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An Epically Bad Week for US Brick-and-Mortar Retailers and Landlords

June 15, 2020

An Epically Bad Week for US Brick-and-Mortar Retailers and Landlords

Winners in this crisis: Ecommerce – for retailers that don’t sell men’s office & formal wear – and for sure, lawyers.

Tailored Brands, a holding company for men’s apparel stores, including Men’s Wearhouse and JoS. A. Bank, is considering filing for bankruptcy, according to sources cited by Bloomberg on June 8. Bankruptcy would allow the company to shut weaker locations while keeping other stores operating, the sources said.

The company confirmed in an SEC filing on June 10 that it may have to file for bankruptcy:

“If the effects of the COVID-19 pandemic are protracted and we are unable to increase liquidity and/or effectively address our debt position, we may be forced to scale back or terminate operations and/or seek protection under applicable bankruptcy laws. This could result in a complete loss of shareholder value,” it said.

But its problems started years ago, including the misbegotten $1.8 billion acquisition of JoS. A. Bank in 2014, whose revenues promptly went into a death spiral. Overall revenues fell every year since 2016.

In an update on June 10, Tailored Brands said that total revenues in the first quarter (ended May 2) collapsed by 60% year-over-year, with even ecommerce sales plunging 32%.

The company started re-opening its stores on May 7, and had 634 stores open by June 5. So how well are these reopened stores doing?

In the week ended June 5, for stores open at least the entire week, average comparable sales at Men’s Wearhouse were down 65%, at Jos. A. Bank 78%, and at K&G 40%.

That total ecommerce sales, including rental services, plunged 32% in the second quarter through June 5th – when retail has largely switched to ecommerce, and everyone else’s ecommerce sales are booming – is a sign that work-from-home has crushed demand for clothes worn to the office; and that the postponements of events such as weddings have crushed the demand for renting formal wear.

…click on the above link to read the rest of the article…

Retail Store Closures Have Huge Impact On Communities

May 30, 2020

Retail Store Closures Have Huge Impact On Communities

Across America many buildings stand empty or under-leased. They once housed thriving businesses that provided Americans with good-paying jobs.Over the last several years retailers have been closing stores and as the carnage rapidly accelerates this will be back in the news bigger than ever. The impact of these store closings all across America will be huge and take a huge toll on communities with a great number of jobs being lost forever.Much of this is linked to small businesses having its clock cleaned when forced to shutdown because of Covid-19, however, a lot is related to paying higher wages, compiling with new government regulations, and being forced to compete with big businesses backed by Wall Street money.

Retail closures come with a hidden cost to society that the average person fails to internalize. Retail closings will result in lots of other small businesses closing their doors. Not only will the retail employees lose their jobs but these stores support many local businesses.People often forget that the brick and mortar stores suffer several expenses not fostered upon online companies. All these constitute a sort of tax on these stores which benefits the community in which they are located.

These costs rapidly add up and include such things as maintaining landscaping, ensuring safe ingress and egress, or providing a parking lot for customers. Staffing for longer hours, for the convenience of customers, often results in being open when foot traffic would indicate a store should be closed. Dealing with security and shoplifters is another expensive burden. Over the last few years, stores such as Target and Macy’s have even had to face a slew of dishonest shoppers trying to sneak defectives products purchased online back as exchanges and trading them for a fresh unbroken product. I have seen this costly abuse recommended by several online shoppers that see this as an “easy fix” on how to handle defective merchandise.

…click on the above link to read the rest of the article…

National facial recognition database to use loyalty rewards to identify American shoppers

November 14, 2018

National facial recognition database to use loyalty rewards to identify American shoppers

image credit: Zenus Biometrics

For years, I have been warning people about facial recognition in retail stores, but this story might convince you to avoid retail stores altogether.

A recent article in Biometric Update. com (BU) reveals that retail stores have a master plan to convince Americans to accept facial biometrics.

BU interviewed four facial biometric company CEO’s and what they revealed is frightening.

The article starts off innocuously enough by telling us that U.S. retail biometrics is used primarily in loss-prevention but things quickly take a turn for the worse.

BU’s interview with FaceFirst CEO Peter Tripp is especially disconcerting, as he reveals how retailers plan to use a “facial recognition opt-in environment.”

“There is another step though that exists which has more to do with consumer loyalty, and consumer experience, that is not quite as expensive an endeavor, and I think there are lots of folks looking at ways of doing that in a friendly opt-in environment, where privacy is not the cornerstone issue, Tripp said.”

If any of this sounds familiar its because they are doing the exact same thing with digital drivers licenses.

Biometric companies are trying to convince Americans to accept digital drivers license by tying them to loyalty rewards programs.  Last year the Lincoln Motor Company installed “complimentary” TSA PreCheck biometric scanners in all their new vehicles so customers can get through airport and sport stadium check-in lines quicker.

Corporate-run national biometric database 

According to a recent ZDNet article a new partnership between SureID a biometric fingerprinting company and Robbie.AI a facial recognition company “could create a national biometric database.”

…click on the above link to read the rest of the article…

It’s Just Starting: Moody’s Warns A Deluge Of Retail Bankruptcies Is Coming

March 15, 2018

It’s Just Starting: Moody’s Warns A Deluge Of Retail Bankruptcies Is Coming

2017 was a perfect storm for “brick and mortar” retailers who officially lost the war with Amazon, and no less than 30 retail chains filed for bankruptcy in a year in which the CEO of Urban Outfitters said the “retail bubble has now burst“…

Source: Reorg First Day

… bringing the total number of Chapter 11 cases since mid-2015 to 50, accounting for over $20 billion in liabilities.

So is the worst over for retail, or is the sector just now approaching the eye of the hurricane?

According to the latest Moody’s research report on the retail sector, the rating agency now forecasts at least six retail & apparel issuers defaulting over the next 12 months, with most of these occurring in the first half of the year. 

While the good news is that the industry default rate is expected to peak at 12.43% this March, Moody’s cautions that the still-high default forecast for the remainder of 2018 points to more pain before this lower ratings rung in retail stabilizes. Recent defaulters include Tops Markets, which filed for Chapter 11 on February 21, which followed Bon-Ton’s filing on February 4. Charlotte Russe and Charming Charlie both defaulted in December, and Claire’s has hired restructuring advisors.

Meanwhile, the Toys “R” Us bankruptcy in September its overnight Chapter 7 liquidation has only added to pressures by accentuating potential pressures between vendors and the more stressed retailers, even as it left some 33,000 employees without a job.

The problem is that it only gets worse from there, and the rating agency expects upcoming maturities for distressed issuers will spike in 2019. Defaults are growing as many struggle with high leverage and challenged operating performance. These challenges are compounded by the biggest risk – mounting maturities –  which spike in 2019. Overall, issuers in the Caa1 and lower group face $14.9 billion in public and private maturities due 2018 through 2020 as shown in Exhibit 1. The lion’s share of these maturities (Exhibit 2) is attributable to just five issuers:

  • Sears Holdings Corp. (Ca negative),
  • Neiman Marcus Group LTD LLC (Caa2 negative)
  • Claire’s Stores, Inc. (Ca negative),
  • BI-LO Holding Finance (Caa1)
  • Guitar Center Inc. (Caa1 negative).

…click on the above link to read the rest of the article…

“The Retail Bubble Has Now Burst”: A Record 8,640 Stores Are Closing In 2017

April 22, 2017

“The Retail Bubble Has Now Burst”: A Record 8,640 Stores Are Closing In 2017

        “Thousands of new doors opened and rents soared. This created a bubble, and like housing, that bubble has now burst.”

        – Richard Hayne, Urban Outfitters CEO, March 2017

The devastation in the US retail sector is accelerating in 2017, and in addition to the surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious than in the soaring number of store closures.

While the shuttering of retail stores has been a frequent topic on this website, most recently in the context of the next “big short”, namely the ongoing deterioration in the mall REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact from Credit Suisse:“Barely a quarter into 2017, year-to-date retail store closings have already surpassed those of 2008.”

According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

As the WSJ calculates, at least 10 retailers, including Limited Stores, electronics chain hhgregg and sporting-goods chain Gander Mountain have filed for bankruptcy protection so far this year. That compares with nine retailers that declared bankruptcy, with at least $50 million liabilities, for all of 2016. On Friday, women’s apparel chain Bebe Stores said it would close its remaining 170 shops and sell only online, while teen retailer Rue21 Inc. announced plans to close about 400 of its 1,100 locations.

Broken down by retailer, either in bankruptcy or not yet:

…click on the above link to read the rest of the article…

Retailpocalypse 2017: Hundreds of Stores Will Be Closing

January 13, 2017

Retailpocalypse 2017: Hundreds of Stores Will Be Closing

After Christmas, all is not calm and bright in the retail world.

For those who are still under the illusion that our economy is great and prosperity is nigh, you might want to consider the massive loss of jobs that will be forthcoming as stores across the country go into damage control mode to try to stop the hemorrhaging from lackluster holiday sales.

Thousands of non-seasonal jobs are being cut as retail stores across the country close down or slash expenditures. If December is the most wonderful time of the year, then January is the most dismal. The beginning of the first quarter is the most common time to announce store closures and assess budgets.

The start of the year is a popular time to announce store closures. Nearly half of annual store closings announced since 2010 have occurred in the first quarter, CNBC reports. (source)

Last year, Wal-Mart stunned the country when they closed 269 stores in January.

Macy’s

The department store chain blames online sales for their woes.

Macy’s said Wednesday it has either closed or will shutter 68 stores and cut an additional 6,200 positions at a time when shoppers are going online to buy everything from scarves to lipstick.

Of the 68 stores out of 730 in total, nine closings had been previously announced and three locations have already shut down. But the retail giant revealed the locations of the remaining 59 stores, which will be shuttered by the middle of this year and affect 3,900 employees, some of whom may be offered jobs at other locations

…Additionally the retail giant says that it will be cutting “layers of management” at its central operations, and paring the number of managers supporting stores, making up the bulk of 6,200 jobs that will be lost.

…click on the above link to read the rest of the article…

Major U.S. Retailers Are Closing More Than 6,000 Stores

May 2, 2015

Major U.S. Retailers Are Closing More Than 6,000 Stores

If the U.S. economy really is improving, then why are big U.S. retailers permanently shutting down thousands of stores?  The “retail apocalypse” that I have written about so frequently appears to be accelerating.  As you will see below, major U.S. retailers have announced that they are closing more than 6,000 locations, but economic conditions in this country are still fairly stable.  So if this is happening already, what are things going to look like once the next recession strikes?  For a long time, I have been pointing to 2015 as a major “turning point” for the U.S. economy, and I still feel that way.  And since I started The Economic Collapse Blog at the end of 2009, I have never seen as many indications that we are headed into another major economic downturn as I do right now.  If retailers are closing this many stores already, what are our malls and shopping centers going to look like a few years from now?

The list below comes from information compiled by About.com, but I have only included major retailers that have announced plans to close at least 10 stores.  Most of these closures will take place this year, but in some instances the closures are scheduled to be phased in over a number of years.  As you can see, the number of stores that are being permanently shut down is absolutely staggering…

180 Abercrombie & Fitch (by 2015)

75 Aeropostale (through January 2015)

150 American Eagle Outfitters (through 2017)

223 Barnes & Noble (through 2023)

265 Body Central / Body Shop

66 Bottom Dollar Food

25 Build-A-Bear (through 2015)

 

…click on the above link to read the rest of the article…

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