The Death Spiral Archives - Page 2 of 15

Why Macy’s (M) could die

November 10, 2018November 10, 2018 daniel Amazon is winning the Apparel Wars, Bluemercury, Can Macy’s (M) Compete with Amazon?, How many stores will Macy’s Close?, How safe is Macy’s (M) Dividend?, Is Bluemercury the future of Macy’s (M)?, Is Macy’s (M) Making Money, the Macy’s dividend, Why Macy’s (M) could die

The Macy’s brand may not die, but Macy’s as we know it is dying. Macy’s will have to completely transform its business model just to survive.

Macy’s investors enjoyed a dividend yield of 4.13%, an annualized payout of $1.51, and a payout ratio of 38.4% on 8 November 2018. That’s superb for a $37.78 a share stock.
Macy’s is planning a 37.7¢ dividend for January 2, 2019. However, that dividend has not increased since June 2017.

Under these circumstances, Macy’s is a respectable dividend stock, but it is too risky for long-term investment. For instance, I think the Macy’s dividend will soon decrease or disappear.

The Death Spiral

Sears Bankruptcy caused by Lack of Cash

October 28, 2018 daniel Eddie Lampert’s Sick Scheme to save Sears with Bankruptcy, Lampert’s financial engineering, Nordstrom (NYSE: JWN), Sears (OTC: SHLD), Sears Bankruptcy, Sears Bankruptcy a Symptom of a Dysfunctional Retail Economy, Sears Bankruptcy and the Retail Death Spiral, Sears Bankruptcy caused by Lack of Cash, Sears Bankruptcy Lots of Stores No Cash, The Cruelty of Eddie Lampert caused the Sears Bankruptcy, Why the Sears Bankruptcy is happening, Will Other Retailers Join Sears in Bankruptcy

The obvious conclusion is that these retailers, like Sears, become overextended and one quarter away from the Death Spiral. To clarify, the retail Death Spiral occurs when a company cannot generate enough cash to pay its debts.
In today’s environment, however, credit is so cheap retailers can avoid the death spiral by borrowing. When the loans come due, the retailers borrow more.
Under those circumstances, there is no incentive for retailers to modernize, close money-losing locations, or change their inventories. Instead, they keep operating like it is still 1988 until they can longer pay their debts.
A classic example of that was The Bon-Ton Stores (OTC: BONTQ) a department store operator that died earlier in 2018. Markedly, Bon-Ton was hiring extra staff for Christmas season 2017, a few months before they liquidated it. Astoundingly, Bon-Ton is “poised for a comeback” under the direction of delusional management, USA Today claims.

The Death Spiral

Macy’s (M) is dying can Facebook save it?

October 1, 2018October 2, 2018 daniel Amazon (NASDAQ: AMZN), Facebook and Macy’s, Is Macy’s Making Money?, Macy’s (M), Macy’s (M) and Facebook offer Shopping as Entertainment, Macy’s (M) faces a Classic Retail Dilemma, Macy’s (M) is dying can Facebook save it?, Macy’s (M) needs more Cash Flow and Cash, Macy’s (NYSE: M), Macy’s needs more Customers, the Department Store Death Spiral, The [email protected]’s, Will Pop Stores Save Macy’s (M)?

Small-box concepts like Nordstrom Local and Home Goods also have lower real estate and labor costs. They could easily use such small-box concepts as pickup locations for online orders.

Popup stores; like The [email protected]’s, are a classic solution for this dilemma. For instance, Macy’s could rent or lease space to pop up store operators.

Macy’s (M) might interest electronics, auto and other brands in pop-up stores. For example, Tesla (NASDAQ: TSLA) operates auto showrooms in some Nordstrom locations.

Obvious brands for Macy’s to tap for pop-ups include Apple (NASDAQ: AAPL), Toyota (NYSE: TM), Ford (NYSE: F), General Motors (NYSE: GM), The Walt Disney Company (NYSE: DIS), Amazon, and clothing makers. A fascinating idea for Macy’s to consider is Amazon Go in Macy’s.

The Death Spiral

Is Lowe’s Losing Money?

August 30, 2018 daniel Did Income Inequality Kill Orchard Supply Hardware?, Great Baby Boomer Sell Off, Is Lowe’s Losing Money?, Is Lowe’s Making Money?, Lowe’s (NYSE: LOW), Lowe’s Future is Bright, Lowe’s will profit from the Great Baby Boomer Sell Off, Orchard Supply Death proves Lowe’s is a good company, Orchard Supply Hardware

America’s home improvement crisis is hurting the home-improvement business. Logically, this will cause values investors to ask is Lowe’s making money?

Interestingly, the changing economy benefits Lowe’s by speeding up the transition to rentals. A long-term opportunity for Lowe’s is the huge number of homes owned by Baby Boomers (persons between 53 and 72 years of age).

The Death Spiral

Will Best Buy Die?

August 25, 2018 daniel Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Best Buy (NYSE: BBY), Best Buy Needs to work with Amazon Google and Apple not against them, Cash Flow Explains why Best Buy Bought Great Call, Geek Squad, Great Call, How safe is the Best Buy Dividend?, Is Best Buy a Value Investment?, Jitterbug, Mr. Market overvalues best Buy, smartphone for dummies, What’s wrong with Best Buy’s Great Call Acquisition?, Will Best Buy Die?

By acquiring Great Call, Best Buy is competing directly with Apple, Amazon, and indirectly with Alphabet. I cannot see how Best Buy can win that battle.
I see two big problems with Great Call that can make it a drain on Best Buy’s bottom line.
Great Call is a direct marketing company. It sells specific products directly through various channels. Best Buy is a general-purpose retailer that sells a wide variety of products and services through brick and mortar stores. I do not see the synergy there.

The Death Spiral

The Incredibly Shrinking McDonald’s

July 31, 2018July 31, 2018 daniel Is McDonald’s in the Death Spiral?, McDonald’s (NYSE: MCD), McDonald’s is on the Verge of a Catastrophic Revenue Collapse, McDonalds Dividend is Unsustainable, McDonalds Revenues Shrank, McDonalds Revenues Shrank by more than $5 billion in Four Years, Shrinking McDonalds, Surprise McDonalds is still Making a Lot of Money, The Great McDonalds Sell Off, The Incredibly Shrinking McDonald’s, Why is McDonalds’ Making Money?

By my calculations, McDonald’s annual revenue fell by $5.285 billion between December 2013 and December 2017. McDonald’s reported $28.105 billion in revenues on 31 December 2013, and $22.82 billion in revenues on New Year’s Eve 2017.

The implications are obvious McDonald’s is suffering permanent revenue shrinkage that is increasing dramatically. If McDonald’s 2018 financial performance is a repeat of 2017, revenues might drop by 14% or more.

The Death Spiral

Here’s why you should be afraid of a Baby Boomer Real Estate Sell-Off

July 26, 2018July 26, 2018 daniel aging Baby Boomers, Are There Buyers for the Baby Boomers Homes?, Baby Boomer Real Estate, Baby Boomers, Here’s why you should be afraid of a Baby Boomer Real Estate Sell-Off, Will Baby Boomers Cause a Real Estate Glut

The bottom line is that the real estate market in the United States will be a slow-moving train wreck for the next two decades. Expect a lot of people to lose a lot of money in real estate as the Baby Boomers’ age. Those who stay out of the real estate market for the foreseeable future – might be playing it smart.

The Death Spiral

The Sears Horror Gets Worse

July 11, 2018 daniel Sears has Closed 500 stores in 15 months, Sears Holdings (NASDAQ: SHLD), Sears is Truly Doomed, Sears Liabilities Exceed its Total Assets, The Sears Horror Gets Worse

Highlights of the latest round of the Sears horror show include:

Year-to-Year revenues fell by nearly one third (-31.15%) in 2nd Quarter 2018.

Sears achieved an “operating income” of -$237 million on May 5, 2018.

That gave Sears a net income of -$424 million on the same day.

Sears actually achieved negative a “free cash flow” of $-1 billion on May 5, 2018.

The Death Spiral

The Slow Death of General Electric

July 10, 2018 daniel GE shows why we should not Fear Big Tech, General Electric, General Electric (NYSE: GE), General Electric and the Death of the Old American Economy, General Electric pioneered Computers, General Electric’s Controversial Past, Historical Highlights of General Electric, Is GE Making Money?, Is General Electric Silicon Valley’s Future?, Stay away from General Electric, The Slow Death of General Electric, Will Amazon and Apple End up like GE?

General Electric’s problems stem from its roots in the Old American economy. That economy is slowly dying and taking companies like GE with it.

Investors will wonder if today’s tech titans like Jeff Bezos and Elon Musk are building bureaucratic empires that are doomed to failure. General Electric started on the cutting-edge of innovation and ended up as mess of red tape, bureaucracy and micromanagement.

The Death Spiral

The Life and Death of Department Stores TJX vs JC Penney

July 6, 2018 daniel Can Instacart Save Penney’s or Jump Start TJX?, Is JC Penney Making Money?, JC Penney (NYSE: JCP), Penney’s is no Longer Competitive, The Instacart Opportunity, The TJX business model, TJX (NYSE: TJX), TJX vs JC Penney

Traditional department stores are dying before our eyes. Shares of JC Penney (NYSE: JCP), the quintessential middle-class retailer were trading