Malls Say Turnover Jumped in Summer

They estimated that sales at shopping centers jumped by 20% to 30%, compared with the summer of 2011.

After half a year of sluggish sales, the country's shopping malls saw turnover rise sharply in the summer, executives in the sector told TheMarker.

They estimated that sales at shopping centers jumped by 20% to 30%, compared with the summer of 2011. But they ascribed the increase to one-off factors, rather than a sign that Israel's economy is shrugging off its sluggishness.

"Our sales, on average, were 20% higher than a year ago," said Ofer Shechter, CEO of Ariel Properties Promall Mall Management, which operates 30 shopping centers. "Last year the social-justice protests were at their peak in July and August and that really affected sales, which fell. This year, the protests were barely felt at all."

Shechter also cited the timing of the Jewish calendar: There was a longer gap between the Tisha B'av holiday and Rosh Hashanah this year than there was last year, which has meant that religiously observant families did more shopping in the summer.

In addition, the unusually hot weather drove more people into air-conditioned malls as they followed appeals by the Israel Electric Corporation to use less air conditioning and few appliances at home in peak hours. Domestic tourism was also a factor, Shechter said.

The early start of the school year this year reduced the number of shopping days, said Moshe Rosenblum, CEO of the mall operator Melisron, but he said his tenants reported that sales were up nevertheless. That included fashion chains, which have had a difficult year so far.

"The electronic and computer segment also saw rising sales because people were in a hurry to buy before value-added tax rose," he said. VAT rose on September 1 from 16% to 17%. "July ended with an 8% increase [in sales] and August was excellent, though we don't have final numbers yet."

Mall management companies are not about to celebrate, however. They say the summer likely reflects a convergence of one-off factors that won't continue lifting sales into the autumn.

"The feeling in the market is that the crash is going to come after the High Holy Days," said Hai Galis, marketing and operations management vice president for BIG Shopping Centers. "In the meantime, however, we're only seeing a slowdown, not a recession."

Sales rose between 7% and 30% at BIG's malls in July and August, Galis said, but for the first eight months of the year as a whole they were up no more than 2%.

"September will be a good month because of holiday shopping, so all told the third quarter will be positive, it seems. But the fourth quarter is expected to be very difficult. A drowning man can come up for air before he finally sinks," said Galis, dismissing the summer blip higher in sales. "Only very cold weather in October and November can save [the mall] tenants."