July 2018 - Sachse Construction
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Month: July 2018

Corporate America Embraces Solar Power

by Sachse Team

Solar power is riding a wave of popularity among corporate customers, with the top users adding 325 megawatts of installed capacity last year, according to an assessment by the Solar Energy Industry Association (SEIA), a national trade group. While trailing the record installation of 410 megawatts set in 2012, the tally represents a 2 percent year-over-year increase and a 43 percent jump since 2015, and marks the third-largest year on record.

SEIA’s Solar Means Business 2017 report tracks 2,562 megawatts of commercial projects at nearly 7,400 project sites and represents more than 4,000 companies. The impact translates to a significant increase in the renewable component of the companies’ power supply, enough to supply 402,000 U.S. households and offset 2.4 million metric tons of carbon dioxide annually.

Solar panel prices have been on a rapid downward trend, while the overall cost of systems is also decreasing, mostly thanks to more efficient panels and lower costs for the rest of the systems. In addition, easy-to-install pre-engineered systems help cut prices by bringing down installation costs.

Despite falling prices, SEIA projects that the pace of growth will likely start to soften this year, for several reasons:

  • Incentive regime changes in Massachusetts and California shifts to less favorable time-of-use (TOU) rates for commercial solar customers
  • Tariffs on imported solar modules and cells
  • Decline in the Investment Tax Credit from 30 percent this year to 10 percent in 2022.

However, the industry also has a stream of opportunities, including the decline in costs for non-module hardware, increased electrifications (EVs) and the Internet of Things. Moreover, a growing number of corporate customers are pledging a transition to 100 percent renewable energy.

“To leading companies across America, deploying solar is a common-sense business decision,” said SEIA president & CEO Abigail Ross Hopper, of the Solar Energy Industries Association (SEIA). “Large corporations have found that going solar not only benefits the environment, but also their bottom-line, satisfying both shareholders and customers alike.”

Solar Power’s Top 10 Corporate Customers

 

10. Amazon.com makes its first appearance in the top 10 with 33.6 megawatts distributed among 14 installations. Meanwhile, the company is also investing in wind power—last fall it began operations at its largest wind facility, Amazon Wind Farm Texas, a 253-megawatt project with more than 100 turbines, which will generate more than 1 million megawatt-hours of energy

9. Macy’s has boosted its solar installed capacity to 38.9 megawatts in 33 installations.

8. IKEA has a solar presence atop nearly 90 percent of its U.S. locations, with a total generation capacity of 44.9 megawatts in 71 installations. Among its solar projects is the 244,000-square-foot rooftop installation in Renton, Wash., a 1.1 MW system with 3,268 panels anticipated to generate about 1.26 million kilowatt-hours of electricity per year.

7. GGP Inc. has 50.2MW of solar power in 44 installations. Since 2011, the retail real estate company has reduced their grid-purchased electricity consumption by more than 277.2 million kilowatt-hours, enough to power all the homes in Napa, Calif., for one year. In addition, it’s been awarded GRESB’s Green Star for four consecutive years.

6. Costco’s portfolio comprises 50.8 megawatts in 158 installations.

5. Kohl’s department stores feature 51.5 megawatts in 85 installations. The company utilizes more than 200,000 rooftop solar panels, which provide energy to 163 of its facilities, up to 50 percent of a store’s needs. Moreover, 88 percent of the chain’s stores are ENERGY STAR-certified.

4. Apple generates 101.4 megawatts in only 5 installations, enough to power their worldwide operations entirely with renewable energy. Furthermore, the company persuaded 23 of its suppliers to commit to powering all their Apple operations with 100 percent renewable energy. Apple’s goal: bringing 4 gigawatts of new clean energy online in their supply chain by 2020.

3. Prologis counts 120.7 megawatts in 52 installations and plans to have 200 megawatts installed by 2020. Since 2011, the company has registered a 27 percent decrease in corporate greenhouse gas emissions.

2. Walmart has 149.4 megawatts in 371 installations, which provide energy for about 28 percent of the company’s portfolio. This means Walmart’s chances of reaching its goal of using 50 percent renewable sources by 2025. In addition, the retailer launched Project Gigaton last year, named for its goal of reducing emissions from the collective value chain by one gigaton by 2030. So far, more than 400 suppliers have signed on and more than 200 of these suppliers reported emission reductions of more than 20 million metric tons.

1. Target takes the top spot by a wide margin with 203.5 megawatts in 425 installations. In 2017, the company added upward of 40 megawatts, a total higher than that of more than 20 states as well as any other US retailer. By 2020, Target aims to grow the number of buildings with rooftop solar panels to 500, at the moment they are at 446. Currently, their solar power-equipped stores generate between 15 and 30 percent of the electricity they need to function. Also by 2020, the company plans to divert 70 percent of its retail waste from landfills through reuse or recycling programs.

Off-site procurement has been a major driver of corporate solar installations in recent years, such as GTM Research—which counts 31 operating off-site corporate projects, plus another 21 in development. The commercial market growth in the past two years is owed to three factors:

  • declining prices
  • demand from potential International Trade Center expiration and expiring incentives in key state markets
  • growth of financing opportunities—PPAs, Contracts for Difference, off-site arrangements, Commercial PACE.

Office Owners Elevate Their Amenity Game

by Sachse Team

Amenities have been critical to the hospitality sector for decades, with hotel owners often having only one night to impress their guests and maintain a good reputation. But as technology has advanced to offer consumers constant connectivity and mobility, the office sector has had to boost its offerings, as well, to compete with today’s seemingly endless alternatives of where and how to work. With the distinction between home and work blurring, motivated employees expect their workplaces to offer more choices, and employers are looking for their office spaces to provide the amenities and services needed to attract top talent.

“The office owner traditionally had one product—the termed lease—that was commonly for 10 years.  Tenants sought efficiency in its corporate statement, so service was never a focus,” observed Equity Office President & CEO Lisa Picard. As technological innovations continue to shorten business cycles, and the meaning of work-life balance changes drastically, the flex office product, popularized by WeWork, “is satisfying the market with an office product, granting work space that is flexible and has a dose of fun.“ Picard added, “The office worker needs something more than just some place to show up at 8 a.m. and leave at 5 p.m.”

Shifting attitudes toward work have driven the popularity of these lifestyle components. By creating environments that reduce the contrast between home and work, organizations can attract the most passionate employees to an environment where people want to do their best work. Picard commented that engaging amenities and services can keep employees in the building longer, providing the dual benefit of slow-releasing commuting traffic during peak hours and giving those working longer hours a place to take a break.

Arms Race

Google and Apple largely initiated the concept of creating offices with hotel-like amenities and services as ammunition in the war for talent, noted Bernice Boucher, managing director of JLL’s consulting group & senior leader of the firm’s workplace strategy practice. Now, office owners themselves are following suit.

Today, office assets built in the 1970s and 1980s are being repositioned to feel “less corporate,” Picard noted. More owners are trading grand, marble-floor lobbies for more inviting entries that offer grab-and-go cafes and coffee bars. They’re also incorporating in-demand amenities like outdoor areas and rooftop decks, as well as more sophisticated fitness centers and conference centers.

“If you have a commodity asset that feels corporate, it’s almost like the kiss of death,” Picard observed. “It says to the people of the organization that they’re less cared for.”

Low unemployment and a shortage of skilled labor have intensified competition for top talent, so providing high-quality amenities and services is a necessity. “If (office owners) don’t have these amenities and services, they’re really not as relevant,” Boucher asserted. “Tenants look at different buildings, and as soon as one building starts to offer these options, then everyone else needs to follow.”

And while some owners may be concerned about the cost of investing in hotel-like amenities and services, the returns make the investment worthwhile, she added. By her estimate, more innovative and new features often allow owners to push rents up about 15 percent. Elevated offerings can also attract a high-quality tenant to lease space, frequently leading to accelerated lease-up and rent increases of 10 to 20 percent on subsequent deals, she added.

“(Owners) need to think about what they can do to attract a tenant that’s going to make a splash and validate that space. … It can be a magnet for other tenants,” she said.

This strategy has been successful for Equity Office, which is in the midst of a $500 million redevelopment of Willis Tower, the 110-story Chicago landmark formerly known as Sears Tower. Highlights include 300,000 square feet of experiential retail and entertainment space and 150,000 square feet of tenant-exclusive amenity space.

While the renovation isn’t scheduled for completion until 2019, the firm has already inked more than 1 million square feet in leases over the past year. Just a few weeks after Equity Office unveiled renovation plans in February 2017, the tower landed the Chicago operations of the National Restaurant Association for a full-floor lease. Other big names have signed on, including Morgan Stanley, which will occupy 125,000 square feet on four floors.

But implementing hospitality-like amenities and services is not just about attracting tenants; it’s also about retaining them, especially in today’s market, where office leases are getting shorter and traditional owners are facing competition from co-working providers.

Quality, Not Quantity

Some owners that are hesitant about deploying the capital needed to build out or operate amenity space are turning to third-party services. “We create a hybrid between a managed offering and a leased service that sways between tenant-exclusive and open to the public,” explained Convene President & Co-Founder Chris Kelly. His company partners with owners to bring in hotel-like amenities and services and manage them on the owner’s behalf. In exchange, owners often permit Convene to rent out their meeting and event space to outside customers.

The most common hospitality-inspired amenities that Convene’s clients request include flexible meeting and lounge spaces, fitness centers with programming, pantry services and catering, as well as coffee shops and grab-and-go restaurants. Many Convene owners have bought into the company’s business model by rolling out Convene’s services across their portfolios, according to Kelly.

Just as customers develop an allegiance to a hotel brand because of its services and offerings, tenants can form loyalty to office owners—and they often will pay a premium for a workplace that offers this unique and tangible value, Kelly explained.

According to Kelly, this value trickles down to the talent hunt, particularly as more firms define themselves as technology companies and compete for the same employees as Silicon Valley titans. He recalled speaking to a major financial services company that said it lost more candidates to Google than to any other company, despite offering higher salaries.

This is because “the definition of compensation is changing,” Kelly explained. “Quality of life at work is a meaningful element of compensation that is changing people’s decision about where they want to work. … People are working all the time now, and the counterbalance for that 24/7 live-work integration is that people expect their quality of life at work to be addressed.”

Picard agreed that traditional owners are realizing the benefits of investing in amenities and services because “replacing a worker or finding talent is far more expensive than paying a premium in real estate.”And if the amenities are proven to help those organizations attract and retain talent, then owners are willing to pay premiums, Picard added.

As more owners get on board, advancements in technology will allow them to expand their offerings even further. JLL has seen a desire among owners and tenants for their buildings to be “really activated with the Internet of Things,” Boucher said. Several of JLL’s clients use an app that shows where building amenities are located, allows users to order coffee or lunch, makes reservations for specific spaces and more.

“The same way tenants want to understand utilization of their space, building owners want to understand the utilization of their amenities and services,” Boucher added. “The same way people are activating their homes with digital assistants, building owners can create a higher level of experience using technology.”

While Kelly acknowledged that it will take some time for owners and landlords to fully grasp the benefits of designing their buildings with hotel-like amenities and services, he reports that he’s already starting to see a change.

“We’re going to see a maturation of the industry,” he said. “Right now, flexible services and amenities are largely being applied to buildings as an afterthought. … But developers are now thinking about creating layers of flexible space and on-demand services in the infrastructure of their new developments as a forethought, where the dominant design of an office building will start to change and look more like a full-service hotel, where the entire base of the building is essentially amenities and the value of the offices on top of it are determined by the level of service.”

University Trends 2018: Schools are Desperately Searching for Ways to Economize

by Sachse Team

Work in the higher education market is steady, but uneven geographically. The South and West are the hottest markets, with the Northeast and Midwest lagging a bit.

Nationwide, demand is most robust for housing and interdisciplinary academic and research buildings. Overall higher education construction spending is projected to increase 1.6% in 2018, the lowest increase reported in the last five years, according to the Center for the Study of Education Policy at Illinois State University.

Though the U.S. economy is strong with investment gains buoying endowments, colleges and universities face pressures to economize and stretch their capital budgets. “Declining enrollment in the last few years is creating financial issues in mid-tier institutions,” says John Baxter, AIA, LEED AP, Higher Education Sector Leader with EYP Architecture and Engineering. This has prompted some closures and mergers, though large, well-endowed institutions are doing fine, he adds.

One new drag on the revenue side has been Trump Administration policies making it more difficult for foreign students to obtain visas to study in the U.S. “Colleges had been relying on the financial stream from international students,” says Baxter. The drop in international enrollment will probably be temporary, he adds.

Demand for modernized housing and STEM research facilities persists, but this trend is being tempered with an overriding sense of caution. “Clients are being more conservative,” says Patricia Bou, AIA, LEED AP, Principal with CannonDesign. “They are scared to overbuild.”

As a result, many schools are engaging in more detailed master planning of student housing, says Chris Brasier, FAIA, LEED AP, Design Director and Principal with Clark Nexsen. “This includes evaluating existing
buildings and considering off-campus competition,” he says. Housing master planning typically includes financial modeling and detailed market analysis.

For Orange Coast College, a two-year institution in Costa Mesa, Calif., construction of new housing is part of a marketing strategy. Located in pricey Orange County, OCC will become the first community college in the Golden State to build campus housing.

“They are trying to attract more students, and one way to do that is to offer lower-cost housing,” says Paul Kearney, LEED AP, Associate Partner with MVE Architects. As a tax-exempt entity, the college can build for less than a private developer, enabling the school to undercut apartment rentals. The project, now in the construction documents stage, will include student lounges and administrative offices on the 15,000-sf ground floor that will welcome commuter students as well as residents.

The past decade saw a wave of housing projects catering to upperclassmen. Now there’s growth in student housing developments geared for freshmen and sophomores, says Peter Aranyi, AIA, Principal with Clark Nexsen. These units tend to have traditional double-occupancy or suite-style designs, in contrast to individual bedrooms and apartment-style units that had been in vogue in recent years. Newer projects for underclassmen often include community-style bathrooms of old with a twist: private shower and toilet facilities. Common vanity sinks offer space where students see and interact with each other.

Look for universities to focus more on helping students make ends meet over the next few years. A recent online survey of Massachusetts college students by the Wisconsin HOPE Lab found that nearly half of the state’s community college students and a third of the in-state college students cannot afford consistent access to food and housing. Those conditions are not uncommon to the Bay State.

“The newer generation of students is looking to be prudent with their money,” says Baxter. This portends a trend to less luxurious residence halls. “I think you’ll start to see a wave of residences that are more economical than we were seeing five years ago,” Baxter adds.

Public-private partnerships continue to gain ground in the student housing space. Providing an alternative funding method that allows development without taking on new debt, P3s are also becoming an increasingly common engine powering new academic and specialty research lab projects.

A new take on the P3 concept is mission-oriented interdisciplinary facilities. EYP is in the early stages of designing a building to house an institute dedicated to solving some of the planet’s most critical issues such as increased food production, air pollution, and water pollution.

“They want to bring together ag science, veterinary science, engineering, social scientists, and others to collaborate in one building,” says Baxter. “It will not be owned by a department or college. It’s going to be an extraordinary building that can attract corporate partners, because research will be going on that can provide real world solutions.”

A notable public/not-for-profit partnership saw Wingate University and
Blue Ridge Community College team up with Henderson County, the City of
Hendersonville, and Pardee UNC Health Care to develop the Henderson Health Sciences Center. Located on Wingate’s campus, the $32 million building opened in fall 2016. It houses Pardee Hospital’s Cancer Center and Surgical Clinic, Wingate’s Pharmacy and Physician Assistant programs, and Blue Ridge Community College’s Nursing and Surgical Technology programs.

“It provides a connection between academy and practice,” says Brasier. Students have access to internships and professional instruction along with academic classes in the same building. Higher ed institutions are increasingly looking for these types of innovative partnerships to bolster their offerings backed by partners who contribute to capital projects.

Having grown up with mobile phones and tablets, Generation Z is known for socializing online but with fewer person-to-person interactions than students of the past. Colleges are taking note and trying to provide more spaces for impromptu socialization. Sightlines and wayfinding are important for these spaces to be used as intended. “A lot of it is having the places known,” says Ken Salyer, AIA, Principal and Higher Education Practice Leader with HMC Architects. “We try to make it evident where those places are.” Alcoves with soft furniture and even diner-style booths located off of corridors help to fill this need.

On many campuses, master planning includes a focus on “rightsizing and rightplacing,” says Bou. Cramped for space, many institutions in recent years assigned programs and administrative functions to wherever they would fit. “They are now looking to put things where they belong instead of just where they fit,” says Bou.

A new project in the works at Virginia Tech is a case in point. The university is planning a comprehensive wellness facility that will bring services for physical and mental health, along with clinical services, into one building.

Another trend of note: renovation of the academic workplace, especially at business schools. With most business school instructors coming from corporate environments, they are accustomed to modern workplaces, says Bou. Providing semi-private offices, even if they are small, with transparent sightlines and touchdown spaces of different sizes nearby for meetings, can help woo top talent from the corporate world.

Healthcare Market Trends 2018: Health Systems get Leaner, More Resilient

by Sachse Team

Faced with the complexities of value-based payment models and the uncertainties surrounding healthcare reform, the nation’s healthcare delivery systems are taking the long view of their operations.

“They’re looking at everything from organizational structures, staffing, and services, all the way down to the cost of building and operating a facility,” says Mike Zorich, PE, LEED AP, Client Executive with engineering firm IMEG.

Case in point: Boston Medical Center’s multi-year campus consolidation will trim its footprint by 60 beds and 329,000 sf, saving $25 million a year in operating costs.

Academic medical centers are also modernizing. The IPD team for Sutter Health’s California Pacific Medical Center, San Francisco—which includes SmithGroupJJR, Boulder Associates, and HerreroBOLDT—is building two replacement hospitals, closing an existing campus, and converting another one from inpatient to outpatient care.

“We are quickly transitioning from patient-centered to patient-driven care,” says Heather Chung, EDAC, LEED AP, VP/Health Studio Leader, SmithGroupJJR. “Patients are changing what it means to be accessible and convenient and are shaping what healthcare providers deliver.”

“The healthcare market continues to reach further into communities and away from the traditional hospital for many front-line services,” says IMEG’s Zorich. “Healthcare buildings used to be designed for more than 50-year life spans, but many of the smaller off-campus outpatient facilities are now looking at 20 years or less.”

An emphasis on reducing costs and improving efficiency is fueling the use of Lean construction and prefabrication.

Prefab helped Skanska shave more than $200,000 in construction costs off a 444,000-sf hospital expansion at the University of Virginia Health System, Charlottesville. “Laser scanning identified opportunities for the prefabrication of materials alongside critical in-place infrastructure that could not be interrupted,” says Andrew Quirk, Senior Vice President and National Director of Skanska USA’s Healthcare Center of Excellence.

AEC firms are also stepping up the use of VR and AR tools. “Not only can VR and AR help our clients understand department layouts, adjacencies, workflows, and finishes during the design process, but clients can continue to use these tools to maintain and operate their facilities more efficiently,” says Mike Stapf, Vice President, Design Integration, McCarthy Building Companies.

Doubling Down on Resilience, Collaboration

Resilience is guiding the design of healthcare facilities, particularly in regions vulnerable to extreme emergency events. “Healthcare facilities need to maintain services during and after extreme events, and this drives priorities in a very different direction than before,” says Pat Bosch, LEED AP, Design Director, Perkins+Will, Miami.

In South Texas, P+W is leading the expansion of Christus Spohn Hospital Corpus Christi–Shoreline, a pilot project using the RELi rating system. RELi helps project teams plan for hazards and emergencies that could cut power and heat or compromise a building’s functionality.

The hospital’s leaders recognized the facility’s role as a regional command center in the event of a natural disaster or terrorist threat and as a place of refuge. “They identified resilient design as a top priority,” says Julie Frazier, Associate Principal, Perkins+Will, Dallas.

Masonry skin, impact-resistant glazing, and galvanized exposed metals will protect the 10-story structure during extreme events. If HVAC systems are knocked out of service, reflective roof surfaces will minimize heat gain; sun-shading devices will filter natural sunlight on patient floors. Several days’ provision of food and water will be stocked.

Another new healthcare design trend: translational medicine, which brings researchers and clinicians under the same roof to hasten discoveries that accelerate individualized patient treatments.

“Just as the AIDS epidemic needed a new way of thinking, cancer care and clinical care in general need a new way to take advantage of advanced technology and research methods to deliver innovative, personalized care and treatment for their patients,” says Hank Adams, AIA, ACHA, EDAC, Global Director of Health at HDR.

Transdisciplinary integration is breaking down the physical and organizational barriers that have traditionally separated these areas, to speed up the development of life-saving therapies.

“The merging of patient care, education, and science into one contiguous platform is the future of academic medicine,” says Scott Rawlings, AIA, FACHA, LEED AP, Director of Healthcare with HOK.

“Leading institutions are finding that focusing superspecialties into one building that combines clinical care, trials, research, and education enables them to quickly translate basic research findings into prevention and treatment and to enhance patient care,” says Rawlings.

Need for Automation Drives CAD Market Growth

by Sachse Team

Long gone are the days of drafting project drawings by hand. CAD tools aid drafters by allowing for more accuracy and precision which, in turn, benefits contractors by reducing the chance of design errors that require rework. Some have estimated that rework costs amount to as much as 5% of a contract’s value, or $250,000 per every $5 million spent on the project.

Another advantage inherent to CAD software is the digitization and centralization of project documents. With 4D models, in particular, project stakeholders can access up-to-date design documents and understand how a project will (or should) evolve as time progresses.

A McKinsey & Co. study found that large construction projects take 20% more time than was scheduled and can be as much as 80% over budget due to the industry’s “slow pace of digitization.” As contractors increasingly digitize their design, scheduling, performance management and other workflows, they can expect to “improve efficiency, timelines, and risk management,” the study found.

Can Pop-up Retail Prop Up Malls?

by Sachse Team

One of Canada’s largest retail landlords has unveiled another set of pop-up stores at its busiest mall, a move industry observers applaud to combat rising vacancies.

Cadillac Fairview, which has more than 38 million square feet of leasable space at 67 properties, said it would host the third installment of what it calls the CF Collective at its CF Toronto Eaton Centre location, creating a limited-run retail experience for three local vendors.

Craig Patterson, founder and editor-in-chief of Retail-Insider.com, said it’s a “sound move” by landlords to look for alternatives to traditional retail concepts.

“There has been a lot of disruption in retail. Some tenants are willing to sign five- and 10-year leases, but some are not ready,” said Patterson, noting Cadillac has had many retail initiatives testing pop-ups, including trying out some European brands.

Colliers said in its spring 2018 report landlords need to consider other options for filling the space vacated by bankrupt retailers like Sears because there are not many anchors waiting in the wings.

“Be prepared to bend over backwards to secure a long-term deal,” said the report authored by James Smerdon, vice president and director of retail consulting, and Russell Whitehead, a planning consultant, on trying to get a new anchor tenant.

National retail sales grew by 6.46 percent in 2017 from a year earlier, but missed Colliers’ expectations by $422 million.

While Patterson said a pop-up isn’t going to move the dial much in terms of sales, landlords are embracing the concept and noted Oxford Properties had created a permanent pop-up retail section called Concept at Yorkdale Shopping Centre, which is regarded as the most valuable mall in Canada.

“We are seeing this in a lot of the better malls around the world,” said Patterson, noting Westfield Century Square Shopping Center in Los Angeles has pop-ups as does Roosevelt Field Mall in East Garden City Long Island. “I do think it is part of the future of the retail mix. Consumers are demanding interesting new ideas.”

Cadillac will introduce three stores Aug. 2-5 at the Eaton Centre from local retailers. They include Sonic Bloom, which specializes in planters; Blackhare, founded by a local couple that make hand-crafted tops and tees; and CUT Designs, which specializes in city cartography.

“We aim to deliver a compelling mix of retail offerings while providing uniquely curated in-mall experiences that resonate with our guests, and we believe CF Collective seamlessly marries both of these objectives,” said Sheila Jennings, general manager of CF Toronto Eaton Centre.

Patterson said there have been success stories from the pop-up world, and the best one that comes to mind is Montreal-based shoe retailer l’intervalle.

“They first popped up in Sherway Gardens [in Toronto’s west end] and the Eaton Centre. They were so happy they have opened permanently in those malls,” said Patterson.

Avi Behar, chief executive of the Toronto-based Behar Group, which specializes in retail, said he can see groups taking larger spaces in downtown spots or even shopping centres that they will sublet out, almost using a WeWork model.

“Everything is going into the direction of controlling bigger space and bringing in synergistic collaborative uses,” he said. “If you talk to Oxford, the Ghermezains [who own the West Edmonton Mall], they will tell you pop-up is here to stay.”

Under Armour Q2 Sales Rise on Strong International Growth

by Sachse Team

Under Armour’s rebound is proving costlier than expected.

The athletic gear and apparel brand, which is in the midst of a turnaround plan to pump up sales, saw its net loss widen to $95.5 million, or 21 cents per share, in the period ended June 30, from $12.3 million, or 3 cents per share, a year ago. Excluding the impact of the restructuring plan, adjusted net loss was $34 million, or 8 cents a share, in line with analysts’ estimates.

Revenue rose 8% to $1.2 billion, slightly above expectations. International revenue rose 28%, which included a 34% jump in Asia. But sales in North America only increased 2%.

Analyst Neil Saunders, managing director of GlobalData Retail, said that Under Armour continues to suffer from an erosion of customers, many of which are migrating to other brands.

“More and more consumers are confused about Under Armour’s proposition,” he said. “Given the rather fragmented range, a lack of focus on any particular sport, and a scattergun approach to product development, this is hardly surprising. In our view, the brand needs to have a much clearer identity — possibly by using sub-brands – to gain wider acceptance and grow customer numbers.”

Gross margin decreased approximately 110 basis points to 44.8% due to inventory management initiatives and a $6 million impact related to restructuring efforts. Adjusted gross margin decreased 60 basis points to 45.3% driven predominantly by inventory management initiatives.

In February, Under Armour announced a 2018 restructuring plan, which detailed expectations to incur total estimated pre-tax restructuring and related charges of approximately $110 million to $130 million. After further review, the company said it has identified approximately $80 million of additional restructuring initiatives and now expects to incur approximately $190 million to $210 million of pre-tax restructuring and related charges in 2018.

Based on the updated restructuring plan, in 2018 the company expects to incur up to $155 million in cash related charges, consisting of up to $75 million in facility and lease terminations and up to $80 million in contract termination and other restructuring charges. And pp to $55 million in non-cash charges comprised of up to $20 million of inventory related charges and up to $35 million of asset related impairments.

“As we work through our multi-year transformation, we continue to proactively attack underperforming areas of our business including our SG&A cost structure and inventory,” said Kevin Plank, CEO. “All of this will help create a better and stronger Under Armour through even greater operational efficiencies. We are unwavering in building our global brand and confident we’re on the right track.”

Looking to the full year, Under Armour is now expecting to incur roughly $190 million to $210 million of pre-tax restructuring and related charges, up from a prior forecast of $110 million to $130 million.

Amazon Go: Four Things Retailers Can Learn

by Sachse Team

Walking into the new flagship Amazon Go store in Seattle is like walking into a giant vending machine, and about as personal. After unlocking the physical barrier to entry by scanning their designated app, shoppers are free to roam around the store, pick up food, and simply walk out. Is this the start of a retail revolution? The end of the long and frustrating checkout line?

Since Amazon first introduced its “just walk out” payment technology earlier this year, several other retailers have announced plans for similar platforms. Microsoft is testing new technology for an automated checkout experience, working with retail giants like Walmart. Albertsons also announced a pilot program in Texas that creates a checkout-free experience for selected items, such as prepared meals.

What can other retailers learn from the Amazon Go experience?

Brand impact
Building on the success of Amazon Prime, shoppers have already bought into the convenience that Amazon affords them. The brand and the technology are trusted. Shoppers already equate Amazon with easy shopping, cutting-edge technology and painless returns. Amazon Go cleverly translates these elements into grocery shopping, taking away the frustrations that so many of us have with simple retail purchases – no need to stand in line, no need to carry a wallet, no need to interact with anyone.

Amazon took the time to carefully research and test the new technology to ensure its success. Introducing new technologies can strengthen your brand story, but moving too quickly or carelessly can invite disaster.

Impersonal can be personal
Amazon’s vision of the retail future uses big data to help carefully curate items that appeal to customers in the area. It feels as if Amazon personally understands what we are looking for when we need to grab a bite on the run. That is the key – understanding the customer.

Amazon anticipates our frustrations and offers a new way to buy that is easy, quick and tailored to our lifestyle. What Amazon has done so well is make the impersonal personal – there is no human interaction, yet the insight they use to populate the store helps it feel personalized.

Find the right niche
Amazon’s retail dominance is rooted in understanding what customers want online, but their move to brick-and-mortar is a test of how well they can physically draw them in. Situated in Seattle’s busy business district, Amazon Go is offered to those select consumers who will be most likely to engage with it – the young, tech savvy, cash-rich, but time-poor city dwellers. It is no surprise that Amazon plans to roll out Amazon Go stores in Chicago and San Francisco this year [as well as another in Seattle].

Turn the mundane into exciting
Sandwiches and pre-packaged meals are essentially an ‘unassisted purchase,’ a necessary drain on time-poor consumers. Buying a sandwich is not normally exciting. Yet, Amazon Go makes it exciting. By putting preparation kitchens in the window of the store, they have created a theatrical element. The physical barrier to the store, only unlockable by scanning their app, creates a feeling of being part of a club. And there’s a certain frisson of excitement you get when you walk out without physically paying.

Groceries are ideal for this type of no-interaction experience. The question is – how long before we are walking out with a huge cart full of food rather than one sandwich?

Ready to jump in? 
For other retailers wanting to enter the underdeveloped food convenience sector in the U.S., perhaps Amazon Go should be seen as a challenge rather than an unbeatable rival. But there are tough strategic questions to work through:

• Will established brick-and-mortar brands have the ability to overcome legacy thinking and move quick enough?
• Will the lack of human interaction eventually become a downside?
• The Amazon Go vending machine is all very well and exciting now, but will shoppers care who actually made that particular machine when more retailers open up in this space?

Translating the experience into other retail sectors will be harder. There will always be a need for human interaction with certain purchases where shoppers value the advice and expertise of an experienced sales team. Removing the human interaction also removes the sense of identity. Impersonal is only good when it leads to quick and convenient transactions. It is hard to imagine a wedding dress shop ever evolving into a no-interaction experience.

At the moment, Amazon has first mover advantage. For those early adopters, stimulated by something new and inquisitive about different experiences, this is definitely an exciting development. It won’t be long before there are replicas. But it won’t be easy. Amazon has a ready-made community. Many of us have been trusting Amazon for years, and can’t imagine life without an Amazon account. Amazon has built up a huge wealth of data on our shopping habits. Will challengers be able to replicate this sense of community, trust in technology and effective use of data?

It as an interesting retail experiment, and one that is sure to leave a big impression. Think about other Amazon experiments, such as its online book store: it had a huge impact on the humble book store, but it didn’t kill them off altogether. Amazon Go shows us what is possible.

Competitors are already working out what elements they should replicate. Others may fight back by embracing what Amazon lacks: the human face of retailing, distinguishing themselves through the very people that make their particular store stand out. An online community is a powerful thing, but a living, breathing army of human ambassadors for a brand is even stronger. Time will show who has the loudest voice.