How Does Spirit Halloween Work?
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How Does Spirit Halloween Work?
Popping up towards the end of each summer in everyday strip malls and vacant box stores in communities across the land is a retail giant that seems to have successfully bucked the trend against in-person shopping. The aisles are packed and the registers ring, for a solid 60 days at least. Then the banners come down, the inventory is packed away for another year, and the circus of ghouls and ghosts rolls out of town. Where did Spirit Halloween come from? And how does it work? Let’s bite in.
There is a market for everything, and individual holidays like Halloween are no exception. It is estimated that Americans will spend over $12 billion on Halloween this year, up nearly 400% since 2005, as shown the Statista chart below.
Spirit Halloween was created by Joe Marver in 1983 when he opened the first pop-up store at a mall in Castro Valley, California. The company grew to 90 pop-up locations around the country when it was sold to Spencer Gifts in 1999. Yes, that Spencer Gifts, which had a ubiquitous presence in shopping malls from Bangor, Maine to Bend, Oregon throughout the 1990s and 2000s.
At the time of this writing, Spirit Halloween is currently operating over 1,500 locations and employs over 40,000 seasonal employees. Just as a brief aside, to be able to hire that many temporary workers in this labor market is pretty astounding. According to ZipRecruiter, the average Spirit Halloween worker makes nearly $29/hour, well ahead of minimum wage in any state in the country. In a sample size of one, with the one person being the sales associate I spoke to when buying ninja turtle costumes for my son and me this week, this particular person seemed to love her job. It probably doesn’t hurt that the work is temporary and no matter how sick you get of Halloween by the end of it, come November 1st it is pretty much over other than the clearance sales and packing up. And if you really want to work in retail, once you get through the Halloween season the holiday blitz is on and job opportunities are a plenty.
What About the Real Estate?
Spirit Halloween typically operates in retail box stores that were formerly places like Toys R Us, Bed Bath & Beyond, Circuit City, and the like. There are plenty of these structures available in and around the periphery of current mall areas. The vacant real estate is a problem for the property owner, of course, but also for cities and towns who don’t want these behemoth structures sitting empty. Unfortunately for code reasons and just due to the aging nature of these buildings not to mention declining retail footprints that are needed in the age of online shopping, it is not always easy to fill them. This makes the owners of said real estate eager to plug in any stable tenants they can get to sign a lease, even if said lease is for, say, 90 days of the year.
What does the Spirit Halloween corporation look for in their temporary locations? You need look no further than what the company itself has published on their website in soliciting for new spots, noting:
Spirit is ideally looking for temporary 3 MONTH leases that include a kick-out clause (should the landlord secure a permanent deal by June). Since Spirit locations open on or about September 1st and remain open through November 1st, our ideal lease would run from mid July through mid-November. We like to locate our stores in power centers, strip centers, free-standing stores, major downtown retail locations and in major malls surrounded by a national retailer mix. Our aim is to set up in communities that have 1) a population of approximately 35,000+, 2) living within a 3-5 mile radius, and 3) with a car count of at least 25,000 cars per day. Our flexibility is key! While our ideal locations feature between 5,000 to 50,000 square feet of sales floor space with awesome visibility, no store is too large (or too small).
So who wins in this arrangement? Namely, everyone. Beleaguered real estate owners with vacant storefronts get revenue from a temporary tenant, Spirit Halloween gets prime locations for retail foot/car traffic (after all, these locations were originally chosen by the aforementioned retail giants exactly because of their locations), and shopping areas get a little bit of life injected into them before the busier holiday push that comes once Halloween has passed. I would add that cities and towns get to keep real estate values (and property taxes) bumped up just a bit by the occupancy temporary though it may be; a box store that is vacant for 12 months of the year is worth less on the property tax rolls than one that is vacant for nine.
From what I’ve been able to gather in researching this article including speaking with a couple of commercial real estate brokers, Spirit Halloween typically comes back to the same locations year after year if they can. Large spaces with high traffic counts might require lease payments of $30,000/month or more. That might sound like a lot, but some of these spaces can be 50,000 square feet or more, and it is just for three months. The company typically pays an extra fee for utilities, but the utilities themselves flow through the property owner so that Spirit Halloween (or Spencers, LLC) does not have to deal with local utilities companies for such temporary arrangements.
Lastly, the company offers a kick-out clause where if the property owner gets a permanent tenant before a certain date (often June 15th), Spirit Halloween will lose rights to the space for the upcoming fall. This offers property owners, who are likely always on the hunt for permanent, long-term tenants, some protections.
The Numbers
Neither Spirit nor Spencers is a publicly traded company, so specific revenue numbers are hard to find. But by several estimates out there, the company is doing $1.5 billion in sales each year, the vast majority of it in-person from the end of August to the end of October. This is an estimated revenue per employee of $400,000, which is strong by any retail metric. By comparison, Target’s revenue per employee is around $240,000 while Walmart’s is about $265,000. Lowes and Home Depot are around $262,000 per employee.
The Phenomenon Includes Memes
Spirit Halloween has entered the cultural zeitgeist here in the United States. Once scoffed at or met with eyerolls or derision, the opening of a Spirit Halloween come late August is now often a quirky media event in local markets. Speaking personally, I had never been to a Spirit Halloween before my kids insisted we stop by the former Babies ‘R Us then Bed Bath and Beyond building here in Bangor. I was super impressed. The store was well stocked, there were customers everywhere, and prices were reasonable. No, this is not an advertisement or paid plug for Spirit Halloween, just an acknowledgement that shopping can actually be kind of fun (in small doses), and this was actually an enjoyable little family trip.
So popular has the Spirit Halloween phenomenon become that the stores have sparked two entirely separate mainstream memes. The first is the addition of a mock Spirit Halloween signage on the facades of famous buildings when they become unexpectedly vacant, such as Yankee Stadium when the team has not made the playoffs, which happens to come just at the right time of year for such a meme:
The other meme is the ubiquitous costume package that Spirit Halloween is known for. You can see some of examples here, here, and here. And in wrapping up this article, it wouldn’t be a Sunday Morning Post article without touching once more on real estate, so here is one for the housing advocates and investors out there:
With the holiday market only expected to become more robust over time and with relatively few direct competitors, Spirit Halloween is likely to remain a retail mainstay for some time to come with numbers (and memes) like this and continued growth opportunities around the country.
Have a great week, everybody.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.