Retail malls used to be a quintessential American institution, but they’re slowly falling by the wayside. From Wolf Richter at wolfstreet.com:
The Painstaking Relentless Collapse of Brick-and-Mortar Retail.
“Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores,” lamented Target CEO Brian Cornell this morning in the earnings release.
“Unexpected” is a hilarious choice of words. Because we, mere outsiders, have been vivisecting the now structural brick-and-mortar retail quagmire for a long time, and no deterioration is “unexpected.”
Target’s revenues in the fourth quarter fell 4.3% year-over-year to $20.7 billion. Revenues for the whole year dropped 5.8% to $69.5 billion. Down from $69.8 billion in fiscal 2011. That makes for six years of sales stagnation.
Net income plunged 43% to $817 million for the quarter, and 19% for the year to $2.7 billion. But at least, Target is still making money – unlike other retailers, many of which are either already in bankruptcy or are slithering toward it.
Sales at stores open for at least a year fell 1.5% in the quarter and 0.5% for the year. It expects same-store sales to fall further in the “low-to-mid single” digits. Target also lowered its outlook for earnings, which caused even retail optimists to howl in pain.
Target’s shares crashed 14% at the open today – which would be its worst one-day dollar-decline since its IPO in 1972. Currently at $58.53, shares are down 30% from their 52-week high.
But Target has a plan. It has had plans for years. So another plan, including 12 new brands over the next two years. And it “will invest in lower gross margins” to get competitive.
Which means it will cut prices. Which means it’ll have to sell more merchandise just to keep dollar sales even. And that’s unlikely. Which means it’s going to hurt dollar sales further. Which is going to maul earnings even more. Hence the dive in the shares.
Everyone is trying to be competitive. Wal-Mart started running price-comparison tests in about 1,200 stores, and it’s pressuring suppliers to cut prices, something Wal-Mart has long been infamous for. Being a supplier to Wal-Mart can be a curse.
To continue reading: So What Are We Going to Do with the Retail Malls?
