Tuesday, December 30, 2008

73,000 retailers to to close in first 1/2 of 2009

For those of you who don't know, consumer spending makes up roughly 70 pct of the US economy, yet many consumers have been pulling back due to job insecurities, declining credit lines, falling wealth effect (caused by falling home values/cratering retirement plans) and overall general unease about the future. The end result of this pull back: Significantly declining retail sales - leading to numerous store bankruptcies and closings.

Dec. 29 (Bloomberg) (Article snippets below)

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 may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers. Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations.

“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.”

The ICSC predicts, using U.S. Bureau of Labor Statistics data, that 148,000 stores will shut down in 2008. That would be the largest number since 151,000 closings in 2001, during the last recession, according to ICSC Chief Economist Michael Niemira. The total number of retail establishments will decline by about 3 percent this year, also taking into account locations that were opened, he said. The U.S. had 1.11 million retail locations in 2002.

Another 73,000 locations may shut their doors in the first part of 2009, Niemira said.

My closing thoughts:

These store closings will create a self-perpetuating feedback loop - wherein more people will get laid off, which will lead to less consumer spending, increased foreclosures and credit card delinquencies, tighter credit conditions/less available credit - leading to more store closings, etc...


Degaz said...

so now the question is, which are the best retailers to short??

Mad Scientist said...

A better question is: How long do we wait for the thieves to give us our money back?

Anonymous said...

Who is to blame for all this!!!!

Sue Densmore said...

And yet, we are bailing out the super rich so they can buy 37 million dollar apartments with their "severance" packages and TARP money!

Anonymous said...

According to this post, 200,000 stores could close next year -including thousands of malls:


About 160,000 stores will have closed this year and 200,000 more could shutter next year, said Burt P. Flickinger III, managing director of consulting firm Strategic Resource Group. That would be the industry's biggest contraction in 35 years. In March and April of next year, Flickinger expects 2,000 to 3,000 malls to shutter.

jerry said...

The facts are that retail has been over built, and the reasons are nothing more than that. The consumer (+70% GDP) could not buy enough stuff to fill their lives. Wal-Mart did not help by buying most of their stuff from China undercutting smaller, neighborhood, community-based retailers, many of which eventually failed. The multi-national big box developers couldn't build enough of them, eventually overstocking, and thinning out the market share, which thinned out wages, too. Just as there is too much stuff on car lots, and store shelves, there are too many retailers.

What brought this on was nothing more than easy credit and gluttonous consumers who were so willing to borrow more off their homes and credit cards to buy more and more cheap stuff to fill their homes. At the same time they were borrowing, the rich fat cats filling the financial industry, were carving up those loans into asset debt derivative obligations, insuring them with credit default swaps, which eventually killed the economy and froze up credit.

It is that simple. No conspiracy. Just pure and simple greed and consumer gluttony willing to buy more because it was cheap and at minimum pricing.

kotybear said...

It's true. Many of these retailers have expanded foolishly. It only follows that they would get smacked when the free spending days ended. And, end they must. There is no free lunch Alice.

Tom said...

Twenty-eight years ago I did a job wiring a 1,200 unit self-storage business built into an old beer brewery for a computerized bookkeeping/burglar alarm system. Because all of the spaces were open-top, I got to see what was stored in them. It was nearly all excess junk from out-of-control shopping addictions which would no longer fit in the renter's apartments. Fast-forward to some nation-by-nation statistics I saw last year on retail space per citizen: the low was Italy at 10 square feet per capita and the high by a wild margin was the USA at 400 square feet per capita. Obviously, we are long overdue for this correction to our massively overbuilt shopping "opportunities".

Frankie-Goeth-to-Hollywood said...

"Who is to blame for all this?

Gretchen said...

Americans are finally waking up, but it's too late for many. There will always be those who shop themselves into the poor house, but the majority are realizing the party is over and are getting out of the pool.

Why is the economy tanking? Who was in charge the past 8 years? Hmmmm...

jerry said...

We have to ask ourselves why is there so much commercial real estate? It is because real estate creates non-productive wealth creation for lenders and developers. They sit back and collect rent, which in turn becomes more paper wealth creation, such as securitized debt obligations, with credit default swaps, and more loans. The developer, then, builds another mall, or thing, in order to pay the interest on the first loan project. The Ponzi Scheme now begins. Build more on the back side, to pay the interest on the front side. Get investors through venture capital hedge funds and the Ponzi is expanded.

Once the development is built, the rent checks start pouring in for the commercial financial banks who loaned out cheap money to these huge land developers. It created short term jobs for middle class laborers, but once done, the non-tradable retail service economy kicks in. The retailer now begins to order merchandise from those foreign producers, mainly in East Asia, where once American Made stuff has now been purposefully sent far away to be made.

It is then shipped back to the overbuilt retail commercial real estate big boxes filling up our farmland and open space so middle class consumers can extend their credit limits to the max and buy, buy, buy. Eventually, as Tom stated, and my neighbor has done, they move it into storage garages, draining more of their limited, and stagnated wages.

It is all coming to an end.

LoLcAkEz said...

That's good and now I hope humans will use that thing called brains to figure out life is not about consuming.

But I'm afraid humans will stay on the retarded capitalist-extremist path.


Sounds pretty bleak.