In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
It looks as if dollar stores are a black hole that eats up revenue and produces little profit. Or at least that is what Walmart has concluded; it is concentrating its small box growth on Neighborhood Markets that generate several streams of revenue. Most neighborhood markets contain a grocery store and a pharmacy as well as a discount store, and many of them also have gas pumps.
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Rite Aid, which operates around 4,600 drugstores in 31 states and the District of Columbia, is about to be taken over by Walgreen Boots Alliance (NASDAQ: WBA). The press is treating the deal as just another corporate buyout, but to me, it sounds as if a very desperate Rite Aid effectively sold itself to Walgreens to avoid the humiliation of bankruptcy or the death spiral
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What this seems to indicate is not that Amazon is stealing business from Walmart but instead it is stealing revenue growth. Basically, the additional revenue in the economy that would have normally flowed to Walmart and other big box retailers seems to be flowing to Amazon.
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The 2016 holidays and the free shipping offers may prove whether Target and Best Buy are going to be major players in the world of online retail or not. One just hopes that management teams are not betting the company on such offers. If they are, the death spiral could be closer than we think, especially for Target.
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These major retailers are either standing still or worse experiencing shrinking retail. At a few of them such as Sears and Aeropostale revenue is actually in free fall. These numbers show us two very frightening things folks, first the retail apocalypse is heating up and getting worse and second consumer spending is dismal.
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The revenue figures show us that Kmart is now smaller than Dollar General (NYSE: DG). Dollar General reported a TTM Revenue of $19.31 billion on April 30, 2015.
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One also has to wonder what Seritage investors are actually buying. Seritage purchased the properties from Sears for $2.72 billion, yet it only raised $1.6 billion through the IPO. It is unclear how it will generate revenue because all but 11 of the properties it owns are leased back to Sears, a company that’s losing $2 billion a quarter. There’s no guarantee that Sears will be able to cover those lease payments.
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The social, political and economic consequences of the retail apocalypse will be immense. It will change America in ways we cannot even begin to imagine. One has to wonder how much longer this will continue until it produces some sort of civil unrest.
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The Robbins Arroyo prediction of insolvency because of the real estate deals sounds a little too optimistic when you take a look at these figures. If the revenue losses continue, Sears is headed for insolvency with or without the Seritage and other deals.
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If that wasn’t enough, the amount of Dollar General’s revenue growth actually exceeded that of Target. The numbers indicate that Target’s TTM revenue increased by $1.46 billion between April 2014 and April 2015, rising from $71.23 billion in 2014 to $72.69 billion in 2015.
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