Some people have contested my statement that there are thousands more retail stores in the US today than there were in 2007. Yes, many mom and pop stores have gone out of business, but the big boys continued to expand in the face of reality. The mall based mega-retailers dominate the retail landscape in this country. Here is a partial list of the biggest retailers in the US and their store counts.
Store 2007 Store Count 2010 Store Count
Wal-Mart 6,756 8,416
Best Buy 873 1,297
Target 1,591 1,752
Costco 488 567
Lowes 1,534 1,710
Kohl’s 929 1,089
Walgreen’s 5,997 8,001
Rite-Aid 3,333 4,773
TJX 2,430 2,761
Just these nine well known retailers alone, have added 6,435 stores since 2007. Some of the stores were international, but the vast majority were opened in the U.S. This increase in store counts in the face of reality is the ultimate in CEO hubris. Inflation adjusted retail sales since 2007 in the U.S. are down 19%. This is a recipe for disaster. Americans must deleverage over the next decade. They have no choice. Their retirement savings levels are pitiful. They will be forced to stop buying crap. The boomers are leaving their high spending years and entering the forced saving phase of their lives, whether they like it or not. Every retail CEO in the country should recognize these facts. But still, they relentlessly expand. A fool and his company are soon parted.
The lifeblood of retail expansion is same store sales. If same store sales do not increase, any store count expansion becomes a death march. Below is a chart of the same store sales increases/(decreases) for November of each of the years listed for six of the largest well known retailers in America. With a base year of 2006, I’ve shown what the sales level for comparable stores is today versus 2006. This includes the outstanding growth year of 2007, before the financial crisis. Even a CNBC anchor should be able to realize that the “Best” retailers in America have lower sales today than they did in 2006.
| % | % | % | % | % Change | ||||||
| 2006 | 2007 | Change | 2008 | Change | 2009 | Change | 2010 | Change | from 2006 | |
| Kohl’s | $100 | $110.2 | 10.2% | $90.9 | -17.5% | $93.9 | 3.3% | $99.6 | 6.1% | -0.4% |
| JC Penney | $100 | $105.4 | 5.4% | $92.9 | -11.9% | $87.4 | -5.9% | $95.4 | 9.2% | -4.6% |
| Saks | $100 | $125.7 | 25.7% | $119.2 | -5.2% | $88.1 | -26.1% | $92.7 | 5.3% | -7.3% |
| Macy’s | $100 | $113.4 | 13.4% | $98.3 | -13.3% | $92.3 | -6.1% | $98.0 | 6.1% | -2.0% |
| Nordstrom | $100 | $108.7 | 8.7% | $91.4 | -15.9% | $93.4 | 2.2% | $98.2 | 5.1% | -1.8% |
| Target | $100 | $110.8 | 10.8% | $99.3 | -10.4% | $97.8 | -1.5% | $103.2 | 5.5% | 3.2% |
Now for the kicker. Inflation since 2006 according to the BLS has been 10%. Therefore, on an inflation adjusted basis, sales for these retailers since 2006 are down by 7% to 17%.
Today, Best Buy reported atrocious 3rd quarter sales figures. Best Buy is rightly considered one of the best run retailers in America. The Apple iPad is a mass sensation. Consumers are supposedly spending again. The age of austerity is over according to the mainstream media. Best Buy’s biggest competitor, Circuit City, went out of business two years ago. The world was its oyster. But somehow, the yellow brick road turned from gold to piss.
In the U.S., Best Buy’s same-store sales dropped 5%, while total sales fell 3% to $8.7 billion. The company estimated that its market share declined 1.1 percentage points, losing traction in TVs and gaming software, and it also expects its share for the year to decline. By categories, U.S. sales of consumer electronics, which make up more than a third of Best Buy’s total domestic business, fell 11%, while entertainment software sales, which make up 15% of the total, slid 14%.
It seems that the storyline being sold to the American public by the media is a load of bull. Best Buy is the first of many retailers to be blindsided by reality. Americans are running out of money. They’ve used up all the equity in their houses. The credit cards are maxed out. Wages are stagnant. Retirement years in a brown cardboard box awaits delusional Boomers unless they stop spending and start saving.
Best Buy’s results are the canary in the coal mine. Delusional retail CEO emperors across America need someone to step forward and tell them they have no clothes. Continued expansion in this environment will lead to financial ruin, massive layoffs and bankruptcies. Based upon history and the known hubris of most CEOs, there will ultimately be thousands of vacant rotting rat infested big box eyesores dotting the landscape over the next ten years. Maybe they can be converted to shelters for homeless delusional Boomers who forgot to save for their retirement. Ask the former CEOs of Montgomery Ward, Circuit City or Blockbuster if it can’t happen.
Administrator says:
Cramer’s Latest Wipe Out Call: Buy Best Buy December 17 $44 Calls For A Total Loss
Submitted by Tyler Durden on 12/14/2010 11:19 -0500
Best Buy Jim Cramer
The man who has become an embarrassment to clowns everywhere was out on Friday literally screaming his usual schtick. That said, the good thing about clowns is they don’t give you advice that will make you broke. Unlike Jim Cramer. In his December 10th segment, Cramer says: “I would be willing to risk a small amount of money December $44 call options, they expire on Friday.” Oops. Total loss on that small amount of money. And what is even funnier: “Best buy gives us a window into what people are buying for the holidays, so we hear what products are selling.” Er, none? As always, trademark Jim Cramer entertainment that will leave you broke.
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14th December 2010 at 12:17 pm
Viet Vet-70 says:
How much of this expansion is related to their yearly bonus? When I was in manufacturing, the VP’s use to increase inventory as their bonus was based on that; however, 6 or so years later and after they had bolted, we had to scrap the outdated material.
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14th December 2010 at 12:23 pm
Smokey says:
Viet Vet-70—–I don’t know who the fuck you worked for, but any company that links bonuses to increased inventory has some SERIOUS operational issues. Ordering extra inventory should not affect bonuses by a penny in any company, unless the people running the company are fools.
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14th December 2010 at 12:56 pm
StuckInNJ says:
Those 10 retailers have 30,366 stores in the USofA. This is peanuts.
There are about 19,000 municiplaites in the USofA. I propose that each and every municipality have exactly one of every store listed above. That’s about 190,000 stores.
This means that an additional 160,000 stores can be built.
This alone will propel the USofA into a 50-year era of Super Duper Expee Ally Docious PROSERITY. So, fuck you China. Oh wait … we need shit from China for inventory. Nevermind …
Anyway, my solution will work!!
Stucky for Prez in 2012!!!
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14th December 2010 at 1:02 pm
Administrator says:
Stuck
Can I be your Propaganda Czar?
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14th December 2010 at 1:15 pm
Kill Bill says:
i think every store on the list sucks and dont shjop at any of them except maybe Lowes but there employees are basically igmoes and about as helpful as roids.
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14th December 2010 at 1:29 pm
StuckInNJ says:
Jim – you can be my bitch, my czar, or anything else you desire.
Smokey needs to be Inventory Czar so he can find ample supplies of Throat Yogurt.
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14th December 2010 at 1:33 pm
Drew says:
hey, what is an igmoe?
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14th December 2010 at 5:03 pm
McMike says:
The retail store count is a data point in support of the idea that the accounting for our economy is no longer about making things, doing things, or even selling things. It is about making a buck on transaction flow, particularly big boondoggle transactions.
The stores need to keep adding stores because they cannot stand still. They must do deals. They must expand. The money to be made is in the capitalization, the initial splash, etc. Somehow that can all be made to look profitable and healthy through accounting tricks.
Somehow, through accounting tricks and forward motion that I do not claim to know or understand, they remain suspended in mid-air, like Wile Coyote over a canyon. Still growing. Still making the executives rich.
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14th December 2010 at 5:41 pm
Smokey says:
???
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14th December 2010 at 5:54 pm
llpoh says:
Smokey – I agree totally with you re the inventory statement. Never, ever seen it done, and I have seen lots of shit done in order to increase bonuses. Perhaps what Viet was referring to was some variation of the following, which I have seen done:
The VP’s bonus was based on production output. He was a little short on production for the period so he decided to count “almost complete” product as complete – he counted those products that were completely manufactured but not yet packaged. No major drama, right? Next period, he had the same problem, but he had to go back further down the process this time, as he had already been to the well before. This time he counted dishwashers that were complete except that the final testing hadn’t been done. Over the course of about 3 years he had moved so far back down the line that he was counting the dishwasher as complete when the frame was first set on the assembly line. When an audit was done, he was millions of dollars out on inventory, as you might expect in a factory making thousands of dishwashers a day. He went directly to jail.
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14th December 2010 at 6:15 pm
Smokey says:
llpoh—Yes, it probably unfolded in some manner similar to what you cite there.
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14th December 2010 at 6:33 pm
MuckAbout says:
DREW: Definition of igmo :.
(ĭg’mō)
1. (n.) An ignorant person; abbreviated form of ignoramus.
Submitted by: Anonymous, Topics: Behavior & Lifestyle, Insults & Disrespect
2. (acro.) I’ve Got My Orders. A rueful to matter-of-fact commentary by a person executing a decision of others that may not seem sensible to the speaker or addressee.
Origins: Military slang.
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14th December 2010 at 7:06 pm
billhopen says:
“igmo” -short for – ignorant moron; morons, however low in intelligence, can still be educated, and thus are higher functioning…but if morons are additionally ignorant, you got an “igmo” situation, stupid AND dumb
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14th December 2010 at 5:55 am
Opinionated Bloviator says:
I believe Shakespeare described Cramer best “All sound and fury, signifying nothing”.
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14th December 2010 at 4:59 pm
SWiss Genome says:
When this thing cracks its going to be one hell of a Hole !
Any Bets on How much longer the American Dream Illusion can be kept Going ?
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14th December 2010 at 5:46 pm
Administrator says:
SWiss Genome
I give it 2 to 5 years.
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14th December 2010 at 8:48 am
StuckInNJ says:
You want a fucking canary Jim?
Rep. Cleaver (Missouri) has a $48 BILLION DOLLAR earmark!!! The purpose? To give money to his inner city Negroes so they can be better consumers. That’s not a goddamn exaggeration. Look it up.
THERE is you goddamn dead Canary. Of course, some Negro in Missouri can now afford a $10,000 funeral for the bird.
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14th December 2010 at 9:01 am
Matt says:
In light of reality, it’s remarkable that the numbers are even this high. In a sane world, the retail model would not work. It is completely inefficient and is simply part of the bread and circus society. For resiliency, a person needs to be part of a vertically-integrated organization where you can control every aspect of the supply chain. To some, this means stocking up on canned goods and ammunition and/or buying a plot of land and raising chickens. It does not have to be this way and indeed this lifeboat model will fail after only a few months. We can be more creative than this.
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14th December 2010 at 12:25 pm
owngolddotbiz says:
“Based upon history and the known hubris of most CEOs, there will ultimately be thousands of vacant rotting rat infested big box eyesores dotting the landscape over the next ten years. Maybe they can be converted to shelters for homeless delusional Boomers who forgot to save for their retirement.”
++
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14th December 2010 at 8:55 pm