US Bricks and Mortar Retail is Imploding



POSTED BY Ed (24 days ago)
“Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores,” lamented Target CEO Brian Cornell this morning in the earnings release.

“Unexpected” is a hilarious choice of words. Because we, mere outsiders, have been vivisecting the now structural brick-and-mortar retail quagmire for a long time, and no deterioration is “unexpected.”

Target’s revenues in the fourth quarter fell 4.3% year-over-year to $20.7 billion. Revenues for the whole year dropped 5.8% to $69.5 billion. Down from $69.8 billion in fiscal 2011. That makes for six years of sales stagnation.

Net income plunged 43% to $817 million for the quarter, and 19% for the year to $2.7 billion. But at least, Target is still making money – unlike other retailers, many of which are either already in bankruptcy or are slithering toward it.

Sales at stores open for at least a year fell 1.5% in the quarter and 0.5% for the year. It expects same-store sales to fall further in the “low-to-mid single” digits. Target also lowered its outlook for earnings, which caused even retail optimists to howl in pain.

To raise cash, the company is trying to sell distribution centers and other properties that aren’t leased, but most of the stores are leased and there isn’t much to sell. In January it sold its headquarters in Plano, Texas, for $353 million. It’s also shuttering two distribution centers, which it owns and might be able to sell.

On Friday, it said it would shutter between 130 and 140 stores over the next few months, or around 13% to 14% of its 1,014 or so stores. But closing a leased store isn’t cheap – lease termination expenses can add up. J.C. Penney tried to put a positive spin on it, claiming that the closings would save roughly $200 million a year. But it would cost $225 million to do so. Once retailers decline, there’s no easy way out.



Ed (24 days ago)
Best Buy surprises with weak holiday sales, bleak forecast

Best Buy on Wednesday accelerated its share buyback plan to $3 billion over two years from $1 billion over two, and also hiked its quarterly dividend.

archcherub (23 days ago)
Ecommerce for the win!

Ed (16 days ago)
It's a complete bloodbath in US as well as Canada...2016 was bad, 2017 is going to be a lot worse...all this shut just in the last 1 month...

BCBG Max Azria to shut down stores in Canada, files for bankruptcy protection

Fargo-based Vanity to close about 140 stores after filing for bankruptcy protection

Macy's committed to closing 34 more stores as sales drop in 2016

HMV Canada To Close All Stores

After 102 years, all stores to shut:

King's Variety to close all stores in 2017

Crocs set to close down 160 stores by 2018

Whole Foods closing 9 stores, including 2 in Colorado, amid sluggish sales

My Fit Foods closes all 8 Dallas-area stores

11 CVS stores in Chicago are closing

Savers closing 5 Chicago-area thrift stores

9News: Thrift-store chain closing all Colorado locations (Video)

Electronics retailer hhgregg to close 88 stores, including all in Maryland

Lucy Activewear will close stores and be folded into North Face brand

A Slew of Canadian Clothing Store Locations Could Close For Good

Retail chain Family Christian plans close after 85 years

Nasty Gal stores to shut their doors

J.C. Penney to close up to 140 stores, offer buyouts

Holt Renfrew to shut down hr2 in Brossard's Dix30, Vaughan Mills

Here is a full snapshot: These 13 retailers are closing more than 1,500 stores in 2017

Is Your Local RadioShack Store Closing Soon? Let Us Know

Ian Poulter is shutting down his clothing line


Then there is UK

Mapped: All 34 Budgens store closures and when they will shut

Ed (16 days ago)
Manhattan Retail Vacancies Soar

Dusty windows on Madison Avenue. Ghostly traces of signs on Columbus Avenue. Graffiti on a shop in SoHo.

Manhattan’s top retail strips, some of which are among the world’s priciest shopping districts, appear to have seen better days.

Once-packed streets are being hit by competition from emerging neighborhoods, and deep discounting from online retailers, according to community officials, landlords and brokers.

“Retailers are experiencing painful adjustments right now, there’s no doubt about it,” said Rafe Evans, a longtime broker with the firm Walker, Malloy and Company. He added that he had struggled to fill some Upper West Side buildings with tenants that last more than a few years.

Ed (16 days ago)
Dying shopping malls are wreaking havoc on suburban America

A Third Of All US Shopping Malls Are Projected To Close

In my recent article about the ongoing “retail apocalypse“, I discussed the fact that Sears (NASDAQ:SHLD), J.C. Penney (NYSE:JCP) and Macy’s Inc (NYSE:M) have all announced that they are closing dozens of stores in 2017, and you can find a pretty comprehensive list of 19 U.S. retailers that are “on the brink of bankruptcy” right here. Needless to say, quite a bloodbath is going on out there right now.

But I didn’t realize how truly horrific things were for the retail industry until I came across an article about mall closings on Time Magazine’s website:

These 19 retailers are on the brink of bankruptcy…13,216 stores to close?

Ed (16 days ago)
An $11 trillion commercial real estate bubble is ready to rock the economy

Warnings about the loans, bonds, and commercial-mortgage-backed securities (CMBS) tied to the vast $11-trillion commercial property sector in the US have been hailing down for months. Moody’s Investor

Services just warned about the rising delinquency rate of some $360 billion in CMBS it rates. Delinquencies of 60+ days jumped from 4.6% last year to 5.6% in September.

Fitch Ratings has been fretting about valuations in the sector, and CMBS, for months. “Valuation and lending trends are not sustainable in the medium term,” it said most recently in its November report.

It’s worried about the banks, whose commercial real estate (CRE) lending has reached “record levels”

Alas, since the report was released on Election Day, interest rates have already jumped. This comes at the worst possible moment, at the peak of the most gigantic CRE price bubble the US has ever seen.

The Green Street Commercial Property Price Index has soared 107% from the trough in May 2009 and now exceeds the peak of the totally crazy bubble in 2007 by 26%:

“I can paint a picture that it could be disastrous, with runaway inflation and high interest rates,” said Charlie Bendit, co-chief executive of Taconic Investment Partners, at a New York industry luncheon last week, according to the Journal.

The Wall Street Journal:

In all, Morningstar Credit Ratings LLC predicts borrowers won’t be able to pay off roughly 40% of the commercial mortgage-backed securities loans coming due next year. Suburban office properties and shopping centers are being hit particularly hard, said Edward Dittmer, a Morningstar vice president.

“We’re seeing a lot of stress,” Mr. Dittmer said.


Article dated Nov. 17, 2016

Ed (16 days ago)
RadioShack Successor Enters Bankruptcy (Again) as Retail Woes Mount

Ed (10 days ago)
"Something Snapped": US Department Store Sales Crash Most On Record

On the other hand, one particular chart revealed in the latest monthly Bank of America debit and credit card spending report shows that things may be about to get a whole lot worse for America's department stores, as well as malls where they are for the most part the anchor tenants. Of note: while official US retail sales data will be released tomorrow (BofA data always comes several days ahead of the official release), what is especially ominous is that the collapse in department store spending was the biggest on record:

The collapse in department store spending in February took place in the context of broad weakness across the entire retail universe, with BofA reported that retail sales ex auto declined 0.2% seasonally adjusted. Since that was not accepetable, BofA decided to smooth out large swings over the prior two months, leaving it with retail sales ex-autos running at an average 3 month pace of 0.1% mom SA. As the chart below shows, even that suggests a far weaker than expected retail sales report tomorrow, just hours before the Fed's rate hike announcement: "Given that the BAC data trends closely with the Census Bureau, we think our data points to a soft report when it is released on Wednesday the 15th."

Breaking down the headline number into components shows a notable decline across virtually all subsegments, with the exception of Cruise Ships (clearly not a concern for much of middle-class America), Home improvement stores and Home goods. Everything else was flat to down substantially.

To be sure, Bank of America tries to explain the sudden February weakness with the previously documented delay in tax refunds, although that hypothesis does not conform with last week's Gallup survey according to which February Consumer spending was the highest since 2008. This is what BofA says: "We believe that a delay in tax refunds likely biased spending lower in February relative to prior years.

Comparing debit and credit card spend is a good indication since presumably usage of debit cards should be more sensitive to the tax refund (proxy for cash) than credit cards (leverage). Indeed, we found that retail sales ex-autos for debit cards declined 1.7% mom while credit card spending was up 1.8% mom. The second test we looked at was by income cohort -- the tax changes are more likely to impact the lower income households given that the EITC and ACTC are aimed at assisting lower-income households. We see this clearly in our data where the lowest income quintile reduced spending by 3.4% while the highest income quintile actually increased spending by 0.9% mom. We combine these two factors in the Chart of the Month to show weaker debit card spending, particularly for lower income households.

Alas, even if one believes this explanation, the next charts below show that no matter what - if anything - prompted the February spending collapse, when it comes to secular trends across various key spending segments, the deterioration has been taking place for years. First looking at restaurant sales, there has been a decisive slowing in spending at restaurants over the past two years with weakness concentrated in the larger / chain restaurants.

Ed (10 days ago)
Foreign Investors Pile into US Commercial Real-Estate Bubble

So how is their market timing?

The Greenstreet Property Price Index in February was flat for the fourth month in a row. You have to go back to the early 2000s to find a flat spot this long. During the Financial Crisis it peaked, and without dilly-dallying around, it plunged, and then, fired up with the Fed’s free money, it soared. But this time, there is no crisis. It just hit the ceiling.

Year-over-year in February, the index rose only 2%, not even keeping up with consumer price inflation, a bitter disappointment after nearly eight years of a blistering boom during which the index soared 107%:


Ed (8 days ago)
Neiman Marcus Is Running Out of Options

If Neiman Marcus can't sell itself to Hudson's Bay or another potential bidder, it may be headed for bankruptcy.

Ed (7 days ago)
There are two to three times as many grocery stores as the country "needs," Jim Hertel, vice president of retailing consulting firm Willard Bishop, tells Ashley Gurbal Kritzer of the Atlanta Business Chronicle. Hertel's firm is predicting a contraction in stores and square feet for the industry.

"From office supplies to clothing and accessories, retailers across the spectrum have shuttered physical storefronts in recent years to concentrate on their best-performing locations and online sales," Grubal Kritzer writes.

The thinking goes that, as online retailers like Amazon gain steam in the grocery category and big box stores like Target move in, long-time grocers like Publix and Kroger may look to close their lower performing stores. Another reason for closings among some traditional grocery retailers, says Grubal Kritzer, is the expansion of smaller discount chains like Aldi and Lidl.

Ed (4 days ago)
Retailers Stare Into the Darkness, But It Keeps Getting Darker

Credit Suisse cuts the group as outlook gets increasingly bad

Risks of border adjustment tax are weighing on retail sector

It’s hard out there for retailers -- and it doesn’t look like they’ll be catching a break anytime soon.

Researchers from Credit Suisse Group AG downgraded the retail sector Tuesday, saying the outlook’s become bleaker than they’d thought it would in large part because of what’s been happening in Washington.

In particular, the team headed by Chief U.S. Equity Strategist Lori Calvasina wrote that it’s been questioning whether “the risks of the border adjustment provision in the House corporate tax reform proposal are fully reflected in apparel and retailing stocks.” The researchers cut their view on retailers to market-weight from overweight.

Other firms have issued similar words of caution, with Wells Fargo & Co. analyst Ike Boruchow writing that it’s “increasingly clear that retail is under significant pressure” and that the companies are “running out of time” to hit their first quarter numbers.

Meanwhile, Wedbush Securities Inc. analyst Morry Brown pointed out that trends during the first three weeks of March “only minimally improved from February.” He noted that promotions were broad-based at malls and that conversion rates were low.


Ed (2 days ago)
Commercial & Residential Real-Estate Bubble once again a Risk to “Financial Stability,” and Fed’s Rosengren is Worried

Ed (2 days ago)
Game Over for SEARS?

Lately not a day seems to pass without some materially adverse news hitting a prominent retailer, or the broader space, and today it is perennial default candidate Sears to crash at the open after issuing a "going concern" in its latest 10-K, warning overnight, wrning “substantial doubt” about its ability to keep operating, raising fresh concerns about a company that has lost more than $10 billion in recent years.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Eddie Lampert's company said although always eager to put a positive twist on the worst of news, the company added that its comeback plan may help alleviate the concerns, “satisfying our estimated liquidity needs 12 months from the issuance of the financial statements.” Of course, the question is what happens when vendors start demanding cash on delivery as concerns about SHLD's liquidity concerns continue to grow.

Payless Is Said to Be Filing for Bankruptcy as Soon as Next Week

Payless Inc., the struggling discount shoe chain, is preparing to file for bankruptcy as soon as next week, according to people familiar with the matter.

The company is initially planning to close 400 to 500 stores as it reorganizes operations, said the people, who asked not to be identified because the deliberations aren’t public. Payless had originally looked to shutter as many as 1,000 locations, and the number may still be in flux, according to one of the people.

Ed (2 days ago)
Sears Enters Death Spiral: Vendors Halt Shipments, Insurers Bail

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