Santa Barbara’s State Street is getting a pre-holiday makeover as the nation’s two largest bookstore chains pull out of the city, both to be replaced by discount clothing retailers.
Commercial real estate insiders told the Business Times that off-price apparel stores Marshalls and H&M will replace book giants Borders and Barnes & Noble, which announced one after the other that they were both closing their downtown locations.
Swedish clothing company H&M is slated to go in to the spot at 829 State St., currently occupied by Barnes & Noble, Radius Group Commercial Real Estate General Manager Brian Johnson told the Business Times.
Another commercial real estate source close to negotiations confirmed that clothing discounter Marshalls is taking over the three-story building at 900 State St. currently occupied by Borders.
The two clothing stores will join youth apparel retailer Forever 21, which is on the 800 block of State Street. Here’s a closer look at the changes coming to the intersection:
Borders to Marshalls
Borders has seen declining sales and profit margins for the past several years, prompting the Michigan-based company to cut its store count by almost half over the past three years.
The Santa Barbara location “was not meeting our business objectives,” Borders spokeswoman Mary Davis told the Business Times, and landed on the chopping block. Store general manager Jason Roy said the Santa Barbara store will be closing in January, although some of its 35 employees may be able to transfer to Borders’ Goleta location.
Moving into the 38,000-square-foot building will be Marshalls, a Massachusetts-based retailer aimed at bargain hunters. Currently, the closest Marshalls to Santa Barbara is in Oxnard.
Marshalls parent TJX Companies — which also owns discount retailer TJ Maxx — reported that third-quarter 2010 profits were up 7 percent to $372 million on $5.5 billion in sales, as the firm snagged up excess inventory from struggling department stores.
“The off-price concept seems to be resonating very well with consumers, and TJX is executing it very well,” Stifel Nicolaus analyst Richard Jaffe told Reuters.
TJX has said it expects fourth-quarter sales to increase 5 percent over last year.
B&N to H&M
A block down State Street, books will clear out to make room for clothes as well. Johnson of Radius Group and another commercial real estate source said H&M has agreed to take the Barnes & Noble location.
Macerich, the owner of the Paseo Nuevo mall, did not return calls seeking comment on the property’s next tenant.
H&M, the third-largest fashion retailer in the world by revenue, opened its 200th U.S. location in 20,000 square feet of space in the Pacific View Mall in Ventura in late September.
Over its history, the Swedish firm has been slow to embrace warmer states such as California and Florida, saying it struggles to sell its clothes in more moderate climates.
The firm opened its first American store in Manhattan in 2000 but didn’t debut in Los Angeles until 2006.
Despite strong third-quarter earnings, H&M said a slump in shopping mall construction, particularly in southern Europe, has made it hard to find prime locations for new stores.
It now expects to open 220 stores this year, compared with previous plans for 240 openings, but a pre-built downtown location such as the Barnes & Noble spot may make it easier to expand. H&M’s corporate media office did not return calls from the Business Times.
Barnes & Noble put itself up for sale in August after a long decline in physical book sales. The Santa Barbara location appears to be the latest casualty of the company’s struggling income; the Barnes & Noble store manager told the Business Times that the location is closing soon. The company hasn’t made an official announcement regarding the location, and Barnes & Noble’s corporate media office did not return repeated calls from the Business Times seeking comment.