bother coming at all any more.”

“This is beyond the ordinary shopping”

“I went with a friend last week. I found lots of

brands that I love: the Kooples, Zadig, American

Vintage, Agnes B, Etro, Diesel (super store)“

“Burberry is awesome at Parndorf. Just bought an

insanely beautiful coat discounted from 1300Euro

to 237Euro! Super sale - late night - AWESOME!

Even without the sale if you are a Burberry fan

you should see the store”

“I often end up cutting my visit short here because I

just get too hungry, or tired or thirsty and I go the

adjacent mall for lunch and then just stay there.”

“The trouble here is that it is always the same.

Static and unchanging. You never feel there will

be anything new or exciting. It lacks any

excitement or thrill of discovery.”

“A lot of the shops are shut and what is open are all

the same, very little variety”

“The stores in this outlet offered mostly ugly old

stocks nothing interesting with almost no discount.

On the previous day we went shopping in an outlet

in Germany the same stores offered much better

prices and goods”

“You will not find Gucci, Prada or Burberry here,

but typical Italian brands that are more friendly for

your wallet, Guess, Marina Militare and lots of

other brands. But you will also find popular brands

such as GAP, Calvin Klein and Tommy Hilfiger. I

personally love this outlet. It is big, the selection of

shops is very diverse”


International Brands

Just How International is the European Industry?


Source: FSP

0

500

1000

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International Occupiers Domestic Occupiers

Opportunities For International Expansion


Source: FSP

0

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- 50 100 150 200 250 300 350 400

Ac

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Predicted Count of International Occupiers

AT

NL

IT

DE

RU

UK

FR

NO SE

DK UA RO

ES

CH

PT GR

LT

IE

PL

BG

Which Countries Offer the Right Potential?


Source: FSP

Young Assured Family Classic Old

France 14% 51% 28% 7% 0%

Germany 13% 51% 21% 15% 0%

Italy 14% 52% 17% 18% 0%

Poland 24% 38% 22% 16% 0%

Russia 9% 60% 16% 15% 0%

Spain 17% 56% 24% 3% 0%

United Kingdom 12% 37% 25% 22% 4%

Europe 16% 48% 22% 13% 1%

Key Countries - Occupier Mix by FISH

Which Sites Offer the Right Potential?


Source: FSP

€0

€50

€100

€150

€200

€250

€300

€350

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€450

- 20 40 60 80 100 120 140

20

14

Tu

rno

ve

r (e

x V

AT

)

Millio

ns

Count of International Occupiers

Which Sites Offer the Right Potential?


Source: FSP

Young 47%

Assured 16%

Family 29%

Classic 4%

Old 4%

McArthurGlen Roubaix

Young 21%

Assured 25%

Family 29%

Classic 21%

Old 4%

Roppenheim The Style Outlets

Young 15%

Assured 23%

Family 28%

Classic 27%

Old 7%

Quai des Marques Bordeaux

Young 30%

Assured 23%

Family 29%

Classic 14%

Old 4%

Marques Ave. A6 (Paris Sud)

Young 22%

Assured 27% Family

27%

Classic 20%

Old 4%

One Nation Paris

Young 27%

Assured 21%

Family 31%

Classic 16%

Old 5%

L'Usine Channel Outlet


Communication

The Prague Outlet Centre The Opportunity for Tommy Hilfiger

24

‘Prague is one of the most beautiful and most visited Capital Cities

in Europe. The Prague Outlet offers an outstanding opportunity

for Tommy Hilfiger to serve affluent, brand conscious residents

and cultural tourists from a highly accessible, well appointed and

purpose built outlet centre, located close to the city’s airport’

The Prague Outlet is a 26,000m2, purpose built development,

located in the North West suburbs of Prague

Highly accessible location – close to Prague Airport and just

2 mins from the city’s orbital highway, convenient access for

residents and tourists alike just 25 mins from the city centre

Footfall is expected to exceed 2.5m visitors a year

Ideal customer base – Residents are typically affluent

professionals and tourists with a high spending power

Large population within 30 minutes – Prague is the 14th

largest city in Europe. 1.1m residents within 30 mins. ranks

The Prague Outlet in the top third of Tommy Hilfiger’s outlet

portfolio

Catchment area

4.6m residents within 90 minutes

The Principal catchment (shown right) contains over 4.1m

residents, largely from relatively high income suburbs

Shopper spend on FOC goods is estimated at €307m

Similar lifestyles to Berlin, Metzingen and Zweibrucken

5.9m tourists in 2013, spending €1bn on retail goods

Prague is underserved in terms of quality outlet floor space.

While Luxury brands such as Burberry, Dior, Hugo Boss,

Hermès, Louis Vuitton Tiffany and Tods operate company

stores on Pařížská Street, the fashion offer for affluent

shoppers and tourists is relatively weak

The Prague Outlet

Source: FSP

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=ApC8oBHGNeGbFM&tbnid=WVfQRo_MEpsVRM:&ved=0CAUQjRw&url=http://byznys.ihned.cz/c1-62338360-praha-bude-mit-druhe-outletove-centrum-otevre-v-blizkosti-letiste-vaclava-havla&ei=oCvOU9bYGJGA7Qa6q4HgCA&bvm=bv.71198958,d.ZGU&psig=AFQjCNGBfhwGVm-Zwmx81oV6XVlv2eqhrw&ust=1406106846959578

25

Source: FSP / Czech Statistic Office

Prague – Tourism

Tommy Hilfiger Portfolio – Similar Locations

The chart shows those outlet centres with

Tommy Hilfiger stores which have similar

resident lifestyle profiles to The Prague Outlet

Prague’s Capital City status means that

residents are significantly better off than other

parts of the Czech Republic

There are strong concentrations of mid scale

and wealthy families plus young professionals

– ideal customers for Tommy Hilfiger

Residents are similar to Berlin, Metzingen and

Zweibrucken suggesting that Tommy Hilfiger

will be very attractive to shoppers

Central Prague is a UNESCO World heritage site Attractions

include Prague Castle, Charles Bridge, Old Town Square,

Jewish Quarter and Lennon Wall

According to MasterCard’s Global Destination Cities Index 2014,

Prague is the 9th most visited city in Europe, ahead of Berlin,

Madrid and Warsaw

In 2013, Prague received 5.9m million visitors a 9% increase on

2012. c5.0m (85%) of these were high spending international

tourists

13% of international visitors are German and 11% Russian.

Chinese tourists grew 16% year on year

In 2013, an estimated €1bn was spent in Prague by tourists on

retail goods, with a further €608m on F&B

Source: FSP / MB Research / Gfk

446

594

0

200

400

600

800

1000

1200

Tourist Retail Spend

€m

Same Day Visitors Overnight Tourists

0.6

0.7

0.8

0.9

1.0

0

1

2

3

4

5

Corr

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tio

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oeff

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60 M

inute

Resid

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opula

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M)

26

Prague – Outlet Capacity

The chart combines outlet centre floor space

provision with population and purchasing power

(disposable income) within 90 mins of major

European Capital Cities to create a simple capacity

benchmark for Prague

After Prague Outlet (phase 3) opens, the city will still

have less outlet floorspace than Rome, Lisbon and

Warsaw

If Tommy Hilfiger locates at The Prague Outlet it

would be the second store in the city – increasing

exposure to the market

Tommy Hilfiger currently trades in duel locations

within Sofia, Warsaw and Moscow, indicating 2

stores in Prague will be sustainable

The chart ranks estimated visitor

spend (taking account of competition

and tourism) at sites within Tommy

Hilfiger’s outlet portfolio

Out of 211 trading outlet centres in

Europe, The Prague Outlet will rank in

the top quartile by potential

The Prague Outlet would have similar

potential to established Tommy Hilfiger

locations including Athens,

Metzingen, Neumunster and

Wolfsburg Source: FSP

Tommy Hilfiger Locations – Market Potential

Source: FSP

-

50

100

150

200

250

300

350

400

Estim

ate

d M

ark

et P

ote

ntia

l (a

ll vis

itors

) -

€m

0

0.4

0.8

1.2

1.6

020406080

100120140160180200

Purc

hasin

g P

ow

er

Per

Sqm

(€M

)

Popula

tio

n p

er

SqM

Pop per SqM PP per SqM (€)


Conclusions

Conclusions

2014 was another good year for European Outlet Centres

There are now over 200 trading outlet centres in Europe which encompass a variety of formats,

price positions and locations . Sales have grown to €11.7bn

While there were fewer new developments, the occupier market saw substantial growth

The occupier average portfolio remains at 2.8 outlets however, key markets remain highly

distinct in terms of occupiers

Italy has overtaken the UK as the largest single European occupier market

Development activity is focused in Germany and Central/Eastern Europe. There are

opportunities to infill under-developed regions including the UK (Midlands/SE), France (Lyon,

Provence) and Spain (Catalonia)

There is theoretical scope for further development of 50 to 75 new outlet centres across

Europe. However, these are increasingly marginal opportunities which require careful study

and continuing expansions at established outlet centres will reduce this potential

Opportunities for added value management are challenging however, there are still

opportunities to increase sales by 20% at under performing sites. The success of this will be

determined by choosing the right sites and recognising consumer opportunities using tools

such as FISH


Conclusions

It is important not to manage or develop outlet centres to a standardised formula or to assume

that market share can easily be won from established sites. Competition is more effective and

investors expect stronger performance, delivered over shorter time scales

The most successful centres are increasingly those with strong provision of international

brands. These generate ‘recognition’ and differentiate sites from discount high streets

Insight is now the essential key to successful development, operational management and

increasingly leasing

Occupiers have never had more choice. It is essential to use tools such as FISH to ensure a

strong match between brands and consumers. Operators must go beyond simple drive times

to provide occupiers with ‘more informed’ intelligence on site potential

So if health is measured in terms of diversity, scale and growth, the European Outlet Industry is

looking well. However, with increasing on-line competition, high street regeneration and new

outlet developments, competition is increasing and the point of difference for consumers is less

clear. The outlet industry must therefore keep evolving

The key to maintaining competitive advantage is to grow the presence and widen the

distribution of international brands. Achieving this will require a combination of multinational

operational skills, supportive investment and of course, FSP’s global insight



Merci pour l'écoute

FSP RETAIL BUSINESS

CONSULTANTS

19 Manor Courtyard

Hughenden Avenue

High Wycombe

UK, HP13 5RE

T +44(0)1494 474740

F +44(0)1494 474262

[email protected]

www.fspretail.com

www.snap-shop.co.uk

Ken Gunn Director

T+44(0)1494 474740

M+44(0)7773 779919

F+44(0)1494 474262

[email protected]