Despite an improving economy and upbeat consumer confidence, the performance of the mall real estate investment trusts (REITs) has been lackluster in recent times. Declining mall traffic amid rapid shift in customers’ shopping preferences and patterns with growing online purchases has compelled the mall REITs to reorient their businesses.
The rapid growth of online retailers has reduced the role of the brick and mortar stores in the overall retail space. Increasing number of U.S. customers are now opting for online shopping, given the widespread usage of mobile technology, which offers online retailers constant access to customers.
In the last six months, Zacks categorized REIT and Equity Trust – Retail industry underperformed the broader market. The industry lost 12% over this time frame against 11.9% gain of the S&P 500.
Brick and mortar retailers unable to cope with competition have been opting for store closures and even filing bankruptcies. This comes as a pressing concern for retail REITs as this trend has been considerably curtailing demand for the retail real estate space.
In fact, in February end, J. C. Penney Company, Inc. JCP announced its plans of shutting down around 130–140 stores over the next few months. The decision was triggered by the retailer’s plan to “align the company's brick and mortar presence with its omnichannel network” and redirect investments in locations with high revenue growth potential.
Consequently, some other prominent retailers like Macy’s Inc. M and Sears Holdings Corp. also took similar moves, which sent jitters in the retail real estate market. In fact, investors have been worried about the adverse effects of store closures on mall traffic, sales as well as cash flow of mall landlords. (Read more: Retail REITs Struggle on J.C. Penney's Store Closure News).
Currently, both J.C. Penney and Macy’s carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
4 Retail-REITs to Avoid
Against this backdrop, investors should be selective before choosing Retail-REITs for their portfolio. Here, with the help of Zacks Stock Screener we recommend four REIT stocks that investors should avoid at present. We have selected only the sell-rated stocks with VGM Score of poorer than “C.” Finally, only stocks with negative Earnings ESP have been taken.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Chattanooga, TN-based CBL & Associates Properties, Inc. CBL is engaged in owning, developing, acquiring, leasing, managing, and operating regional shopping malls, open-air centers, community centers and office properties. In the last 30 days, CBL & Associates Properties’ current year estimates moved down 0.4% to $2.28 per share.
Zacks Rank #4 (Sell)
VGM Score = ‘C’
Earnings ESP = -1.89
Santa Monica, CA-based The Macerich Company MAC owns, acquires, leases, manages, develops and redevelops regional and community shopping centers in high barrier-to-entry U.S. markets. In the last 30 days, Macerich’s current year estimates moved down 0.5% to $3.97 per share.
Zacks Rank #4
VGM Score = ‘F’
Earnings ESP = -1.16
Pennsylvania Real Estate Investment Trust PEI is engaged in acquiring and holding for investment interests in real estate. In the last 30 days, Pennsylvania Real Estate Investment Trust’s current year estimates moved down 5.6% to $1.70 per share.
Zacks Rank #4
VGM Score = ‘C’
Earnings ESP = -2.63
Farmington Hills, MI-based Ramco-Gershenson Properties Trust RPT is engaged in the business of owning, developing, acquiring, managing and leasing community shopping centers, regional malls and single tenant retail properties. In the last 30 days, Ramco-Gershenson Properties Trust’s current year estimates moved down 4.9% to $1.36 per share.
Zacks Rank #4
VGM Score = ‘D’
Earnings ESP = -2.86
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Macy's Inc (M): Free Stock Analysis Report
J.C. Penney Company, Inc. Holding Company (JCP): Free Stock Analysis Report
Macerich Company (The) (MAC): Free Stock Analysis Report
CBL & Associates Properties, Inc. (CBL): Free Stock Analysis Report
Pennsylvania Real Estate Investment Trust (PEI): Free Stock Analysis Report
Ramco-Gershenson Properties Trust (RPT): Free Stock Analysis Report
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