Tag Archives: Retail

Mall and Hotel Loans Are Blowing up Commercial Mortgage-Backed Securities, by Wolf Richter

Posted on July 5, 2020 | 1 comment

The debt implosion is just getting started, but in the commercial mortgage-backed securities market it’s picking up steam. From Wolf Richter at wolfstreet.com:

CMBS delinquency rates for retail properties spiked to 18% and for hotel properties to 24%.

he delinquency rate for Commercial Mortgage Backed Securities (CMBS) spiked by 317 basis points to 10.3% in June, after having spiked by 481 basis points in May, which had been the largest month-to-month spike in the data going back to 2009, according to Trepp, which tracks securitized mortgages for institutional clients.

Another 4.1% of the underlying loans missed the June payment deadline. Because they’re not yet 30 days past-due – they’re marked in “grace” period or “beyond grace” period – they’re not yet included in the delinquent pile. A loan that is in the “grace” period or in the “beyond grace” period could revert to “current” in July without a payment being made, if the borrower enters into a forbearance agreement with the loan servicer. If the borrower fails to obtain a forbearance agreement, the loan will be added to the pile of 30-plus days delinquent loans:

Trepp suggested that this still might get a little worse, but more slowly, and not much worse. “So perhaps we have reached terminal delinquency velocity,” as the report put it, where “most of the borrowers that felt the need for debt service relief have requested it.”

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Plagued Retail: My View from the Trenches, by John McNellis

Posted on June 26, 2020 | Leave a comment

How bad is it out there in retail-land? From John McNellis at wolfstreet.com:

We’ve lost half-dozen retailers — restaurants, clothing, massage… Tenants who in effect said, sue me, I’m taking a hike. And replacement shop tenants are just behind spotted owls on the endangered species list.

“I have 2 options that are non-negotiable. I’m going bankrupt (chapter 7). Covid happened and I cannot survive. I’d rather not go through bankruptcy because it ruins my credit, but if I have no choice, I won’t think twice. The second option is to let you keep my deposit, and take what I have in the bank which is around 10k. Again this is non-negotiable. That is all I freakin have.”

This tenant’s sad bankruptcy threat sets the table for examining our retail—supermarket-anchored neighborhood shopping centers—in the Covid-19 era. Embellishing only slightly, we have two kinds of tenants: those that can’t pay and those that don’t wish to.

In short, bricks and mortar retail has been caught in a pincer movement, flanked on one side by Covid-19 itself, and on the other by its cure. You know this already: The virus separated us, the cure institutionalized that separation, forcing a societal shutdown that has driven us into our deepest recession in perhaps living memory, a recession that seems certain to run several years. The coronavirus means we will remain wary of one another until there’s a vaccine, perhaps longer; the cure means the majority of Americans will have little to spend.

What does this portend for our retailers? Putting aside kids swarming the beach towns, few of us wish to take more risks than necessary. Driving on a freeway entails an infinitesimal risk, but we do it to get somewhere; going shopping now involves a minute risk, but we accept it if the shopping is essential. (As an aside, we had no idea we were in the essential retail business until this year.)

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Retail Store Closures Have Huge Impact On Communities, by Bruce Wilds

Posted on May 29, 2020 | 1 comment

There’s no question that online retailing has had a devastating impact on malls, but the Covid-19 closures will be the death stroke. From Bruce Wilds at brucewilds.blogspot.com:

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.

Abandoned Malls, A Canary In The Coal Mine

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.

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The Boom Turns Into A Bust – Here are 14 Signs That The U.S. Economy Is Steadily Weakening, by Michael Snyder

Posted on October 31, 2019 | Leave a comment

Michael Snyder is usually pessimistic, but he’s got hard evidence to back up his pessimism. From Snyder at theeconomiccollapseblog.com:

There should no longer be any doubt that the U.S. economy is slowing down, but most Americans still don’t realize what is happening because the major news networks are completely focused on the endless impeachment drama that is currently playing out in Washington.  And without a doubt that is important, because it threatens to literally rip our entire nation in two.  But meanwhile, economic activity has taken a very ominous turn.  Hiring is slowing, consumer confidence is plunging, defaults on auto loans are rapidly escalating, the “transportation recession” continues to get deeper and it appears that the housing bubble is popping.  Everywhere we turn, there are signs of economic trouble, and many are deeply concerned about what this will mean for us as we head into a pivotal election year in 2020.

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A Farewell to “Bargain Shopping”, by James Howard Kunstler

Posted on January 7, 2019 | Leave a comment

James Howard Kunstler illustrates the connection between imploding debt and imploding rural America. From Kunstler at kunstler.com:

“May God save the country for it is evident the people will not.”
—Millard Fillmore, 13th POTUS, born this day, 1800

France has its Yellow Vests. Here in USA, we have a few poor shlubs hoisting the “Going Out of Business” signs on the highway in front of the K-Mart. The store in my little flyover town in upstate New York announced that it would shutter in March, and the sign-hoisting shlubs appeared out on Route 29 the first Saturday in January, an apt kick-off to a nervous new year. K-Mart’s parent company, Sears, is moving into liquidation, meaning anything that’s not nailed down must be converted into cash to pay off its creditors.

The store’s closing is viewed as both an injury and an insult to the town. There just isn’t anywhere else to buy a long list of ordinary goods, from dish-towels to tennis balls without a 17-mile journey west, which means an hour behind the wheel coming-and-going, plus whatever time you spend picking stuff up inside. And, of course, many people in town feel that this is just another way of Wall Street saying “…you deplorable, pathetic, tapped-out, drug-addled, tattoo-bedizened yokels are not worthy of a K-Mart….”

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How Amazon Rules, by Wolf Richter

Posted on July 14, 2018 | Leave a comment

Amazing Amazon: like or hate the company, it dominates e-commerc. From Wolf Richter at wolfstreet.com:

It owns 33% of the internet “cloud,” 49% of US e-commerce, and is elbowing into other sectors.

Amazon (AMZN) is a Goliath in very different sectors. One is the internet cloud, a booming business. Amazon Web Services has evolved into the single largest player offering cloud computing services to companies, governments, and individuals. In the first quarter, AWS owns 33% share of the cloud infrastructure market, ahead of Microsoft (MSFT) with a 13% share, and Google (GOOG) with a 6% share. Being the biggest kid on the block, it has become the shoo-in for a multi-year $10-billion Pentagon contract. That business is highly profitable.

Less profitable are Amazon’s e-commerce operations. But in terms of magnitude, Amazon totally rules. According to a report from eMarkter, cited by CNBC, Amazon’s online sales in the US are expected to surge 30% in 2018 compared to a year earlier, to $258 billion. This would boost Amazon’s share of US e-commerce sales of 49.1%!

The other combatants are fighting over the crumbs in terms of market share. The next nine largest e-commerce operations combined grab about 22% of the market:

  • eBay (EBAY): 6.6%
  • Apple (AAPL): 3.9%
  • Walmart (WMT): 3.7%
  • Home Depot (HD): 1.5%
  • Best Buy (BBY) 1.3%
  • QVC Group (QVCA): 1.2%
  • Macy’s (M): 1.2%
  • Costco (COST): 1.2%
  • Wayfair (W): 1.1%

That leaves 29% of e-commerce for all the other retailers with online operations, from Bed Bath & Beyond (BBBY) to the tiniest home-office operations, millions of them.

Amazon online sales fall into two categories: its “direct sales” and the sales from other sellers that use Amazon’s platform and execution (“Marketplace sales”). Both are growing in leaps and bounds, but Marketplace sales are growing the fastest.

In 2018, Marketplace sales are expected to account for 68% of Amazon’s e-commerce sales, and direct sales for 32%, according to eMarketer estimates.

Overall, e-commerce sales in the US have soared 16% in the first quarter from a year ago and are on track to exceed $500 billion this year.

But some types of sales have resisted the move to the internet, largely because of the type of product that doesn’t lend itself easily to online sales: gasoline, new and used vehicles, groceries, and beverages. Together they account for 51% of total brick-and-mortar sales.

To continue reading: How Amazon Rules

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We Have Tripled The Number Of Store Closings From Last Year, And 20 Major Retailers Have Closed At Least 50 Stores In 2017, by Michael Snyder

Posted on November 28, 2017 | Leave a comment

It can’t all be blamed on Amazon. From Michael Snyder at theeconomiccollapseblog.com:

Did you know that the number of retail store closings in 2017 has already tripled the number from all of 2016?  Last year, a total of 2,056 store locations were closed down, but this year more than 6,700 stores have been shut down so far.  That absolutely shatters the all-time record for store closings in a single year, and yet nobody seems that concerned about it.  In 2008, an all-time record 6,163 retail stores were shuttered, and we have already surpassed that mark by a very wide margin.  We are facing an unprecedented retail apocalypse, and as you will see below, the number of retail store closings is actually supposed to be much higher next year.

Whenever the mainstream media reports on the retail apocalypse, they always try to put a positive spin on the story by blaming the growth of Amazon and other online retailers.  And without a doubt that has had an impact, but at this point online shopping still accounts for less than 10 percent of total U.S. retail sales.

Look, Amazon didn’t just show up to the party.  They have been around for many, many years and while it is true that they are growing, they still only account for a very small sliver of the overall retail pie.

So those that would like to explain away this retail apocalypse need to come up with a better explanation.

As I noted in the headline, there are 20 different major retail chains that have closed at least 50 stores so far this year.  The following numbers originally come from Fox Business…

1. Abercrombie & Fitch: 60 stores
2. Aerosoles: 88 stores
3. American Apparel: 110 stores
4. BCBG: 118 stores
5. Bebe: 168 stores
6. The Children’s Place: hundreds of stores to be closed by 2020
7. CVS: 70 stores
8. Guess: 60 stores
9. Gymboree: 350 stores
10. HHgregg: 220 stores
11. J.Crew: 50 stores
12. JC Penney: 138 stores
13. The Limited: 250 stores
14. Macy’s: 68 stores
15. Michael Kors: 125 stores
16. Payless: 800 stores
17. RadioShack: more than 1,000 stores
18. Rue21: up to 400 stores
19. Sears/Kmart: more than 300 stores
20. Wet Seal: 171 stores

If the U.S. economy was really doing well, then why are all of these major retailers closing down locations?

To continue reading: We Have Tripled The Number Of Store Closings From Last Year, And 20 Major Retailers Have Closed At Least 50 Stores In 2017

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There Better Be a Miracle for Retailers, by Wolf Richter

Posted on November 30, 2015 | Leave a comment

From Wolf Richter at wolfstreet.com:

They tried to spin it in the most favorable light, and even then it was ugly.

It’s early in the shopping season, and Americans might still come out and head to the mall in massive numbers and do their patriotic duty and buy things that ideally no one needs made in countries they don’t know with money they don’t have to prop up manufactures, middlemen, transportation companies, oil companies, the entire supply chain, and finally US retailers that have hired hundreds of thousands of part-timers just for this sacred period of the year.

The hope is that these consumers will get their act together to relieve the enormous pressures that have built up behind the scenes: ballooning inventories. But it doesn’t look like it.

After months of crummy retail sales across the nation, followed up by earnings warnings and lousy results from big retailers, the first numbers are in for the Thanksgiving Weekend. And they support ugly anecdotal evidence of less crowded malls and parking lots: Brick-and-mortar retailers are having a hard time.

The results of the National Retail Federation’s Thanksgiving Weekend Survey were painfully – some might say willfully – murky: It said nearly 102 million people shopped in stores over the Thanksgiving weekend, while over 103 million shopped online, including via mobile devices. Given the overlap, over 151 million people did at least some shopping over the weekend. That’s 47% of the entire US population of 319 million. This would be a good sign, at least the surge in online shopping would be. But average spending over the weekend was a measly $299.60 per person.

That’s where it gets murky. This year, NRF refuses to provide comparisons to prior years. The results are “not comparable to the 2014 results,” it says, since it changed the methodology of its questions. So it refuses to answer the single most important question that it had answered before: are retail sales up or down?

But Bloomberg compared the numbers that were “not comparable” and found that the average spent per person over the weekend had been $380.95 in 2014 and $407.02 in 2013. So this year’s sales would represent a 26% and 27% plunge!

To contine reading: There Better Be a Miracle for Retailers

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