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The New Anchor Tenants

As many investors following the news are aware, this past week the parent company of Sears Canada Inc. (TSX:SCC), Sears Holdings Corp. (NASDAQ:SHLD), announced that the “going concern” principle was now a concern, resulting in the shares tumbling.

For those not in the know, the going concern is the worry that a company won’t be able to pay the bills on a day-to-day basis, which would lead the company into bankruptcy. Although this is bad news for both Sears Canada and the U.S.-based Sears Holdings, the reality is, investors now need to consider the ramifications for many of their other holdings.

It’s widely believed that one major tenant, like Wal-Mart Stores Inc. (NYSE:WMT) or Sears Holdings, drives traffic into nearby shopping malls, since the major “big-box” retailers are destinations for shoppers.

Given the closure of many of theses anchor tenants in traditional shopping malls, the interesting investment thesis may now come in the form of strip malls instead of traditional shopping malls outside major city centres.

Many consumers are no longer frequenting traditional shopping malls. As we know, the majority of things previously purchased at malls are now being bought online, and things that need to be picked up are now being purchased at smaller strip malls.

Enter the new anchor tenant.

Previously a standalone company, Shoppers Drug Mart would have been a fantastic example, but it is now owned by Loblaw Companies Limited. Let’s keep looking.

In the Quebec market, we find pharmacy Jean Coutu Group PJC Inc. (TSX:PJC.A), which is now a destination for many consumers. Consumers are already parked to visit the pharmacy, so why not go to other stores in the same plaza?

Although strip malls operate on a smaller scale than major shopping malls, the reality is, investors need to remain focused on returns on equity instead of total dollar profit.

Currently, shares of Jean Coutu trade at slightly more than $20 per share and pay investors a dividend yield slightly more than 2.25%. Although the trailing price-to-earnings ratio is slightly under 20 times, investors are sticking with this company. It could become an investors’ new best friend.

While investors have traditionally purchased a number of things at big-box retail stores and other goods in the mall, it makes sense to assume that the closing of big-box stores will lead investors to drive to other locations. Enter the pharmacies at the strip malls.

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Fool contributor Ryan Goldsman has no position in any stocks mentioned.

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