Retailers will close 12,000 stores in 2009

Discussion in 'Wall St. News' started by ByLoSellHi, Dec 29, 2008.


    Holiday Sales Drop to Force Bankruptcies, Closings (Update2)


    By Heather Burke

    Dec. 29 (Bloomberg) --
    U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.

    Retailers will close 12,000 stores in 2009, according to Howard Davidowitz, chairman of retail consulting and investment- banking firm Davidowitz & Associates Inc. in New York. AnnTaylor Stores Corp., Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations.

    More than a dozen retailers, including Circuit City Stores Inc., Linens ‘n Things Inc., Sharper Image Corp. and Steve & Barry’s LLC, have sought bankruptcy protection this year as the credit squeeze and recession drained sales. Investors will start seeing a wide variety of chains seeking bankruptcy protection in February when they file financial reports, said Burt Flickinger.

    “You’ll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains either multi- regionally or nationally go out,” Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said today in a Bloomberg Radio interview. “There are a number that are real causes for concern.”

    Sales at stores open at least a year probably dropped as much as 2 percent in November and December, the International Council of Shopping Centers said last week, more than the previously projected 1 percent decline. That would be the largest drop since at least 1969, when the New York-based trade group started tracking data. Gap Inc. and Macy’s Inc. are among retailers that will report December results on Jan. 8.

    Women’s Clothing, Electronics

    Consumers spent at least 20 percent less on women’s clothing, electronics and jewelry during November and December, according to data from SpendingPulse.

    Retail Metrics Inc.’s December comparable-store sales index will drop an estimated 1.2 percent, or 5 percent excluding Wal- Mart Stores Inc. Retailers’ fourth-quarter earnings may fall 19 percent on average, the seventh consecutive quarterly decline, according to Ken Perkins, president of Retail Metrics, a Swampscott, Massachusetts-based consulting firm.

    Probably 50,000 stores could close without any effect on consumer choice, Gregory Segall, a managing partner at buyout firm Versa Capital Management Inc., said this month during a panel discussion held at Bloomberg LP’s New York offices. Only retailers with healthy balance sheets will survive the recession, according to Matthew Katz, a managing director at consulting firm AlixPartners LLP.

    Store Closings

    About 200,000 stores may close in 2009, compared with a record 160,000 in 2008, Flickinger said.

    The U.S. economy shrank in the third quarter at a 0.5 percent annual pace, the worst since 2001, according to the Commerce Department. Economists surveyed by Bloomberg in the first week of December forecast the world’s largest economy will contract through the first half of 2009.

    The Standard & Poor’s 500 Retailing Index shed 34 percent this year before today, with only two of its 27 companies rising.

    The index doesn’t include Wal-Mart, the world’s largest retailer, which fell 21 cents to $55.14 at 9:58 a.m. in New York Stock Exchange composite trading. Wal-Mart shares gained 16 percent this year through Dec. 26.

    “If you’re going to be in retail right now, the discount space is where you want to be,” Patrick McKeever, a senior equity analyst at MKM Partners LLC, said today in a Bloomberg Television interview.

    Discount Advantage

    Discounts of 70 percent off or more by Macy’s, AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Consumers are trained for sales, according to Patti Freeman Evans, an analyst at Jupiter Research in New York.

    “The situation is not going to right itself in January; it’s going to be a long while that discounting’s going to be around,” said Evans. “Consumers are going to get used to it and it’s going to very difficult for retailers to move forward in a full-price mode.”

    Retail bankruptcies may help the industry in the long run, according to Flickinger.

    “We’ll be going from a Dickens-esque worst of times this December to the best of times in future Decembers because we’ll rationalize out all the redundant retailers and retail space in shopping centers,” Flickinger said.
  2. The real question is when can I buy a PS3 and PSP at 50% off or more.
  3. GTS


    Answer: Never

    Why Some Toys Don't Get Discounted - Manufacturers Set Price Minimums That Retailers Must Follow or Risk Getting Cut Off
  4. Thanks for the article.

    Guess I'll just use Ebay or wait till Sony buckles under the economic pressure.
  5. Followed by the other real question: How old are you?
  6. S2007S


    Commercial real estate is going to drop like a damn rock.....

    Do you have any idea the amount of retail space that will be available at the end of 2009 as some of the biggest retailers in the world start to close up. Its going to be incredible.
  7. S2007S


    The commercial real estate industry is the latest to seek a government bailout.

    A dozen real estate development groups have asked Uncle Sam for help to avoid defaults, foreclosures and bankruptcies. The Wall Street Journal reports that some of the country’s biggest developers have asked Treasury Secretary Henry Paulson to be included in a $200 billion loan program recently created by the government to support the market for car loans, student loans and credit card debt.

    In a letter to Paulson, the commercial real estate leaders warn that thousands of properties are in danger of foreclosure because current financing is coming due and credit for new financing is hard to come by.

    The report cites research from Foresight Analytics LCC that says $530 billion of commercial mortgages will be coming due for refinancing in the next three years.

    Unlike residential mortgages, commercial mortgages are usually designed to last five to 10 years with balloon payments at the end of the term. A loan must be refinanced or repaid at the end of the term. If refinancing is unavailable, an owners are faced with attempting a distress sale or losing the property.

    Treasury officials have indicated a willingness to consider adding commercial real estate to the $200 billion loan initiative, but it could take time. The program is not even expected to be up and running, let alone modifiable, until February.
  8. I wonder if it would be possible to convert a Starbucks or Caribou Coffee into a loft/condominium? :cool:
  9. They are perpetuating an old system of middleman that add no value and can no longer be supported.

    Sounds like a page from the RIAA's playbook - why don't they review how that worked out for them. Eventually these products will find a way to get discounted or watch marketshare dissapear.

    Look at how the Wii massively outsells PS3 and XBox360 for example. The Wii surely isn't winning on graphics and the wireless controllers alone....
  10. Circuit City to liquidate remaining US stores.
    Bankrupt Circuit City Stores Inc., the nation's second-biggest consumer electronics retailer, said Friday it failed to find a buyer and will liquidate its 567 U.S. stores. The closures could send another 30,000 people into the ranks of the unemployed.
    #10     Jan 16, 2009