The situation is not that bleak for Abercrombie & Fitch because of the clothing market’s decentralized nature. To clarify, there is more than enough market share for Abercrombie & Fitch (ANF) to survive.
Notably, Amazon Prime had 95 million subscribers in June 2018 up from 85 million in June 2017, Statista calculates. Thus, Amazon Prime is the fastest growing and most important retail outlet in America.
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Debt is not the only thing, Sears Holdings is trying to unload. The Chicago Tribune reports Sears is seeking buyers for 505 stores.
If a buyer cannot be found for the stores by December 5, 2018, (next Wednesday) Sears could liquidate the locations. Notably, Sears Holdings is seeking bids on the liquidation of the stores as well.
Sears is planning to sell or liquidate most of its locations if The Tribune is correct. Sears operated 866 stores in August 2018, USA Today estimates. In detail there were 506 Sears’ stores and 360 Kmart outlets in operation over the summer.
However, that number has probably shrunk because of recent closings. Notably, Sears planned to close 13 Kmarts and 33 Sears stores in November. Hence Sears is probably operating around 820 stores.
Thus Sears is planning to shrink its footprint to 315 stores if The Tribune and USA Today are correct. Under those circumstances, most of the company’s stores will close.
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The 2018-2019 Holiday Season could kill two of the most historic names in American retail, Sears (OTMKT: SHLDQ) and JC
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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.
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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.
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.
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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).
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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.
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.
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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.
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