Tag Archives: Retailing

Brick-and-Mortar Meltdown No Problem: Online Retail Startups Shift into Brick-and-Mortar, by Wolf Richter

Posted on May 17, 2017 | Leave a comment

Online or bricks-and-mortar, it’s getting harder and harder for retailers to make a buck. From Wolf Richter at wolfstreet.com:

With a tinge of bitter irony and perhaps desperation.

Mattress startup Casper Sleep Inc. is going to disrupt, again. Brick-and-mortar retailers are melting down. Today, clothing store rue21 filed for bankruptcy, shuttering 400+ of its nearly 1,200 stores. A slew of brick-and-mortar retailers announced a similar fate this year. To survive, they’re trying to carve out their niche online. But online retail is tough. And online-only retail startups too are finding out that it’s tough, and now they seek salvation in, well, brick-and-mortar retail.

“You have to start with digital,” Philip Krim, CEO and co-founder of Casper, told the Wall Street Journal. But once the brands is better known, “offline distribution – that’s where you’re really able to get a lot of scale,” he said, apparently oblivious of the meltdown.

Casper’s primary product is a foam mattress, sold online, and shipped in condensed form directly to a bedroom near you. Its revenue reached about $200 million in 2016, up from $100 million in 2015, Krim told the Journal, which added: “Casper raised prices on its mattresses in January to $950 from $850 for a queen, saying it made improvements that justify the higher cost.”

But a snag has cropped up. “Casper is finding it can no longer shun the storefront.” So it made a deal with Target.

Target expects in June to put Casper’s products [pillows, sheets, and other accessories] at the end of rows, a high-profile area, and 35 stores are scheduled to have a larger display with a Casper mattress to try out.

Target, which said the deal came together after about a year of talks, doesn’t yet sell mattresses in stores…. But Casper said it would become the exclusive mattress of Target.com and is discussing the possibility of bringing the bed into stores.

For three years, Casper has “lured customers through Facebook ads and podcast sponsorships,” as the WSJ put it. “It plastered New York subways with posters featuring cute cartoons, sponsored podcasts and flooded Facebook and Instagram with ads.”

To continue reading: Brick-and-Mortar Meltdown No Problem: Online Retail Startups Shift into Brick-and-Mortar

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11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016, by Michael Snyder

Posted on April 24, 2017 | Leave a comment

How bad do things have to be before even puffed-up government statistics cannot hide the deterioration in the economy? Things are getting worse. From Michael Snyder at theeconomiccollapseblog.com:

There is much debate about where the U.S. economy is ultimately heading, but what everybody should be able to agree on is that economic conditions are significantly worse this year than they were last year.  It is being projected that U.S. economic growth for the first quarter will be close to zero, thousands of retail stores are closing, factory output is falling, and restaurants and automakers have both fallen on very hard times.  As economic activity has slowed down, commercial and consumer bankruptcies are both rising at rates that we have not seen since the last financial crisis.  Everywhere you look there are echoes of 2008, and yet most people still seem to be in denial about what is happening.  The following are 11 facts that prove that the U.S. economy in 2017 is in far worse shape than it was in 2016…

#1 It is being projected that there will be more than 8,000 retail store closingsin the United States in 2017, and that will far surpass the former peak of 6,163 store closings that we witnessed in 2008.

#2 The number of retailers that have filed for bankruptcy so far in 2017 has already surpassed the total for the entire year of 2016.

#3 So far in 2017, an astounding 49 million square feet of retail space has closed down in the United States.  At this pace, approximately 147 million square feet will be shut down by the end of the year, and that would absolutely shatter the all-time record of 115 million square feet that was shut down in 2001.

#4 The Atlanta Fed’s GDP Now model is projecting that U.S. economic growth for the first quarter of 2017 will come in at just 0.5 percent.  If that pace continues for the rest of the year, it will be the worst year for U.S. economic growth since the last recession.

To continue reading: 11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016

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So What Are We Going to Do with the Retail Malls? by Wolf Richter

Posted on March 1, 2017 | Leave a comment

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?

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Retailer Bankruptcies Are Hailing Down on the US Economy, by Wolf Richter

Posted on April 22, 2016 | Leave a comment

If there were no stock market, what would be your general impression of the economy? Ask yourself the same question after reading this article from Wolf Richter at wolfstreet.com:

There’s no respite in sight.

Another retailer is heading for bankruptcy. This time Aeropostale, with 800 teen-clothing stores, after three years in a row of losses. It’s “preparing to reorganize under a Chapter 11 bankruptcy, and could file as soon as this month, according to people familiar with the matter,” Bloomberg reported today.

Upon Bloomberg’s propitious report, Aeropostale shares plunged 28% to 15 cents. It has been a penny stock since last September. The New York Stock Exchange, which had threatened the company with delisting, removed the stock before 2 p.m. today, and trading of the shares has been suspended.

Bloomberg:

Aeropostale is trying to work out a loan to finance its operations during the bankruptcy process, according to the people. A deal to avert a filing or find a buyer also could still emerge, they said.

Which is what just about all collapsing retailers are valiantly trying to do. And often to no avail.

In March, Aeropostale had already announced that it would “evaluate strategic alternatives.” It hired Stifel Financial Corp. to work on a sale or restructuring. According to Bloomberg, it’s also working with law firm Weil Gotshal & Manges LLP and FTI Consulting, “people familiar with the matter said last week.”

As in so many cases, there is a private equity angle. PE firm Sycamore Partners owns a large state in Aeropostale and is its main lender. But they have been embroiled in a feud. Sycamore also owns Aeropostale’s key clothing supplier, MGF.

In 2013, when Sycamore acquired its stake in Aeropostale and lent if $150 million, it obtained two seats on the board and set up the supply deal with MGF. Bloomberg:

At the time, Sycamore was seen as possible savior for the troubled chain. Some investors expected the investment firm to eventually acquire the rest of Aeropostale, helping redeem a stock that has been declining since 2010.

But that didn’t work out. These hopeful investors lost their shirts. Sycamore’s two directors left Aeropostale’s board. In March, Aeropostale said that MGF has stopped delivering merchandise in violation of the terms of its agreement, leaving the retailer short on merchandise. MGF, as Bloomberg put it, said “it was merely seeking protection from Aeropostale.”

There are numerous other 1990s and 2000s brands that didn’t quite make the transition in the relentlessly tough US retail environment of squeezed consumers, fickle and picky teens, smart women, shoppo-phobic men, inscrutable millennials, and a brutal shift to online sales.

To continue reading: Retailer Bankruptcies Are Hailing Down on the US Economy

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Tiffany Sings Brick-and-Mortar Bluesl, by Wolf Richter

Posted on January 20, 2016 | Leave a comment

From Wolf Richter at wolfstreet.com:

Brick-and-mortar retailers are sinking into a quagmire – even luxury retailers, like Tiffany and Company.

So, sure, they’re still looking pretty good when compared to the oil and gas industry, which is in a depression, laying off well-paid people, from director-level engineers to roughnecks. Contractors are out of work. Revenues are plunging. Losses are piling up. Cash is running out. Bankruptcies and debt restructurings are now a common occurrence. The junk-bond bubble that funded the US drilling boom is imploding. Banks are starting to recognize losses on their loans. But the sector has been through this before. It’s temporary. When the price of oil rises again, the survivors and new players will thrive, hire, and expand.

That’s not the case with brick-and-mortar retailers.

But it’s a slow process. Some bigger operations have already gone bankrupt recently or have defaulted on their debts. Junk bonds that fund much of the industry are swooning. Liquidity is drying up. And many private equity firms that bought these retailers during boom times and loaded them up with debt are now stuck with them [Defaults and Restructuring Next for Retailers].

Among the list of brick-and-mortar retailers to warn of crummy holiday sales is luxury jeweler and specialty retailer Tiffany and Company. It reported this morning that sales during the holiday period fell 3% on a constant-currency basis: 5% in the Americas and 6% in the Asia-Pacific region. Sales at stores that were open at least a year dropped 5%. And it lowered its guidance.

To continue reading: Tiffany Sings Brick-and-Mortar Blues

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