Being declared a non-essential business during the pandemic was a death knell for the retail industry, with 31% more bankruptcies so far in 2020 than there were for all of last year. It won't be surprising then to learn that mall operator Simon Property Group (NYSE:SPG) hasn't fared all that well either.
Because shopping malls were already ailing well before the COVID-19 outbreak due to changing consumer shopping habits, Simon has been trying to prop up its retail tenants to keep the situation from getting worse. It's a strategy fraught with risk.
The mall is a ghost town
The mall operator, along with industry peer Brookfield Property Partners and brand management firm Authentic Brands Group, have been buying up bankrupt retailers to ensure their businesses aren't liquidated and their stores don't become yawning chasms of vacancy.
Over the past few years the three, or a combination of them, have acquired Aeropostale, Forever 21, and Lucky Brand, while also bidding to acquire Brooks Brothers and J.C. Penney. The risk comes from these businesses being deeply damaged before the coronavirus pandemic and not being able to recover from its impact, as well as the mall operators entering into a line of business much different from their area of expertise.
Yet it may be a necessary risk since vacancies, particularly among anchor stores, could cause even fewer consumers to shop at malls leading even more retailers to go under.
The retail industry's woes on Simon Property Group's stock has been apparent. Shares that were trading at almost $144 a share at the start of 2020 now go for just over $68 each, a loss of 53%. While they've regained 61% from their March lows, $10,000 invested in the mall operator on Jan. 1 would now be worth $4,577, a loss of $5,423.