Look up and eastward from the old streets of downtown New York, look over the crimson banners of the auction houses on University Place, and you will see an ancient wall of brick jutting into the sky, throwing its shadow upon the roofs and chimney pots of Union Square. If the sun is bright or the neon lights in full flush, you can read on that expanse of grimy brick a faded legend: “F. A. O. Schwarz—Toys of All Kinds.” Painted in plain, white letters, the words create a nostalgic stir in the beholder, especially if he is a New Yorker who can recall grandfatherly tales of horses whinnying at stable doors in Washington Square, of grooms shouting in cobbled byways, and country carts bumping along with loads of aromatic hay. It is, indeed, an old, old sign, thickly brushed in the times when Santa Claus sometimes had an “e” at the end of his honored name. ... Ride fifty blocks uptown, and you will see that name set up again, neat and bright, in inch-high block letters of wood that occupy a one-foot length of the most valuable space on earth: a Fifth Avenue show window. The letters, gleaming white and blue amid the sawdust of a rodeo exhibit (with rocking horses at a hand gallop), repeat the name “F. A. O. Schwarz” and nothing more, nothing about toys. It’s no longer necessary for the Schwarz store to shout. This low Whisper will serve. Everybody knows it is the chief toy emporium of the world, unique because it is the biggest store that sells nothing but toys.
That now-infamous overhaul, under then-CEO and former Apple retail guru Ron Johnson, sought to reposition Penney as a flashier retailer with fancier merchandise. But it backfired: Customers fled, sales tumbled by almost a third, and Penney was crippled financially. Three years ago the board brought back Mike Ullman, the CEO it had unceremoniously chased out in favor of Johnson, to stop the U.S.S. Penney from sinking. And last summer he handed the reins to Ellison—an executive the opposite of flashy. ... It’s fitting that Ellison, a lifelong musician, plays electric bass, an instrument that rarely gets a flashy solo but without which no band can click. He made his reputation in retail at Home Depot, helping engineer that chain’s turnaround by focusing on unsexy but primordial things like the supply chain and the integration of stores and e-commerce. He’s a data devotee who grounds every decision in information—including that seemingly intuitive shoe move. ... The trees look nice, but the forest is daunting. Penney’s sales, an estimated $12.6 billion for the just-completed year, are still down 37% from their 2006 peak. Its nascent recovery, part of its fourth turnaround effort since 2000, hasn’t swayed Wall Street—its stock trades close to a 35-year low. In the long term, the problem isn’t just that Penney has been dysfunctional; it’s also that Penney is a department store, a practitioner of a business model under siege.
Hundreds of shopping centers across the U.S. are facing obsolescence, abandoned by shoppers who are going online or getting choosier about where they shop. ... in its combination of novelty, technology, and customer pampering, Roosevelt Field embodies the strategy that has helped its owner, Simon Property Group, navigate retail’s crisis to stay on top of the mall world. ... Its U.S. portfolio includes 108 malls, most of them high-grossers like Roosevelt Field, and 72 discount outlet centers. ... including the Forum Shops at Caesars Palace in Las Vegas, King of Prussia outside Philadelphia, and the huge high-end New York outlet mall Woodbury Common ... The key to that success: constantly adapting to figure out what sells, at a time when many of the businesses that fill its malls—especially department stores and apparel retailers—aren’t selling. ... Simon dominates the so-called A-malls, those with the highest sales per square foot. To win in that category, Simon has been diligent about staying ahead of trends and modernizing its centers, and quick to replace struggling brands with those on the upswing. ... acknowledge the risk posed by the wave of store closings. ... Analysts generally believe America is “overmalled” to begin with: There are 2,353 square feet of space of shopping centers in the U.S. for every 100 Americans, compared with 1,636 in Canada and 458 in Britain ... From the 1960s through the 2000s, developers built hundreds of malls per decade. But since 2010, only nine new ones have been built ... the typical anchor store pays around $4 per square foot in annual rent; the average non-anchor tenant paid $42.22 per square foot a year as of the third quarter of 2016