Another Retailer Goes Bankrupt, Shutters Stores, While Tiffany Blames Trump Tower for US Holiday Sales Debacle

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And American Apparel shuts down.

This time a year ago, Tiffany & Co. cut its full-year forecast after reporting a drop in holiday sales. It blamed sluggish tourist spending and the strong dollar. Rinse and repeat. But today, it changed the culprit to the brouhaha around Trump Tower, the neighbor of its flagship Fifth Avenue store, where sales over the two-month holiday period plunged 14%.

In its holiday sales update, Tiffany said that in in the Americas, which represent half of its global business, total sales fell 4% year-over-year, to $483 million, over the holiday period, and comparable store sales also fell 4%. The drop in sales was due to “local customer spending,” it said. So this time, it didn’t blame the hapless tourists.

And the ongoing decline in sales in the US was “exacerbated” by the 14% plunge at its flagship store on Fifth Avenue. It attributed this plunge “at least partly” to the “traffic disruptions” around Trump Tower.

These “traffic disruptions,” with the President-Elect holding court next door at Trump Tower, have been a problem not just for Tiffany but also for other retailers nearby. In addition to the enormous security efforts – the barricades, dump trucks, checkpoints, and armed-to-the-teeth police around Trump Tower – there have been protesters, waves of tourists, and an army of journalists that all might discourage some well-heeled shoppers from entering or even getting near Tiffany.

Alas, Tiffany’s flagship store accounts for less than 10% of global sales, the company said in its third-quarter earnings report last November, when it already warned about “election-related activity.” CFO Mark Erceg said at the time that it had caused “some minor disruptions to pedestrian foot traffic at the store.”

Globally, Tiffany’s holiday business was a mixed bag: In Europe, sales during the two months plunged 10% year-over-year, and comparable store sales plunged 11%. Eliminating currency fluctuations, total sales were flat and comparable store sales fell 4%. In Asia Pacific, sales looked better, though comparable stores sales also dropped. In Japan sales were hot, with comparable store sales up 12% – “partly offset by lower wholesale sales.” So global sales inched up 1%.

And in this tough brick-and-mortar retail environment in the US, another retail chain joined the growing list of retailer bankruptcies, while another company that already filed, is shuttering all its stores and manufacturing operations.




Women’s apparel chain Limited Stores announced today that it filed for Chapter 11 bankruptcy. On Friday it had said that it would shutter all its 250 stores, effective Sunday.

This is another private equity story. PE firm Sun Capital Partners bought a majority stake in The Limited in 2007, during the grand wave of leveraged buyouts (LBO), including those of retailers. These PE firms that were gobbling up retailers and loading them up with debt were all hoping to make a killing on the new American prosperity and then sell those chains in IPOs down the road. But that plan has collapsed. The Financial Crisis intervened, and they’d failed to consider the devastating impact of online sales on brick-and-mortar stores.

So Sun Capital bought the remainder of The Limited in 2010. And since then, the environment for brick-and-mortar retailers, particularly apparel retailers, has only gotten worse.

In a letter to investors on Friday, Sun Capital said that Limited Stores is evaluating strategic alternatives for its remaining e-commerce business and intellectual property.

Yesterday, there was another hiccup in the industry: American Apparel, which had filed for Chapter 11 bankruptcy in November — after having just emerged from its first bankruptcy filed in October 2015 — confirmed rumors that it had started to lay off 2,400 workers in Southern California.

The rights to the American Apparel brand were acquired for $88 million by Canadian apparel maker Gildan Activewear in a bankruptcy auction last week. But it then withdrew its plan to acquire some of the manufacturing operations. Nearly 90% of Gildan’s 42,000 employees work in cheap-labor locations in the Caribbean and Central America. It only manufactures socks in the US.

That’s the end of American Apparel manufacturing in the US.

No one was interested in buying the 110 American Apparel retail stores, and they’re now being shuttered. So the second bankruptcy filing was the charm: outside of the brand, now owned by a Canadian company, there will be little left over.

Retail sales over the holidays have been tough for brick-and-mortar all around, despite soaring consumer confidence, and pundits are being sent back to the drawing board. Read…  Surge in Consumer Confidence Turns to “Dismal” Retail Sales beyond Autos, Gasoline




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  56 comments for “Another Retailer Goes Bankrupt, Shutters Stores, While Tiffany Blames Trump Tower for US Holiday Sales Debacle

  1. Jan 17, 2017 at 1:49 pm

    As a late-stage boomer I’ve been telling them ( by not spending ) that I don’t need more stuff. My millennial child, living at home with me, has no room for more stuff.

    There’s too much retail acreage. Read the tea leaves people ! ( By people I mean retail-mall managers )

    Demographics is all. DUH !

    SnowieGeorgie

    • Petunia
      Jan 17, 2017 at 3:47 pm

      My millennial only cares about tech stuff. He wouldn’t miss any of the stores that just went bust. I’m not going to miss them either. I’m really tired of all the expensive junk being sold.

      • economicminor
        Jan 18, 2017 at 11:21 am

        I’m a little light on their business models.. They make most of the clothing in cheap labor countries and yet need to sell it here for huge dollars..

        Where is all that money in the middle gone to?

        My guess is that it is all part of the leverage upon leverage. The company is leveraged, the property is leveraged, they probably even pay high leverage on the inventory… So when sales drop, the business can no longer pay all that leverage.. Just guessing but when you make a piece of clothing for a dollar and try an sell it for a hundred or more or even fifty… there should be lots of money to cover the overhead..

        And IF my guess is true, who holds the paper? More pension funds or just rich people playing games with their own money.

        • Petunia
          Jan 18, 2017 at 12:05 pm

          Most of the American designers went public in the 80’s and 90’s, that’s where the founders made their money. They have flagship stores in NY or LA and sell their merchandise everywhere as well. There is total saturation of their products in the market, especially in the outlet malls. Once these brands go public the quality goes downhill.

        • Rocky
          Jan 18, 2017 at 1:11 pm

          As usual, EM, your observations are accurate and you look beyond the boring and always shifting consumer sentiment patterns.

          All Americans need to do to truly understand who the primary profiteers are in our capitalist system these days is to “follow the money.”

          The new capitalist, with the Trump Kleptocrats leading the charge now, is all about hoarding capital.

          The endemic lies of the duopoly politicians FBO the Wall Street elites – including private equity and the incoming Trump Cabinet privatization thieves – is only going to further foster monopolization of US products and services.

          As the American middle class continues its economic decline, so will competition and what’s left of our US version of democracy.

          It’s ironic that Tiffany’s feels the hurt from Trump’s political drama.

        • DH
          Jan 18, 2017 at 2:34 pm

          American Apparel clothing is (until this buyout) made in America, so this going to cost 3500 jobs in LA.

        • TheDona
          Jan 19, 2017 at 12:46 pm

          Pension plan taking the hit on this retail purchase…

          Ares Management and Canadian Pension Plan bought Neiman Marcus in 2013 with hopes for IPO last year…which did not happen. Sales are down for 4 consecutive quarters. Regarding debt load: “In our view, such a debt burden is completely unsustainable for a company of Neiman Marcus’ scale,” Saunders said in a note emailed to Retail Dive. “Indeed, even if all interest was frozen and the entirety of operating profit was to be directed to the purpose of paying down the debt, it would take well over 40 years to remove it from the balance sheet.

          They are trying to find a buyer and even money launderer Anbang Insurance Group turned it down.

    • RongHua
      Jan 17, 2017 at 10:58 pm

      hmm, is this due to demographics or a decrease in disposable incomes?

      • Jan 18, 2017 at 8:45 am

        YES INDEED !

        I neglected to mention that. And it is true for me a lot, but not so much for my millennial trespasser.

        Why I said “trespasser” : I had a good friend decades ago whose kids were still at home. That’s the way it had to be, but he did not like it too much. He said this, “. . . if they are still living at home after 21, they are trespassing !”

        A sardonic phrase which has stuck with me since the moment he said it.

        Still, ya gotta do what ya gotta do !

        Thanks for the reminder about my plummeted income .

        SnowieGeorgie

        • rich
          Jan 18, 2017 at 11:18 am

          Consignment stores are springing up everywhere as the baby boomers dump their “antiques”. Exponentially growing inventory with few buyers, and there is still a long way for the rat (cohort) to travel through the python. Anyway, why buy used when it’s cheaper to buy new at Sears.

          Went into Sears, and there were more sales clerks than customers. A lot of 60% off sales, and, with points and other discounts, I walked out of the store with some DieHard steel toed work shoes for $12 bucks. Got a $529 fridge for $320, including sales taxes along with free delivery. DieHard is a Kmart brand that Sears bought, and is now selling. Sears Craftsman brand is currently being sold Black & Decker. Looks like another retail icon may soon bite the dust.

        • Christopher Martin
          Jan 18, 2017 at 10:31 pm

          The family home is where they have to let you in when you have to go there.
          I watch antique roadshow and the name Tiffany comes up with reverential awe because of their exquisite designs and quality, particularly in Art Nouveau through to the 30’s. A brand is valuable and can be bought, but the new owner has to live up to it or face consumer rejection.

      • Jan 18, 2017 at 12:18 pm

        @RongHua Demographical Decrease in Disposable Dollars

        More on the same point you raised :

        http://www.mybudget360.com/millennials-are-worse-off-than-baby-boomer-parents-financially-income/

        Interesting personal observation — my millennial is earning about the same as I did, in NOMINAL DOLLARS — at the same age as she is now. Meaning less in real terms.

        We both earn the same now ( in today’s dollars ), as I refused to re-enter the high-stress rat-race after I got laid off at age 60.

        I am happier now and the money meets my needs as well.

        Less stress and I might even live longer.

        SnowieGeorgie

  2. Kent
    Jan 17, 2017 at 2:15 pm

    The PE industry seems to have a no-lose proposition. Borrow other people’s money to buy a business, then pay back the loan with money borrowed by the business.

    Proceed to gut investment to maximize short-term profits and flip the company with a shiny new stock price. It seems the PE company can’t lose. That all losses fall squarely on the shoulders of employees and consumers.

    Am I wrong about this? Am I missing something? If I’m right, shouldn’t this be made illegal? This is like gambling, but if you lose, you don’t take the loss. Someone else does.

    • BradK
      Jan 17, 2017 at 3:22 pm

      I pretty sure that Mittens Romney was a pioneer of this M.O. for corporate raiding during his tenure at Bain Capital, leaving a trail of carnage behind.

      • Petunia
        Jan 17, 2017 at 3:53 pm

        A few weeks ago we order Domino’s Pizza, a Bain company, and after 2 hours they delivered a half eaten pizza. This was in the middle of Romney being interviewed for the Secretary of State position. I thought if the guy can’t run a pizza joint, it’s a good thing they didn’t pick him for the state department.

        • Chicken
          Jan 17, 2017 at 4:17 pm

          Romney should not be invited into the administration, IMO.

        • P
          Jan 17, 2017 at 6:39 pm

          He was only considered so he could be rejected after grovelling…well played

    • Nik
      Jan 17, 2017 at 4:07 pm

      Aloha Kent..are you not Familiar with ALL the “Smoke and Mirrors” Chicanery that exists within that Honorable Quagmire of Thievery…Created by Worldwide Financial Institutions,Bankers and Executives..???? lololol Wolf,does a good Job of bringing it to light on a daily basis..! thanks for reading,aloha

    • d
      Jan 17, 2017 at 10:02 pm

      In a lot of other country’s this is illegal basically, as the American’s perfected it in England and Europe in the 60’s and 70’s.

      Now they are doing it in the US.

      Which means there is plenty of manufacturing death left to exploit in the US, where almost all corporate fraud is legal.

      Look at how PE 45 made most of his money. Serial Bankrupt, he is.

  3. Jan 17, 2017 at 2:30 pm

    Kent, this is how it works in the USA. Don’t you remember the last crash? The big banks gambled, lost, and the taxpayers took the hit. The bankers all got their Christmas bonuses and kept their jobs. Is this a great country or what?

    • Kent
      Jan 17, 2017 at 2:38 pm

      Well, I’m really hoping someone is going to tell me that I’m wrong. That guys like Mitt Romney made his millions by taking gut-wrenching risks with his own capital to build something better than existed before. Not gutting perfectly fine companies and sucking out the bone marrow.

      What’s the point of capitalism if this is where it leads?

      • Jack
        Jan 17, 2017 at 3:24 pm

        Kent,

        There probably wouldn’t be any capitalism if it didn’t work this way.

        • Chicken
          Jan 17, 2017 at 4:23 pm

          Is that called creating value, conserving value or unlocking value? I’m having a Venn Diagram flashback.

      • Michael Fiorillo
        Jan 17, 2017 at 4:36 pm

        “What’s the point of capitalism if this is where it leads?”

        But this is the point, painfully inevitable given the forces in play.

        As long as capital feels no need to make any concessions to labor, this is inevitably what we get, aggravated by the techno-cultural moment.

      • David in Texas
        Jan 17, 2017 at 7:47 pm

        I’m afraid it’s the latter (sucking out the bone marrow and leaving employees and communities holding the bag). For a good, well-researched academic perspective, check out “Private Equity at Work” by Eileen Appelbaum and Rosemary Batt. The basic model is 1) buy a company using a high percentage of debt; 2) quickly take out whatever amount of your own capital you used (via a “special dividend,” “management fees,” or other euphemism); 3) leave everyone else holding the bag; 4) rinse and repeat. It reminds me of those big orb spiders that leave shells of grasshoppers on their webs after they have sucked out all the life. As with so many other aspects of society today, the people making the high-level decisions are completely insulated from the consequences of their choices.

    • NotSoSure
      Jan 17, 2017 at 4:18 pm

      It is a great country. For bankers. What people are missing is that it’s always a great country, car, what have you for someone. Just make sure you are that someone.

      “The United States is a business, not a country” as Brad Pitt observed in his movie “Killing Me Softly”.

      It’s true then, it’s true now, it’s true forever.

      • Mary
        Jan 17, 2017 at 6:11 pm

        The exact quote: “I’m living in America, and in America, you’re on your own. America is not a country; it’s a business. Now fucking pay me.”

      • Nathan Brazil
        Jan 21, 2017 at 4:34 pm

        We are all playing Monopoly (R) (Those under 50, see “board games”). Already 12 humans own half the wealth in the world.

        How does a Monopoly game end? One person owns everything.
        Why does it end that way?
        Because the rules dictate that it must. No other outcome is possible.
        Unless we change the rules, this is the path we must be on.

    • Rocky
      Jan 18, 2017 at 1:26 pm

      Jack, it’s called “privatize the profits and socialize the cost.”

      Simply put, it means the US elites get ignorant voters to believe they are going to “drain the swamp” – but instead replace the swamp things with more demonic dwellers.

      They come into power under the guise of creating jobs. The stock market goes up and everyone gets excited.

      Sooner or later, taxpayers – still worshiping the new swamp kingdom – get fleeced as their hard earned tax money trickles up to the “meet the new boss same as the old boss” elites.

      We have another recession. The middle class loses ground and the elites come in and buy bankrupt assets from the middle class on the cheap.

      This is the pretend American capitalist system.

      • Jack
        Jan 18, 2017 at 3:31 pm

        Rocky, hey, you’re preaching to the choir. This, unfortunately, for those on the bottom rungs, is how it’s always worked. Capitalism is a dog-eat-dog world. It sucks.

        • Rocky
          Jan 18, 2017 at 11:07 pm

          Jack, I know you get it. But capitalism itself can be a solution – rather than the big problem it is now.

          American capitalism has devolved back to the robber baron era – only this time the cowardice and greed of corporate media has legitimized the proven failures of the rehashed right wing privatization policies.

  4. Tom Kauser
    Jan 17, 2017 at 2:59 pm

    Everything must go – steely Dan!

  5. Tom Kauser
    Jan 17, 2017 at 3:16 pm

    I know one place where shopping is top of the list …..Davos?
    A lot of assets need to get right quick!
    More horse trading than baseball managers?

  6. mynamett
    Jan 17, 2017 at 5:27 pm

    Nothing is really happening on the retail side in Canada. I am old enough to remember going to an hardware store and could buy all kinds of bolts.

    I could buy extra strength bold or lower strength bolt. Not anymore, every hardware store now sell the same types of bolts at the same price.

    Hardware store in Canada have remove everything that is not selling a lot. Hardware in Canada are now selling construction clothing and have shrink their hardware section by a lot.

    Basically every retailer is now selling the same stuff and try to compete against each other. Everyone is now selling clothing, household cleaning products, electronics gadget such as Ipad.

    There is only one store in my area that still sell electronics component such as transistors. The store is old and there is never anybody.

    I am now forced to shop in China for anything that is not popular ( electronics component, snowblower replacement parts, small oscilloscope and so on ).

    There is too many retailers selling the same thing and trying to compete with each other. Clothing is one example of that

    • Ethan in Northern VA
      Jan 17, 2017 at 7:38 pm

      Please be careful with regards to purchasing electronic components from China, especially higher value ICs and MOSFETs. A lot of them on eBay are fake. Under spec, brand names when they’re not, etc.

      • RongHua
        Jan 17, 2017 at 10:57 pm

        True, unfortunately. The city of ShenZhen is famous for pirates recycling old “chips”, repainted, etc, and sold as new.

  7. Gian
    Jan 17, 2017 at 6:11 pm

    Thank God we gave the liberals another narrative, I was so tired of hearing it was “Bush’s fault” for the past eight years.

  8. NotSoSure
    Jan 17, 2017 at 6:35 pm

    How can you make America great again if a company named American Apparel can’t get things going?

    • Ethan in Northern VA
      Jan 17, 2017 at 7:40 pm

      American Apparel prices were pretty high. I looked once or twice because of the whole made in the USA thing, but come on it doesn’t cost you $80 to make a shirt in the USA.

  9. Patrick Wilson
    Jan 17, 2017 at 7:32 pm

    The limited in bankruptcy is news?

  10. Petunia
    Jan 17, 2017 at 8:14 pm
  11. Town
    Jan 17, 2017 at 10:15 pm

    “And in this tough brick-and-mortar retail environment in the US, another retail chain joined the growing list of retailer bankruptcies,”

    How do you know they weren’t fairing poorly vs other brick and mortar type companies?

    Or should we just all assume that Amazon bagged another competitor?

    Infographic: Just How Big Is Amazon.com?
    http://www.pcmag.com/article2/0,2817,2413305,00.asp

    • Jan 17, 2017 at 11:36 pm

      Did you see the chart I posted the other day, of sales at brick-and-mortar department store v. sales at “nonstore” retailers, which includes ecommerce. It looks like a lopsided X, going back to 2001 – topped off by very lousy sales at brick-and-mortar locations during the last holiday period.

      And some of these brick-and-mortar retailers, while losing sales in their stores, have successful online sales divisions.

  12. ALBERT CHAMPION
    Jan 18, 2017 at 1:48 am

    i am assuming les wexner bailed out before this occurred, right?

    • Jan 18, 2017 at 8:33 am

      I think he’s CEO of Limited Brands not Limited Stores.

    • TheDona
      Jan 18, 2017 at 9:41 am

      Yes. He is CEO of L Brands which is Victoria’s Secret, Pink, and Bath and Body Works and a few others.

  13. night-train
    Jan 18, 2017 at 2:12 am

    From what I see in my neck of the woods, retail seems to be doing OK. Several of the big store closures, discussed here, have spared our town. I think having the state’s flagship university has helped local retail a lot.

    So, here’s what you do. Get yourself a state university with 30,000 – 40,000 students and the rest will follow.

    • Valuationguy
      Jan 18, 2017 at 9:03 am

      <>

      This works only until education and financial reform collide via the Trump administration cutting off the bank’s student loan gravy train. Most of these state supported schools have budgets which include 4-8% spending increases over the next 5-10 years….yet if the federal subsidies to student loans get reduced…revenues are going to decline some 5% (even taking into account attempts to further raise fees and tuition which may succeed ONLY at the top reputation schools).

      The Federal takeover of the student loan market unnaturally suppressed the cost of college since 2007 allowing ‘stupid’ level of inflation in school costs. Removing these subsidies…combined with just general demographic (fewer college age kids) AND economic trends (less job creation, lower wages, etc.) , will decimate the local economies of the university towns for years.

  14. william
    Jan 18, 2017 at 9:04 am

    A few retailers, like The Buckle and Express, have little or no debt. Their sales dropped around 15% also like the rest, yet they remain profitable. I wouldn’t go so far to recommend their stocks for purchase, but I find them interesting to follow to see how this trend plays out. There may be a pivot point where revenue drops to a level that can be maintained, creating a pivot point where y-o-y revenue shows a modest uptick.

  15. Bobber
    Jan 18, 2017 at 10:55 am

    Amazon will have all their business soon. Even the Amazon haters turn around eventually. People used to think physical shopping was an enjoyment, but the same people are now saying it’s a waste of time.

    The only question is – are there going to be competing platforms to Amazon that give them some competition? I haven’t seen anything yet, except in niche areas.

    • Jan 18, 2017 at 1:31 pm

      I think you’re underestimating the online platforms of the big retailers, including Target, Walmart, Macy’s Best Buy, etc, all of which are growing in leaps and bounds. Target just reported that online sales jumped 40% yoy during the holidays. These online sales are covering up just how much sales in their physical stores are hurting. It’s not just Amazon, though Amazon is the largest platform in the US.

      • william
        Jan 18, 2017 at 1:39 pm

        I’ll buy a large item online from a retailer with stores in my area in case I want to return the item. I just bought n item from homedepot.com.

        • Jan 18, 2017 at 1:44 pm

          Yes, a big advantage that online retailers with physical stores have over Amazon.

          But these stores add to their cost structure :-]

  16. Wind Hawk
    Jan 18, 2017 at 6:19 pm

    I’d second Wolf’s observation… I shop quite a bit on Amazon, followed by Ebay and Etsy. But during this past Christmas holiday, there was an iPad Pro flash sale at Target. Order it on-line and picked it up 2 hrs. later at the local Target store. Saved about $50 from Amazon or $150 from Apple. So I can definitely see old guard retail store getting their act together in the on-line store.

  17. chris Hauser
    Jan 18, 2017 at 8:11 pm

    nobody pays retail anymore, why should you?

Comments are closed.