"The Retail Bubble Has Now Burst" A Record 8,640 Stores Are Closing In 2017
by Tyler Durden
Thousands of new doors opened and rents soared.
This created a bubble, and like housing, that bubble has now burst.�
- Richard Hayne, Urban Outfitters CEO, March 2017
The devastation in the US retail sector is accelerating in 2017, and in addition to the
surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious
than in the soaring number of store closures.
While the shuttering of retail stores has been a frequent topic on this website, most
recently in the context of the next "big short", namely the ongoing deterioration in the mall
REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact
from Credit Suisse:"Barely a quarter into 2017, year-to-date retail store closings have
already surpassed those of 2008."
According to the Swiss bank's calculations, on a unit basis, approximately 2,880 store
closings were announced YTD, more than twice as many closings as the 1,153 announced during
the same period last year.
Historically, roughly 60% of store closure announcements occur in the first five months
of the year.
By extrapolating the year-to-date announcements, CS estimates that there could be more than
8,640 store closings this year, which will be higher than the historical 2008 peak of
approximately 6,200 store closings, which suggests that for brick-and-mortar stores
stores the current transition period is far worse than the depth of the credit crisis
depression.
As the WSJ calculates, at least 10 retailers, including Limited Stores, electronics chain
hhgregg and sporting-goods chain Gander Mountain have filed for bankruptcy protection so far
this year.
That compares with nine retailers that declared bankruptcy, with at least $50 million liabilities,
for all of 2016.
On Friday, women�s apparel chain Bebe Stores said it would close its remaining 170 shops
and sell only online, while teen retailer Rue21 Inc. announced plans to close about
400 of its 1,100 locations.
Broken down by retailer, either in bankruptcy or not yet:
Another striking fact: on a square footage basis, approximately 49 million square feet
of retail space has closed YTD.
Should this pace persist by the end of the year, total square footage reductions could
reach 147M square feet, another all time high, and surpassing the historical peak of 115M
in 2001.
There are several key drivers behind the avalanche of "liquidation" signs on store fronts.
The first is the glut of residual excess retail space.
As the WSJ writes, the seeds of the industry�s current turmoil date back nearly three decades,
when retailers, in the throes of a consumer-buying spree and flush with easy money, rushed to
open new stores.
The land grab wasn�t unlike the housing boom that was also under way at that time.
�Thousands of new doors opened and rents soared,� Richard Hayne, chief executive
of Urban Outfitters Inc., told analysts last month.
�This created a bubble, and like housing, that bubble has now burst.�
The excess retail space means that North America has a glut of retail outlets, as well as far
too many shopping malls, something which is becoming apparent as sales per capita decline.
On a per capita basis, the US has roughly 24 square feet of retail space per capita,
more than twice the space of Australia and 5 times that of the UK.
The over-storing, including the influx of fast-fashion and off-price chains, has resulted
in a brutally competitive landscape that made difficult for retailers to raise prices.
�A pair of men�s dress pants costs less today than they did a decade ago,� Manny
Chirico, chief executive of Calvin Klein and Tommy Hilfiger parent PVH Inc., said in a
recent interview.
* * *
Then there are retail rental rates, which across top US markets, such as New York, remain
the highest in the world.
For years, retailers could afford the egregious demands by landlords.
But as overall traffic and volumes have declined, this has also prompted an exodus of outlets
even among the most desired locations, leading to a surge in "fors rent or lease" signs popping
up in unexpected places like Madison Avenue's "golden mile."
According to the FT, on New York�s Fifth Avenue, the world�s most expensive shopping
street, vacancy rates have jumped from 10 per cent a year ago to 16 per cent, according
to Cushman & Wakefield.
Rents there have fallen for the first time since the recession �and the trend is not
over�, the consultancy warns.
Vacancy rates across SoHo have climbed to 18 per cent, from 12 per cent a year ago,
according to Jones Lang LaSalle.
The newfound caution among retailers has had a �very significant and fast� negative
impact on retail property, says Chris Conlon, chief executive of Acadia Realty, a real estate
investment trust.
It is not just prestigious streets that have been hit.
Malls are also hurting, as chains from Sears to Macy�s shut hundreds of stores.
Analysts at Green Street Advisors argue that �low growth is the new normal�, while
market rents are becoming decoupled from tenants� revenue growth as more sales move online.
�[Rents] are at a price point now that exceeds what retail sales can perform,� says Spencer
Levy, global head of research for CBRE.
He notes that a stronger US dollar also hurts sales in New York, where deep-pocketed foreigners
historically flock for deals.
* * *
Then there is the online migration, which recently made Jeff Bezos, owner of Amazon,
the world's second richest man.
As the WSJ adds, as retailers rushed to expand their physical footprint, the internet was
gearing up to do to apparel companies what it had already done to booksellers: sap profits
and eliminate what little pricing power these chains commanded.
Despite the view that shoppers prefer to try on clothing in physical stores, apparel and
accessories are expected this year to overtake computers and consumer electronics as the
largest e-commerce category as a percentage of total online sales, according to research
firm eMarketer.
Helena Cawley, 37 years old, said she used to be a �die-hard� department-store shopper.
But with two small children, the Manhattan entrepreneur doesn�t have time to visit
physical stores the way she once did.
�I buy much more online now,� she said.
�With free returns and free shipping, it�s so easy.�
Ironically, that shift to online shopping has come at a high cost to retailers.
It is less profitable to do business online than in a brick-and-mortar store, largely
due to the higher shipping, customer-acquisition and technology costs of the digital world.
Retail margins on average fell to 9% last year from 10.5% in 2012, according to consulting
firm AlixPartners LP.
Over that period, e-commerce sales increased to 15.5% of total sales from 10.5%.
The internet has also made it easier for consumers to comparison shop, thereby erasing any pricing
leverage retailers may have had.
�The internet has acted as the great price equalizer,� said Joel Bines, the co-head
of Alix�s retail practice.
* * *
Yet while the retail bubble may have burst, does that mean the conventional brick-and-mortar
industry is doomed?
Perhaps not:
Retailing has gone through shakeouts before, whether it was the superstores such as Wal-Mart
Stores Inc., Target Corp. and Kmart that killed mom-and-pop shops, or category killers like
Barnes & Noble Inc. and Toys �R� Us Inc. that did the same to smaller booksellers and
toy chains.
And even today, there are chains that continue to grow, such as off-price retailer TJX Co
s., which is opening hundreds of stores under its Marshalls, T.J.
Maxx and HomeGoods banners, as it steals market share from Macy�s Inc. and other traditional
department stores.
�This is not the end of retailing as we know it,� Mr. Bines said.
�People are not going to stop going to stores.� He's right, however in the meantime there
will be an avalanche of defaults: compounding the retail decline is the debt that retailers
have added to their balance sheets in recent years, either through leveraged buyouts or
to fund share buybacks.
That leverage has become a problem as profits dry up.
According to Moody�s Investors Service, the amount of debt coming due for 19 distressed
retailers is set to more than double over the next two years.
Many retailers were slow to seize on the significance of these changes.
When business was bad during the 2015 holiday season, many chains blamed unusually warm
weather.
But when the most recent holiday season once again failed to produce robust sales growth,
�retailers realized this was a structural change,� Credit Suisse analyst Christian
Buss said.
With all that in mind, is Amazon assured of becoming the world's first trillion-dollar
stock, perhaps hitting the milestone even before Apple?
Perhaps, then again, chains such as Wal-Mart have stepped up their game.
In a bid to better compete with Amazon.com , the giant retailer has been scooping up
e-commerce startups, including Jet.com and ModCloth.
And just this past week, PetSmart Inc. bought Chewy.com, a fast-growing online rival.
Others have given up waiting for a recovery that seems always out of reach and are settling
into what appears to be the new normal.
�We�re planning as if the environment is not going to improve,� Jerry Storch,
chief executive of Saks Fifth Avenue and Lord & Taylor parent Hudson�s Bay Co., told analysts
earlier this month.
In the meantime, expect more store closures, more bankruptcies (recall "According To Fitch
These Eight Retailers Will File For Bankruptcy Next"), and, of course, far lower asset prices,
both for retail equities and mall REITs, as well as the underlying CMBS securities that
for years funded the US retail (and especially mall) bubble, which has now violently burst
For more infomation >> EL FIN DE RichardGamesYTツ? - Duration: 1:34. 
For more infomation >> ADC Rap Battle - FANZE +Lyrics - Duration: 1:54. 
For more infomation >> Elimina toda la grasa de la barriga en 20 dias hierviendo y tomando esto por 15 minutos - Duration: 3:19. 
For more infomation >> HSN | Home Solutions featuring iRobot 04.24.2017 - 01 PM - Duration: 1:00:01. 
Không có nhận xét nào:
Đăng nhận xét