The troubles at the American mall are coming to a boil

The troubles at the American mall are coming to a boil
By Sarah Halzack
Apr 5 2017
https://www.washingtonpost.com/news/business/wp/2017/04/05/the-troubles-at-the-american-mall-are-coming-to-a-boil/

A fresh round of distress signals sounded in the retail industry this week, as another big-name chain announced hundreds of new store closings and still others moved aggressively to recalibrate their businesses for the online shopping stampede.

Payless ShoeSource filed for Chapter 11 bankruptcy and outlined plans to immediately close nearly 400 of its 4,400 stores globally. Ralph Lauren is shuttering its flagship Polo store, a foot-traffic magnet located on tony 5th Avenue in Manhattan, the latest step in a massive cost-cutting effort. Big-box office supplies stalwart Staples is reportedly considering putting itself up for sale.

The shake-out among retailers has been building for years, and it is now arriving in full force.

The retrenchment comes as shoppers move online and begin to embrace smaller, niche merchants. As a result, many major chains now find themselves victims of a problem of their own making, having elbowed their way into so many locations that the nation now has more retail square footage per capita than any other. To use the industry vernacular, they are simply “overstored.”

Many have begun cutting back, sending ripples through the economy. The wave of store closures by Macy’s and Sears alone will empty 28 million square feet of retail real estate, according to an analysis by research firm CoStar. Often those vacancies are slow to fill, leaving shopping centers less hospitable to the chains that remain, feeding even more departures and job losses.

The malaise has spread even as the economy overall grows stronger and the stock market marches higher. Just this week, Urban Outfitters reported that in the current quarter to-date, its comparable sales are “mid single-digit negative.” The women’s clothing chain Bebe said in a regulatory filing Wednesday it is closing 21 locations. Last week, yoga clothier Lululemon chief executive Laurent Potdevin acknowledged the chain had seen “a slow start to 2017.”

Few traditional retailers are immune: The Limited filed for bankruptcy and shuttered all 250 of its stores. Hudson’s Bay, the parent company of Saks Fifth Avenue and Lord & Taylor, announced a $75 million annual cost-cutting effort. Banana Republic and Abercrombie & Fitch each named a new chief executive, leadership changes that were precipitated by ongoing struggles to connect with customers.

In a report published in late February, Standard & Poor’s said it had already lowered ratings 20 times on various retailers in 2017. S&P analysts wrote that they expect to see “increased levels of stress for the sector in 2017.”

As big retail closes stores, it has cost many Americans their jobs. So far in 2017, retailers have announced plans to slash more than 38,000 positions, according to data from job placement firm Challenger, Gray & Christmas.  And yet some of those losses have likely been offset by new jobs at startup retailers and e-commerce operations. Amazon.com, for example, said earlier this year that it expects to create 100,000 full-time roles over 18 months.

Retailers are deploying different kinds of firepower to try to regain some momentum. J. Crew announced this week it is parting ways with its longtime creative director, Jenna Lyons, a change that effectively concedes that it needs to fix its fashion if it wants to boost its sales. Still other companies are exploring branching into different kinds of retailing formats: Ralph Lauren, for example, said it is exploring new opportunities for its Ralph’s Coffee concept. Macy’s is selling off some of its lucrative real estate portfolio, hoping to strengthen its balance sheet.

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