More proof that our economy continues on its downward trek. The big three retailers from my youth were Sears, JC Penney and Macys. One or more of them anchor every regional mall in this country. Sears has been in a slow methodical death spiral for over a decade. They brilliantly added Kmart to their portfolio to give them a further push towards Chapter 11. The blithering idiots on CNBC would gush about Eddie Lampert and his real estate play with Sears/Kmart. How’s that working out with more and more empty retail hulks dotting the landscape? The value of their real estate drops by the day. There is no one who wants a 100,000 square foot location in a dying mall.
JC Penney has taken a different path. They are on the Apple express to oblivion. Ron “Apple of my eye” Johnson was able to undo 100 years of success in 18 months. JC Penney is hurtling towards liquidation faster than Elon Musk’s hyper-train. They will report a same store sales decrease of 15% to 20% next week after having a 22% decrease the previous year. They will enter the trashbin of retail history within the next year.
Macys has been the best of the bunch over the last few years. With their two big rivals in death spirals, why wouldn’t they be doing OK? Well they just reported negative second quarter comp store sales. That is pitiful when you consider their competitors are doing so poorly. This is further proof that the consumer is kaput. Credit card debt continues to decline as people have no discretionary money left. They are busy paying for gas, higher taxes, Obamacare, and food.
Macys conveniently left out a few facts from their press release. Their same store sales declined by 0.8%, but that doesn’t tell the story. They include on-line sales in their same store sales. That is highly misleading to how their core bricks and mortar business is doing. Their on-line sales have been growing 20% to 30%. They also don’t provide traffic counts in the stores. Inflation is easily 2% to 3% for clothing. If you factor these facts into the equation, the number of customers in the store was probably negative 3% to 5%.
Our mall based retail paradigm is dying. When the next stock market implosion arrives and wipes out some more middle class net worth, the closing of these big boxes will accelerate. Right now it is just like watching a slow motion train wreck.
But Jim Cramer and Becky Bubblehead on CNBC say it’s the best time to buy. Back to school will be really cool.
Coming to a Mall near you.
Macy’s warning casts shadow across retail sector
By Andria Cheng
Macy’s Inc. , typically an outperformer in the middle-America department-store sector, couldn’t stave off sector worries heading into the critical back-to-school and holiday sales season.
Its shares fell 3.5%, the biggest S&P 500 decliner on Wednesday after the company’s second-quarter profit missed analysts’ estimates and comparable sales saw an unexpected decline. The company cut its full-year profit and sales outlook. It was the first time in 25 quarters Macy’s results fell short, Citigroup analyst Deborah Weinswig said.
The miss from Macy’s, first out of the gate among major retailers reporting, didn’t bode well for others, especially struggling J.C. Penney Co., analysts said. Penney shares, after having already slumped two-fifths in the past year, were little changed. Nordstrom Inc. , Kohl’s Corp., Target Corp. , TJX Cos. , and Ross Stores Inc. all declined and were among the leading decliners in the S&P 500. Wal-Mart Stores Inc. , the world’s largest retailer, is flat ahead of its report on Thursday.
Macy’s Chief Executive Terry Lundgren blamed disappointing sales on “consumers’ continuing uncertainty about spending on discretionary items in the current economic environment.” Like other retailers, it said it had to discount to clear merchandise after a cool spring hurt summer merchandise sales. Inventory growing faster than sales also was a cause for concern.
However, Lundgren said the company has seen its demand for women’s “ready-to-wear” clothing improving after lagging for two years. The company’s upscale Bloomingdale’s chain also rebounded in the quarter.
“We also are encouraged by our early read on the back-to-school season,” he said.
Still, despite some signs of improvement, Macy’s results confirmed a malaise seen across the board. Back-to-school spending by several forecasts is expected to slow down this year and could be the slowest in four years. Retailers including Costco Wholesale Corp., typically also an outperformer, last week reported disappointing July same-store sales. Meanwhile, Macy’s suppliers including Coach Inc., Ralph Lauren Corp. and Tumi Holdings have all reported declining traffic that hurt demand.
Other retailers including American Eagle Outfitters Inc. and Aeropostale Inc. have given disappointing forecasts as they cited a more promotional environment that forced them to accelerate discounts. There’s widespread worry that their rival Abercrombie & Fitch’s results also won’t be pretty.
With consumers’ disposable income seeing little growth, apparel and retailers selling nonessential things have also had to compete with increased spending for bigger-ticket items such as autos.
Consensus estimates for the retail segments have already been cut for the second half from earlier this year, and they are expected to come down more.