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Kohls, Macys turn landlords in bid to unlock real estate value

Department store operators Kohl's Corp (KSS. N) and rival Macy's Inc (M. N) are betting on a potential money-spinner - carving out prime space within their sprawling stores and leasing them to other retailers. The move underscores the pressing need for the two chains to better monetize their real estate assets at a time when fewer people are visiting malls and instead shopping online for everything from clothes to home decor items. Kohl's said on Thursday it would operate 500 of its nearly 1,150 stores with much lower square footage and would look to lease out the remaining space to other retailers. Macy's, whose flagship locations include Herald Square in Manhattan and Union Square in San Francisco, is also planning to carve out storefront space for high-end retailers and lease or sell that space, Chief Executive Terry Lundgren said on Tuesday. The companies, whose stores are located in prime shopping districts, are hoping that leasing out store space to popular brands will not only generate a steady rental income but also attract more shoppers to its own stores."We are looking for opportunities to bring in other retailers to take that square footage that we are able to carve out to drive some additional traffic," Kohl's Chief Executive Kevin Mansell said on a conference call with analysts.

Between the two of them, Kohl's and Macy's have about 225 million square feet of real estate space - roughly equivalent to a third of Manhattan. Leasing out stores could also be a safer strategy compared with an outright sale or shuttering them, which would result in loss of sales. For Macy's particularly, the move could give it more leverage as it deals with activist investor Starboard, which has been pushing the company to squeeze more money out of its real estate assets.

Nearly 1 billion square feet, or more than 10 percent of current retail space, will be "rationalized" in the coming years in the form of store closures, conversions to other uses, or rent roll-downs, according to real estate data and analytics firm CoStar Group."We will achieve a rationalization of square footage over time, not necessarily fewer stores but probably less square footage," Mansell said on the call. Retailers are generating lower sales per square foot than they did in the decade leading up to the 2008 recession. In early 2000's, companies produced sales of over $350 per square foot, while now it is less than $330 per square foot.

Trump again vows to bring back U.S. jobs, but offers few details WASHINGTON President Donald Trump told chief executives of major U.S. companies on Thursday he plans to bring millions of jobs back to the United States, but offered no specific plan on how to reverse a decades-long decline in factory jobs.

Tesla's 'close to the edge' cash foretells capital raise SAN FRANCISCO Tesla Inc Chief Elon Musk has taken big risks repeatedly since going public in 2010, but investors were spooked on Thursday after he said the electric car company could get "close to the edge" as it burns cash ahead of its crucial Model 3 launch.

Boeing 'not competitive', but tax reform would help: CFO SEATTLE Boeing Co's commercial airplanes division is "not competitive" under current U.S. tax rules and the company is using its access to the Trump administration to press for changes, Chief Financial Officer Greg Smith said on Thursday.

Oil gains as bullish bets on rising prices hit record high

Oil prices rose on Monday as investors showed record confidence in prices rising further, though gains were capped by the prospect of faster growth in U.S. oil production. Brent crude oil LCOc1 rose 55 cents to $56.54 a barrel by 1053 GMT, while U.S. West Texas Intermediate CLc1 added 39 cents to $54.38. Money managers raised their bullish U.S. crude futures and options positions in the week to Feb. 21 to the highest on record, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday."Oil prices are being supported by the ongoing buying interest shown by speculative financial investors, who for the first time expanded their net long positions in WTI to more than 400,000 contracts," Commerzbank analyst Carsten Fritsch said in a note. Speculators also raised their bets on a rally in Brent crude futures to a record high in the week to Feb. 14, with fresh data expected to be released later on Monday."With speculators increasing their bullish bets on U.S. crude to an all-time high, the risk of disappointment and subsequent downward spiral in prices has never been greater," oil brokerage PVM's Stephen Brennock said.

Among the risks is the level of compliance to the deal between the Organization of the Petroleum Exporting Countries (OPEC) and other producers to bring down oil output by about 1.8 million barrels per day (bpd). OPEC's record compliance with the deal has surprised the market, and the biggest laggards, the United Arab Emirates and Iraq, have pledged to catch up with their targets. The International Energy Agency put OPEC's average compliance at a record 90 percent in January. Based on a Reuters average of production surveys, compliance stands at 88 percent.

A Reuters survey of OPEC production later this week will show compliance for February. Looming over the success of the deal is the reaction of U.S. shale producers to rising prices and their ability to increase output. U.S. drillers added five oil rigs in the week to Feb. 24 to 602, the most since October 2015, energy services firm Baker Hughes Inc (BHI. N) said on Friday.

Over the past two weeks the U.S. implied shale oil rig count went up by 15. "[This] is marginally higher than our projected 7 rigs per week for first half 2017," wrote Nordic bank SEB chief commodities analyst Bjarne Schieldrop. The bank has adjusted its dynamic price forecast for 2019 marginally lower from $68.30 a barrel to $67.90.