Article 43

 

The Next Depression Part 22 - Store Closings

empty_pockets.jpg

Holiday Sales Drop to Force Bankruptcies, Closings

By Heather Burke
Bloomberg
December 29, 2008

U.S. retailers face a wave of STORE CLOSINGS, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.

Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers. Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations.

More than a dozen retailers, including CIRCUIT CITY STORES INC, Linens n Things Inc., Sharper Image Corp. and Steve & Barryђs LLC, have sought bankruptcy protection this year as the credit squeeze and recession drained sales. Investors will start seeing a wide variety of chains seeking bankruptcy protection in February when they file financial reports, said Burt Flickinger.

YouӒll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains either multi- regionally or nationally go out, Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said today in a Bloomberg Radio interview. “There are a number that are real causes for concern.”

Sales at stores open at least a year probably dropped as much as 2 percent in November and December, the ICSC said last week, more than the previously projected 1 percent decline. That would be the largest drop since at least 1969, when the New York-based trade group started tracking data. Gap Inc. and Macy’s Inc. are among retailers that will report December results on Jan. 8.

Womens Clothing, Electronics

Consumers spent at least 20 percent less on womenҒs clothing, electronics and jewelry during November and December, according to data from SpendingPulse.

Retail Metrics Inc.s December comparable-store sales index will drop an estimated 1.2 percent, or 5 percent excluding Wal- Mart Stores Inc. RetailersҒ fourth-quarter earnings may fall 19 percent on average, the seventh consecutive quarterly decline, according to Ken Perkins, president of Retail Metrics, a Swampscott, Massachusetts-based consulting firm.

Probably 50,000 stores could close without any effect on consumer choice, Gregory Segall, a managing partner at buyout firm Versa Capital Management Inc., said this month during a panel discussion held at Bloomberg LPs New York offices. Only retailers with healthy balance sheets will survive the recession, according to Matthew Katz, a managing director at consulting firm AlixPartners LLP.

Store Closings

The ICSC predicts, using U.S. Bureau of Labor Statistics data, that 148,000 stores will shut down in 2008. That would be the largest number since 151,000 closings in 2001, during the last recession, according to ICSC Chief Economist Michael Niemira. The total number of retail establishments will decline by about 3 percent this year, also taking into account locations that were opened, he said. The U.S. had 1.11 million retail locations in 2002.

Another 73,000 locations may shut their doors in the first part of 2009, Niemira said.

The U.S. economy shrank in the third quarter at a 0.5 percent annual pace, the worst since 2001, according to the Commerce Department. Economists surveyed by Bloomberg in the first week of December forecast the worldҒs largest economy will contract through the first half of 2009.

The Standard & Poors 500 Retailing Index has shed 34 percent this year, with only two of its 27 companies rising.

The index doesnҒt include Wal-Mart, the worlds largest retailer, which fell 24 cents to $55.11 at 4:02 p.m. in New York Stock Exchange composite trading. Wal-Mart shares have gained 18 percent this year.

Discount Advantage

“If you’re going to be in retail right now, the discount space is where you want to be,” Patrick McKeever, a senior equity analyst at MKM Partners LLC, said today in a Bloomberg Television interview.

Discounts of 70 percent or more by Macys, AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Retailers’ pricing models are being challenged by consumers, according to Richard Hastings, consumer strategist at Global Hunter Securities LLC of Newport Beach, California.

“The whole pricing system is becoming an old-fashioned bazaar,” Hastings said today in a telephone interview. “They’re going into the stores and they’re looking at the stuff and they’re saying ‘You know what? I know that that price is way too high,’ and they have figured out that the signage doesn’t mean that much.”

Retail bankruptcies may help the industry in the long run, according to Flickinger.

We’ll be going from a Dickens-esque worst of times this December to the best of times in future Decembers because we’ll rationalize out all the redundant retailers and retail space in shopping centers,” Flickinger said.

Posted by Elvis on 12/30/08 •
Link to this articleLink to this article and comments
Home
 

Name:

Email:

Location:

URL:

Smileys

Remember my personal information

Notify me of follow-up comments?

Next entry: The Next Depression Part 23 - Local Government

Previous entry: Reboot the FCC

<< Back to main

Home

Members:
Login | Register
Resumes | Members

In memory of the layed off workers of AT&T

Today's Diversion

That which we do not bring to consciousness appears in our lives as fate. - Carl Jung

Search


Advanced Search

Categories

Archives

Favorite Posts

Recent Entries

American Solidarity

Favorites

Statistics