Forrester Research Analyst: Yes, There Is Still Growth In Physical Retail

Physical retail is still relevant, although it looks much different than it has in the past, according to one leading sector analyst.

The Analyst

Forrester Research's Sucharita Kodali discussed the state of retail on CNBC's "Squawk Box."

The Thesis

Malls anchored by department stores like Sears Holdings Corp (NASDAQ:SHLD) dominated the retail segment decades ago — and are among the most challenged today, Kodali said. On the other hand, new-age "neighborhood centers" anchored by anything from Whole Foods to Sprouts Farmers Market Inc (NASDAQ:SFM) and Michaels Companies Inc (NASDAQ:MIK) are finding success, the analyst said. Casual restaurant chains are a "huge" driving factor in attracting consumers to malls., she said.

Malls that boast super luxury names are maintaining relevance, as seen in the strong sales growth reported over the past year, Kodali said. For example, Gucci saw sales growth of more than 40 percent in 2017 alone, and its parent company Kering grew its total revenue by 25 percent.

"Anybody who has Gucci stores in their mall, like [New Jersey's] Short Hills — they are going to be doing OK," she said.

Neighborhood centers are accounting for the majority of consumer spending on and are performing better than legacy malls, Kodali said. Unfortunately for real estate investment trust and retail investors, there are only a relative "handful" of them in existence, she said.

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