“Retailers Are the New Oil & Gas,” Only Worse

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I’ve been doom-and-gloom on brick-and-mortar retail. But I haven’t been nearly doom-and-gloom enough, given the events of the past seven days. Includes my interview with The Financial Exchange, WRKO Boston.

Brick-and-mortar retailers, many of them subject to leveraged buyouts during the LBO boom before the Financial Crisis and now burdened with way too much debt, are keeling over one after the other, in a dense wave of debt restructurings and bankruptcies. And creditors are getting skinned.

The crash of brick-and-mortar retail is due to structural causes – including the shift to online retail. These issues will not go away. They will only get worse. Even profitable retailers, like Macy’s, are shuttering stores. They’re all doing it, profitable or in bankruptcy. This is starting to impact the loans these malls are carrying and that have been packaged into commercial mortgage backed securities.

For example, on March 6, Fitch Ratings warned that JC Penney’s plan to close 140 stores over the coming months “will weigh” on the CMBS that are exposed to these malls, particularly since many of these malls face multiple store closings, not just by Penney’s but others as well, including anchor stores, such as Macy’s or Sears:

An initial look into Fitch’s rated portfolio, where JC Penney was listed as a top five tenant, found 136 properties within 122 CMBS transactions. The current outstanding balance of these identified loans with JC Penney exposure is approximately $11.4 billion. The majority, 130 properties, are securitized in CMBS multi-borrower transactions and six in single-borrower transactions.

The potential closure of these stores will have a direct effect on the respective loans regardless of whether the store itself is collateral for the loan. This is due to declining rental income, reduced foot traffic, and/or potential co-tenancy lease clauses affecting the overall property. Added pressure will occur if the malls already have a closed anchor, such as Macy’s or Sears, without re-leasing prospects.

So here I am on The Financial Exchange, at WRKO Boston, talking with host Barry Armstrong about the bonds and leveraged loans of brick-and-mortar retailers, including those of Neiman Marcus. Its junk bonds plunged to just over 50 cents on the dollar and its loan to 77 cents on the dollar when news emerged that it too had hired a restructuring adviser. And we’re discussing why the stress malls are in is likely to scuttle the buyout of Macy’s (the handsome dude is host Barry Armstrong):

I’ve been documenting the brick-and-mortar retail fiasco for almost two years (the articles are here). But even I, though I’ve been doom-and-gloom on the sector, have not been nearly doom-and-gloom enough, given what has taken place over the last seven days.




Below are nine chain-store retailers that have filed or are considering filing for bankruptcy, or restructuring their debts, so far in 2017, six of them in the last seven days! These are just the largest ones. And the year is barely into its third month:

March 6 – HHGregg, appliance and electronics retailer, filed for bankruptcy. On March 2, it announced that it would close 88 of its 220 stores, shutter three distribution centers, and shed 1,500 jobs.

March 6 – Gordmans department stores: “People familiar with the matter” told Bloomberg that Omaha-based Gordmans, with 99 stores in 22 states, is preparing to file for bankruptcy as early as this month.

March 3 – Neiman Marcus: sources told Reuters that the luxury retailer has hired investment bank Lazard to help restructuring nearly $5 billion in debt – though they claimed it is in no immediate risk of bankruptcy.

March 3 – Radio Shack “is preparing to file for bankruptcy” again, sources told Bloomberg, after having already filed in February 2015. It is now down to 1,500 stores and will likely close more.

March 1 – Payless Shoes, largest family footwear retailer in the US: Footwear News  reported that “multiple new sources contacted FN alleging that their respective firms have not been paid since August for footwear and other products shipped to Payless, and that they have been forced to lay off several staff members as a result.” Payless has been meeting with its lenders to discuss restructuring its debt and closing approximately 1,000 stores.

March 1, 2017 – BCBG, California-based fashion retailer, once with more than 570 boutiques globally, including 175 in the US, filed for bankruptcy. The filing showed that it started closing 120 of its stores in January.

February 6, 2017 – Eastern Outfitters, parent of discount chain Bob’s Stores and outdoor retailer Eastern Mountain Sports, filed for bankruptcy.

January 17, 2017 – Limited stores filed for bankruptcy.

January 16, 2017 – American Apparel, clothing manufacturer (manufacturing clothes in the US!) with 110 retail stores filed for bankruptcy the second time. Stores and manufacturing sites are being closed.

Friday has been a very busy day in Brick-and-Mortar Fiasco Land. Read…  The Bloodletting among Retailers Simply Doesn’t Let Up




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  88 comments for ““Retailers Are the New Oil & Gas,” Only Worse

  1. Nik
    Mar 7, 2017 at 9:19 pm

    The paraphrase a line out-of ‘Casablanca’ There are Bankruptcies going on in Brink and Mortar Retail…I am Shocked…lolol

  2. TheDona
    Mar 7, 2017 at 9:27 pm

    Just wait for the restaurants to start winding down. Applebee’s tried to go upscale and put in wood fire grills (poor franchisee owners). That bright idea didn’t help sales at all. CEO is outa there. They are closing some (24) of the company owned stores this quarter. New strategy is deep discounting. They also hope to sell more company stores to franchisees.

    Pie Five is most likely on the way out.

    Buffalo wild wings had 3 bad quarters last year. They raised prices to aggressively and now they are offering major discounting. LOL Proxy fight this year.

    Ruby Tuesday…just shut down already.

    Noodles and Co is hemorrhaging money and no CEO.

    Texas Roadhouse downgraded.

    Logans Roadhouse will continure to shutter stores. Debt burden.

    Outback and Carrabas closing stores.

    There were all ready a lot of casualties last year, looks worse this year.

    • Nik
      Mar 8, 2017 at 1:10 am

      This is All easy to See and Understand….Today’s Average Consumer simply has LESS Money to Spend..therefore they look for Three things.. Value..Convenience..and MORE Value…lolol its not rocket science,aloha

      • Mar 8, 2017 at 8:51 am

        Exactly! When 90 percent of the population is getting skewered in stagflation, one of the first cuts to the budget is dining out. Ridiculous to spend a week’s worth of groceries on a single dinner unless you have money to burn.

    • Petunia
      Mar 8, 2017 at 11:10 am

      I was in a Carrabas recently. How can any Italian Restaurant not have eggplant on their menu? It’s cheap, vegan, and a favorite of many. I would hate to see them go, but really!

      • TheDona
        Mar 8, 2017 at 12:11 pm

        Probably because it takes a lot of time to cook.

        The original Carrabas family started it’s family restaurant in my hometown of Houston in ’86. They did a joint venture and started the chain, BUT they kept their first 2 Houston stores as self owned and run them exactly as they always have. It is still the most delicious Italian food ever. And yes they have eggplant parm.

        http://www.carrabbasoriginal.com/?q=our-story Check out the menu.

    • Markar
      Mar 8, 2017 at 4:27 pm

      I honestly don’t see how high flyer 5 Guys can make it. The one near me is never busy at lunch hour, the floors are covered with peanut shells making the place look dirty and a small burger, small fries, and small drink is $10

      • Petunia
        Mar 9, 2017 at 9:29 am

        I think 5 Guys is trying to become more upscale by pricing out the riffraff. They make a good burger and are a substitute for Shake Shack, if it’s not in your area. By me, they are paired with Star Bucks and I don’t think that was a coincidence.

  3. 728huey
    Mar 7, 2017 at 9:54 pm

    These sudden retail closings remind me of a skit Chris Rock used to do a long time ago about going to a “ghetto” mall. In the ghetto mall the only stores open sell tennis shoes and baby clothes. While most malls haven’t gotten that bad…yet, I have noticed a lot more vacancies in the local mall across the street from where I work. Many of the chain stores (The Limited, Vanity) have closed or are shuttering the doors soon, and the tenants replacing them have been slow to sign in, and most of those tenants are local mom and pop shops selling e-cigarette and vaping products, small ethnic boutiques, and in one case, a store specializing in blankets.

  4. mean chicken
    Mar 7, 2017 at 9:55 pm

    Only a miracle can save brick and mortar, ala CIA style scandal causing a huge backlash against technology?

    I guess that might be temporary though, since people don’t seem to mind losing their privacy or security rights, or even their jobs when lower prices and deep discounts are the bait.

    Recently, I can source replacement parts at below manufacturing cost due to what I assume are US government subsidies

    Increasing minimum wages pulls the schedule forward.

    • Meme Imfurst
      Mar 8, 2017 at 8:15 am

      Americans always think the other guy will die. It is why tobacco was so successful.

      Yesterday I got a call from my Pharmacy asking if I wanted to FILL a prescription that is not due for refill until June.

      How far must it spread before America sees the light or must Wikileaks come to the rescue?

      Wait until automation takes the last consumer dollar to China.

  5. OutLookingIn
    Mar 7, 2017 at 10:09 pm

    This is purely a valuation conundrum.
    There is NO liquidity crises.
    This IS a collateral crises.
    The assets supporting the debt are no longer worth the loan balance.
    These mounting key retail outlet vacancies, are only going to bring further pressure on the commercial mortgage backed securities (CMBS) derivatives.
    Who knows where this will end up as the derivative sector as a whole, is so intertwined that a failure in some seemingly innocuous segment, could bring about a global derivative implosion.

    • economicminor
      Mar 7, 2017 at 10:50 pm

      This will surely put additional pressure on the pension funds. I know a retired union carpenter who told me his pension was solid because it had huge investments in CR.

      • David
        Mar 8, 2017 at 10:50 am

        Ha ha ha I’ve heard that from Teamster retires as well.
        Years ago I started telling them their retirement is only as good as the country is. Now they start to see what I ment.

  6. tony
    Mar 7, 2017 at 10:14 pm

    best part of all this the westfields mall company will take a big hit and they deserve it.

  7. manny
    Mar 7, 2017 at 10:40 pm

    AAAAAhh, the next big wave auto parts, I bought a moog control arm fo $70 from ebay free shipping, autozone had it for $140 plus tax.

    I want to hear similar sotries.

    • Dan Romig
      Mar 8, 2017 at 8:05 am

      I have been a loyal customer at TireRack.com for 25 years or so, and will only buy tires, wheels, brake and suspension parts from them. TireRack now has a distribution center a few miles from my home, so I can pick up tires, for example, and not pay shipping; but now I do pay Minnesota sales tax.

    • Ace
      Mar 8, 2017 at 9:10 am

      RockAuto.com for my auto parts.

    • Kent
      Mar 8, 2017 at 12:23 pm

      Strangest thing. In my little burg in Florida, we had 3 auto parts stores in town. Evenly spread in different areas. We just had 2 new ones go up, both within 200 yards of each other and 1/2 mile from one of the old 3. Can’t imagine who thought that was a profitable idea.

    • mean chicken
      Mar 8, 2017 at 12:46 pm

      I guess it shouldn’t matter where the parts are made by robots but it seems I can source US government subsidized parts from developing countries delivered to my door at below manufacturing cost.

      A set of two precision roller bearings last week which have been $20/ea for years were obtained for $1.08/ea with free overseas shipping.

      Who do I thank for these below cost bearings, unemployed scourge of the earth white males probably?

      And yes RockAuto is a good source among many but RA charges handsomely for shipping, wheres if sourced from US government subsidized offshore sources shipping is usually free..

      • Mike G
        Mar 8, 2017 at 1:22 pm

        How and why is the USgov subsidizing auto parts overseas?

        • Sonomendo Steve
          Mar 8, 2017 at 8:35 pm

          To add to Mike’s question, what is the size of those bearings and what is now passing for “precision”? Tolerance and mat’l…and for use in what?
          I’m really trying to get the picture here. $1.08 EACH?

        • mean chicken
          Mar 8, 2017 at 9:26 pm

          There seems to be a number of mechanisms, see summary section:

          http://www.exponentialimprovement.com/cms/offshoresubsidies.shtml

      • Craig Jones
        Mar 10, 2017 at 3:44 pm

        What was the company that you bought these bearings from?

        Just curious….

    • sherwood
      Mar 8, 2017 at 12:59 pm

      Manny – you will be proven right in the long-term but I think it will take longer than other sectors. Not to sound overly smug, but the majority of the people who do DIY car work are older, less affluent and tend to live in more rural areas – this demographic is less likely to adapt to online shopping as quickly as other demographics have (i.e. moms buying diapers from amazon instead of target). Also, a lot of times they need parts quickly and can’t wait a few days. Most of the people I know who have become obsessed with online shopping over the past 5 yrs probably couldn’t locate their hood latch.

      • manny
        Mar 8, 2017 at 6:37 pm

        read this

        http://www.marketwatch.com/story/amazon-expands-into-the-auto-parts-industry-2017-01-23

        In the next 10 years, electric car will eliminate: oil, additives, filter, exhaust, the drivetrain have a life of a million miles.

      • Sonomendo Steve
        Mar 8, 2017 at 9:01 pm

        The kids (mainly, I still have many parts from my 86-87 mix from 10 years ago) here and a long ways away (judging by craigslist and on line forums) are keeping lots of 85-95 Toyota PU 22R-E’s alive, and a lot of them look pretty nice. Online and local aftermarket parts everywhere. And not too hard to understand 100% engine control system. Pass North Bay Ca tough smog laws. Almost a forever transport and haul quite a bit. Unless the car companies force change smog rules again.

  8. akiddy111
    Mar 7, 2017 at 11:50 pm

    Interesting, Charles Hugh smith did a podcast with Gordon T. Long on this very topic recently. I’ve been short SPG and MAC a few months now. So far so good. It’s very early days in this cycle for sure, but it seems underway.

    • Sonomendo Steve
      Mar 9, 2017 at 1:36 pm

      When I bought non private party, or junkyard, I went to Smothers. Seem to be doing well, my buddies with shops use them, parts girls deliver, etc.
      Don’t know who they tie to business-wise.

  9. R2D2
    Mar 8, 2017 at 2:30 am

    The problem these retailers have is that they sell something. They should learn from Facebook. Facebook sells nothing, does nothing, has no service worth mentioning, but the market cap is $379 Billion. Volkswagen’s market cap with all it’s plants, manufacturing, engineers, history is $72.94 billion, but Facebook is $379 Billion.

    I have a feeling Matrix was not just a movie.

    • aZtt
      Mar 8, 2017 at 8:41 am

      FaceBook, the alphabet agency’s wet-dream world-person database, is most assuredly receiving gov funds. $379 billion? For the information they collect there, cheap at half the price.

    • alexX
      Mar 8, 2017 at 1:05 pm

      Wrong. Facebook sells eyeballs, just like CBS ABC and NBC were founded on. The people they sell to are the ones with the problems. Hence so has Facebook.

  10. professor plumb
    Mar 8, 2017 at 3:09 am

    I came across an interesting metric as the financial crisis( 2007-2009) was unfolding:
    in 1995 there were 10 square feet of space per capita in the U.S. retail sector dominated by brick and mortar firms such as Sears, JC Penney, and the up and coming Kohls; by 2005 that per capita measure had increased 50% to 15 square feet per capita. The boom was based on optimism engendered by a buoyant stock market and a demographic surge fueled by an increase in births and a surge in immigration. Amazon was struggling to stay alive, and on-line sales were just beginning to percolate upwards. Creative destruction will drive that per capita figure down to perhaps 7 square feet per capita. There will be a bloodbath for those holding on to retail related debt.

    • RD Blakeslee
      Mar 8, 2017 at 10:08 am

      There are small, local free-standing brick and mortar (actually, steel prefab) low-priced food and household goods stores which will probably survive, based on low overhead, location convenience and goods immediately available.

      Dollar General and IGA, for example.

    • Sonomendo Steve
      Mar 8, 2017 at 9:18 pm

      That fits well with the housing in the Phoenix-Tucson corridor. Some optimistic local told me in ’07 that 10-15 Million projected to be living in that corridor…forget by when, but it was pretty soon. Retirees from the north and service people for same. Somehow the water was figured out. And they got a lot of it built….until….
      Think it was all based on some Huge Global Growth story….maybe still is/was?

    • Pegleg
      Mar 14, 2017 at 12:43 pm

      There is a commercial real-estate bubble 5x the size of the 2008 housing one. Once this pops these cutthroat landlords will drop the rental prices to a point where a new business may have a chance.
      Or not.

  11. JB
    Mar 8, 2017 at 8:37 am

    no worries ,, the feds will monetize CMBS bonds.
    load up now they are cheap . big gains will be realized in the next QE cycle .

  12. doug
    Mar 8, 2017 at 8:53 am

    Charles H Smith has predicted 10 out of the last 2 crises…
    Mishmash has predicted the fail of CRE for the last 8 or 9 years.
    They are still building them, even as they shutter them.
    Wake me up when they quit replacing current malls with new malls.

    • akiddy111
      Mar 8, 2017 at 1:02 pm

      “Charles H Smith has predicted 10 out of the last 2 crises…
      Mishmash has predicted the fail of CRE for the last 8 or 9 years.
      They are still building them, even as they shutter them.
      Wake me up when they quit replacing current malls with new malls.”

      That may be true. However, it looks like these dogs are finally having their day. I have been following mall retail for 20 years and i have never seen it this dismal. Not in 2001-03 or even 2008-2010. It’s a perfect storm in the wrong direction and it is happening now.

      As for the new malls opening up, well, God bless ’em.

      • doug
        Mar 8, 2017 at 5:51 pm

        thanks…

  13. Petunia
    Mar 8, 2017 at 9:15 am

    Since fraud is the business model and the world would be a more unhappy place without it, here’s my free advice to Neiman Marcus.

    Stretch out your payables as far as you can without threatening new shipments, forgo your on-time payment discount, and use the money to buy back your 2021 bonds. The debt is discounted at almost 50% which is a lot higher than the small discount you might get for paying on time. The balancing act is contingent on keep new shipments coming in while not paying for them right away, which would surprise no one these days.

    If they do this right, they can maintain the look of impending doom, which will further depress the longer bonds, which they can also buy back at a deep discount.

    • TheDona
      Mar 8, 2017 at 9:51 am

      Petunia, Instead this is what they are investing in to be in tune with the “customer of the future.” Turning technology into a “core value.” A phone charging locker that has your phone number as the combination so that they can then text the crap out of you once your phone charge is complete.
      A memory mirror so one can livestream what you look like in an outfit. The list just goes on with genius ideas on how this will save Neiman’s. I would think the article was from The Onion it is so laughable.

      Please read from Retail Dive: http://www.retaildive.com/news/how-neiman-marcus-is-turning-technology-innovation-into-a-core-value/436590/

      • Petunia
        Mar 8, 2017 at 11:03 am

        I read the link. While most of this is not important to me, I can tell you that millennials shop in a whole different way. Going to an electronics store with my millennial is an experience. He uses apps that comparison shop by photo and texts friends for opinions. The charger locker would be a plus for him, and then he would merely block their contacts.

        The NM tech guy is on the right track in regard to customer service. I used their chat app a few times and it was very fast and helpful. What they really need is an app to rate the staff experience, most of them would get fired.

        The sales people have terrible manners and are not good at selling. I know this is a function of pay, but they would be better off hiring less and better. I miss the days when sales people knew their customers and their merchandise.

        • Sherwood
          Mar 8, 2017 at 1:05 pm

          Yup, millennials trust online reviews more than they do sales reps.

      • kitten lopez
        Mar 8, 2017 at 11:14 am

        i read the article, too, and it just seems like the old adage: the more things change, the more they stay the same.

        like Petunia said, it comes back to the PEOPLE. staff. and all these ways of “knowing” the customer is what the old ladies at department stores used to DO. on their own.

        so it’s a lot of money for more fluff and nothing. they did this in the publishing world back in the day, too. they’d hire consultants for millions of dollars to come in and tell them “sell more best sellers.”

        • TheDona
          Mar 8, 2017 at 1:05 pm

          Kitten, those ‘old ladies’ (made me laugh cuz I was thinking the same thing) were professional sales staff, paid enough to support themselves, and most likely had a pension plan.
          Now it is a constant turnover of as few and as cheap as you can get.

        • alexX
          Mar 8, 2017 at 1:21 pm

          Guys could not agree more re service. Recently shopped at Sawgrass Mills outlets here in SoFlo which anyone that’s been there will attest is a sea of aloof, rude or nonexistent service. In the Nordstrom Rack a quite older (easily mid 70’s) gentleman was working there and was the kindest, most attentive, and intuitive salesperson I’d come across in ages. He also truly seemed to enjoy his work. And I made a very nice purchase from him and will return.

        • Mike G
          Mar 8, 2017 at 1:30 pm

          But the MBA mentality is for management-centric solutions that flatter the importance of managers and treat the front-line staff as interchangeable widgets. Empowering and training the staff and treating and paying them better threatens the ideology that staff are to be dominated and management is all-important (and justifies paying them a huge multiple), so it will never fly.

    • kitten lopez
      Mar 8, 2017 at 10:38 am

      whoa. that’s genius. i love how you work with reality and bring it up front as the method of doing business fraudulently, unapologetically.

      when i was in the book biz, i found out the absurd system of book sales–bookstores were basically filling shelves on consignment even if they’d ordered pallets of books (books that were published with numbers based on previous sales). within the 90 day or 6 mos or whatever it was, before payment was due for keeping the stock, they’d ship the same pallet back to the publisher and re-order it again later.

      the publishers would be floating the brick n’ mortar stores and this is why so many smaller publishers went under. they couldn’t underwrite the stores and their pay schedule was already so far out in advance.

      as an outdated actual artist, i’m counting on the tiny backlash for local handmade goods. but others are, too, and i’m already hearing of brick n’ mortar boutiques.. BUT they’re dealing with artists on CONSIGNMENt again. which means you don’t get paid as the artist til a sale happens–you’re out of luck if it gets dirty, broken, or stolen. and you’re one person. not a big company who can eat hundreds of dollars in returns of expensive picture books mauled by casual shop browsers.

      CHRIS FROM DALLAS: if you’re here, i’ve gotta tell you i’m building something over here with OTHERS. they’re in their 20s and tired of the BS of the internet bleeding into all of daily life. so my sewing’s going slow. it’s okay. i’m doing OTHER building, too. but i had to tell you that one of the guys mentioned: “and we should make our clothes in public, too!” and my eyes bulged because YOU’D SAID THAT ALREADY.

      things are happening over here, but bigger like i’d wanted to go in the first place. i didn’t realize others would want to JOIN me in trying to do our own business as a rebellion against the sameness of everything now.

      so i’m still doing my thing; only i’m kind of “behind it” now. it’s leading ME. i feel humble. scared.

      all these stories of reality make me think i’m doing the absolute WRONG opposite thing, but i’m already starting to hear/see other artists elsewhere wanna do things and NOT offer them online.

      so there is a return to natural secrecy of local specialness that is returning under all this capturing, curating, and surveillance.

      • Petunia
        Mar 8, 2017 at 11:22 am

        Stay away from consignment and steer your business to events where you can meet the customer and get their contact info or give them yours. BTW, getting email addresses in return for showing up was how Obama beat Hillary.

        Over Xmas I saw a guy selling vintage bags, as a popup, inside a dept store. It was a nice surprise, so don’t be afraid to approach big players, everybody is looking for new business.

        • kitten lopez
          Mar 8, 2017 at 3:01 pm

          reply got long so i remembered to tell you i’m posting it below…..

      • RD Blakeslee
        Mar 8, 2017 at 11:38 am

        Kitten, There’s FAR MORE movement toward local economic activity of all kinds than most folks realize now.

        We in the countryside are seeing it firsthand, before urbanites do.

        • kitten lopez
          Mar 8, 2017 at 3:07 pm

          RD-
          i’m relieved to hear that, actually.

        • BrianC
          Mar 8, 2017 at 8:56 pm

          I have been watching the bicycle scene here in Portland OR and it’s interesting watching all the small companies starting around this community:
          https://northstbags.com
          https://black-star-bags.myshopify.com
          https://sugarwheelworks.com
          https://www.randijofab.com
          http://builtbyswift.com
          http://www.northercycles.com

          PDX is pretty hipster, and you get a mix of customers for these places. I see both urban professionals and broke millennials with gear from these companies.

          Why buy mass produced drek when you can support/build a local community, and have something unique?

        • kitten lopez
          Mar 8, 2017 at 9:53 pm

          “Why buy mass produced drek when you can support/build a local community, and have something unique?”

          EXACTLY! that’s IT right there!

  14. MarkinSF
    Mar 8, 2017 at 10:24 am

    It’s not just malls; try walking around Union Square here in San Francisco. There you will find a lot of shuttered store windows. I guess CVS can’t occupy every retail space.

    • kitten lopez
      Mar 8, 2017 at 3:10 pm

      i think there are empty commercial spaces all over san francisco because landlords are so greedy and are waiting to lock people into ever higher long leases.

  15. William
    Mar 8, 2017 at 11:04 am

    BKE and COT are retailers with very high margins, large cash balances, and minimal debt. They also have impressive dividend yields. And yes, their sales are dropping along with their stock prices.

  16. Bobber
    Mar 8, 2017 at 11:08 am

    In Seattle I haven’t seen many shutdowns of anything. There are no “for sale” signs out for housing. Jobs are fairly plentiful. Lots of people moving in on visas. But I will say costs are rising 5-10% per year while wages are rising 1%. Employers will have to rise wages soon or people will not work here much longer.

    Auto retailers are all over the place, selling a lot of high-end cars. That is the type of retail that will get killed here if there is ever a downturn and layoffs.

    • TheDona
      Mar 8, 2017 at 11:28 am

      Bobber, it’s because of Amazon. You are officially a Tech Hipster city now.

    • william
      Mar 8, 2017 at 12:11 pm

      Austin has 500+ Amazon employees and 6,000 Apple employees. This city may become the next Seattle, if only fewer people left here to move to Seattle! (seriously, moving from Austin to Seattle is quite common)

  17. The Orca
    Mar 8, 2017 at 11:15 am

    Perhaps pensions could consider making payments in a combination of cash and scrip. Scrip would be tied to assets in the portfolio like department stores and other dinosaur businesses. (PS to Wall Street, this is sarcasm not an actual proposal.)

  18. Steve
    Mar 8, 2017 at 12:16 pm

    JC Penney negotiating better rental rates for their stores square footage, who’d a thought, the big box store thinks out of the box.

  19. Kent
    Mar 8, 2017 at 12:38 pm

    Played golf with a buddy last weekend who happens to own 3 auto dealerships: one each Honda, Buick & Ford. We discussed how great the business has been over the last few years. His take is folks love the new technology in vehicles and interest rates are way low.

    He did say sales have plateaued over the last year so they are doing a lot of specials to keep the vehicles moving. He is bracing for rising interest rates over the next couple of years. Feels that might blow up the market.

    2 interesting comments:

    1. Sold 2 Ford F150 Shelby additions last month, each for over $90k.

    2. Said that Ford sells more F150s over $50k than any other luxury car maker sells cars over $50k in the USA. The markup on an F150? Minimum $20k.

    • Sonomendo Steve
      Mar 9, 2017 at 1:58 pm

      WOW! On the F-150 $50k anecdote. And I take it most of these aren’t bought by a guy with a business write-off? i.e., a contractor, realtor, etc?

  20. Mar 8, 2017 at 1:40 pm

    I was in Macy’s this past weekend looking for a Polo shirt. ( Ralph Lauren.) yep, I could buy one for $84.99. Went to TJ Maxx instead. Bought 2 @ $34.99 each. Now I am an old man but why would I pay $84.99 for a nice Polo? For the privilege of shopping at Macy’s? Am I the only one who feels this way or is this why retail is closing up shop?

    • Mar 8, 2017 at 1:44 pm

      At least, you’re shopping – and buying – doing your part in keeping GPP growth above zero. That’s good :-)

  21. Mar 8, 2017 at 1:47 pm

    Thanks, Wolf! I refuse to purchase anything from Amazon.

  22. kitten lopez
    Mar 8, 2017 at 3:06 pm

    back to PETUNIA:

    ah…i’m really glad to hear that! it makes SENSE re: vintage bags in a pop up in a dept store… interesting… actually, i’m NOT feeling afraid and prefer THIS direction. consignment was always “ghetto” to me. more for the ego and bs. and no money.

    but i wasn’t SEEING/envisioning a way of having orders placed… or now i see sewing in public connected to a pitch to a big store..

    and i remember touring bookstores being hammered by the internet and amazon and wondering why they didn’t double down on what they did best, like city lights bookstore? do the events, draw people to you…

    and then when i bought my sewing machine and tried not to buy online, i saw only ONE sewing machine store offering free classes for life if you bought a machine there. what people would get in community would be worth paying tax or a few bucks more for ease of warranty issues as well as give you community to keep using machines, upgrade, trade in with the shop and then the shop gets loyal customers… all from trading on what a brick n mortar does BEST.

    and i can see pitching something live to a brick’ store because some people would rather spend time feeling fabrics and trying things on than returning things all the time.

    thanks for that idea. i’m gonna re-read it a half dozen times and ruminate on all that could mean. i’ve been confused because i feel WAY TOO MUCH like a salmon swimming side stream or something.

    because i see what’s going on and what’s been and where it’s going and i see no ROOM for artists like me… until recently. signs… they’ve been coming at me from different unexpected SIDES. and i may like the romance of being a bad ass in public but in private i’m gnawing my elbows off in panic that i’m mad like everyone else only in a different WAY, and so i feel BETTER seeing “electricity being invented all over.” because the idea of being a lone gunman is an american fallacy that settled the west and america with murdering psychopaths, but i want COMMUNITY. what’s been decimated by capitalism and hungry famished young ghosts who’re “living their lives as content” asi heard proudly said.

    and these young ones i’ve been mentoring out of a coffee shop every weekend–mid twenties, they grew up on this shit— they want to create events without cameras. things off camera. adventures. i’m hopeful again about humanity!

    anyhow, as to the electricity being invented everywhere (when things get exciting as we start catching each other on crackly fire!), here’s a cool video James caught half asleep and said i should watch. it inspired me on an epic human level because i’ve long felt fashion was shallow. now i get we need to return to ourselves, to the tourch of fabric, to our own identities. so as an artist in this thread of china sameness killing off itself, and seeing all the artists and rebels evicted from san francisco, i’m glad to see roses sprouting up out of the concrete, as my wild woman sex love goddess apprentice, Gema, says we are. roses growing up out of the concrete.

    but i’m liking that the idea of using a STORE it plays into what i know from live stuff. you’re RIGHT. i have to read your post a half dozen times and ruminate on it. i’ve been kinda stuck because reality was fucking with fantasy again. and i was losing balance on the fantasy part so i could think bigger than what i was FEARING. you know exactly what i mean.

    sometimes you’ve gotta actually believe you can fly like this movie Nunzio i caught by accident in the 70s. they thought he was crazy for thinking he’s a superhero in a towel cape til one night…

    (smile)

    thanks, Petunia. that was powerful. i’m fighting small mind afraid of change micro AND macro. thanks for helping me catch my breath.

    • Petunia
      Mar 8, 2017 at 6:26 pm

      You need to break out of the idea of using one piece to sell many. Make a dozen and sell them at an event. Get models(any girls you know) to wear them, walk around in them, buy the cheap wine yourself, and sell those pieces. Tell people they are custom, unique, the only ones like this….I know you hate techies, but they have money and very little time…Call the tech companies around you and ask if you can do an event in their lobby or campus at lunch time. You are also an author…cross sell your books at the same time….the books give you more credibility. Celebrity is currency in our culture, use it…If you know a bookstore that will let you do a talk, do it, and bring your pieces too. The point is to sell what you make so you can make more. BTW, don’t feel inferior about fashion, it is the oldest form of art, female embellishment. In Japan, geishas think of their kimonos as a store of wealth.

    • BrianC
      Mar 8, 2017 at 9:03 pm

      I agree with Petunia on this one.

      Also remember that price sends a message. If you are marketing to professional types, as providing one off unique, can’t get it anywhere else stuff… Don’t be afraid to price accordingly.

      In addition, remember that not only are they buying a thing… They are also buying a *part* of you. A unique, carefree artist person, living the life that they are *too scared* to live themselves. But by buying what you’re selling, they can emotionally connect and feel artsy, without any of the work/angst. lol.

      This ties in with having your books, your stories, and your work all visible and part of the same event. You want to construct a narrative/vibe that is more that just the stuff you are selling.

      There is also strength in numbers. If you have friends in the same boat you can combine your work to make your event bigger and cooler…

      Best of luck!

      • kitten lopez
        Mar 8, 2017 at 10:03 pm

        “In addition, remember that not only are they buying a thing… They are also buying a *part* of you. A unique, carefree artist person, living the life that they are *too scared* to live themselves. But by buying what you’re selling, they can emotionally connect and feel artsy, without any of the work/angst. lol….”

        WHOA… i love ALL this. will have to also cut and paste this to ruminate on you along with Petunia…thank you…

        and yeah…it somehow already IS already growing bigger and beyond ME. like it’s somehow perfect…

        but i like what you said… it adds to the STORY and i need and love STORY…

        hmmm…

        thanks, BrianC…. that was GOOOOD…

  23. kitten lopez
    Mar 8, 2017 at 3:18 pm

    P.S to PETUNIA: (vid link)

    regarding electricity being invented all over…
    below here’s the link to the 26 mind video that blew my mind about the healing potential of fashion in an artistic context in every aspect of this woman’s life. she is a love goddess to me. i love her messy morning hair, her eyes, and ever line in her face. she’s been through hell and her art is full of love that envelopes her entire family in austin.

    she doesn’t even wanna sell her stuff online! how’s that for FUCK YOU! i loooove that kind of “come to ME” / FIND ME audacity. it’s why facebook or twitter could NEVER work for a woman like me. too many people like me and i know i’ve gone way too soft and it’s time to shake it up. get rid of the riff raff.

    now to clean up and get rid of room for new adventures and people in our tiny kitchen!

    http://www.klru.org/artsincontext/episode/a-light-in-the-dark/

  24. Tim
    Mar 8, 2017 at 4:28 pm

    Payless Shoes’ Australian arm has gone down already. All 130 stores to close after a buyer could not be found.

  25. chris Hauser
    Mar 8, 2017 at 5:01 pm

    ya wanna know what i think? yield curve will flatten, we will go into a shallow recession, and then rates will drop to the floor.

    but kinda like snapchat, don’t bet on it.

    • BrianC
      Mar 8, 2017 at 9:35 pm

      Wow – 6x! That’s… A lot…

      Which implies the “shrink” to normalcy is going to be bad…

  26. Mar 8, 2017 at 10:27 pm

    I think you are right and wrong at the same time. What Macy’s, JCP, SEARS, and others are doing by closing stores NEEDS to happen. It is prudent and wise, but should have been done 10-15years ago. Most of the mall REIT world knew that SEARS was going down in 1993 but it just took 25 years for everyone else to catch up.

    What you miss is the bifurcation that is occurring in the retail real estate world…MAC, SPG, GGP, Taubman, Westfield, etc have all sold or returned to the bank a majority (if not 95%) of the crap malls that were in their portfolios. Of the 1200-1400 major shopping malls in the US, I agree with your synopsis on the future for about 700-1,000 of them. The top 300-500 will still be the top and where the brick and mortar experience will shine and be fruitful for all retailers. The big REITS I mention control a majority of those top 500 and will survive and thrive. The rest are toast as your article insinuates….because they will lose the Macy’s, SEARS, and JCP.

    Omni-channel is here and Online sales success depends on the brick and mortar as a major and focused effort. The cost to gain customers is hugely cheaper per transaction with store sales then online. The demise is greatly overblown but consolidation and the demise of the junkies assets is very much true. Perhaps we could be less hype about the end of the world and more moderated in our approach of the changes that are and will occur to the industry.

    Keep up the research…BOB.

  27. mvojy
    Mar 9, 2017 at 10:11 am

    The USA has always been a retail driven economy. If we eliminate the brick and mortar retail we are left with supermarkets, specialty shops and drug stores while Amazon and Walmart ship the rest to our homes. Will there be enough job openings at Jamba Juice for all of the lost retail jobs? Probably not since these are often in the malls which are emptying quickly. Only the densely populated areas will get to keep their malls and stores open. Rural and suburban tax bases will push property tax burdens onto homeowners that can’t up and run. Fk those robots.

  28. TheDona
    Mar 10, 2017 at 12:00 pm

    Here we go on the effect of store closings on mortgage backed securities. These are the staggering numbers of Penneys only:

    The roughly 140 store closures announced by J.C. Penney last month could impair some $30 billion in commercial mortgage-backed securities, with 39 closings in particular — in malls already suffering from below-average tenant sales — poised to impair some $7.29 billion in commercial mortgage-backed loans, according to a report from credit rating firm Morningstar.

    http://www.retaildive.com/news/morningstar-jc-penney-store-closures-could-impair-30b-in-commercial-mor/437863/

  29. TheDona
    Mar 10, 2017 at 12:07 pm

    RetailDive is just full of news today. Sterling Jewelers (Kay and Jared jewelers) is closing 165-170 mall stores.

    http://www.retaildive.com/news/signet-jewelers-to-close-165-stores-review-sexual-harassment-charges/437868/

    • Petunia
      Mar 10, 2017 at 2:25 pm

      Staples is cutting back as well, read that in the NY press.

  30. Chris Leo
    Mar 11, 2017 at 11:29 am

    “Dead Mall” videos on youtube are very poignant. Spooky, in a way. Below is a video of a stroll through a mall in NC that is weeks away from closing. Zero customers and very few remaining stores. The misallocation of resources in mindboggling.

    https://www.youtube.com/watch?v=viaj_ewX2Cc&t=12s

    • TheDona
      Mar 11, 2017 at 12:01 pm

      Chris, there are entrepreneurs who have brought those malls on respirators back to life. One example, is a dying mall brought back to vibrancy by catering entirely to the Hispanic market in Ft. Worth, TX.

      http://www.thelegaspi.com/center-stage-la-gran-plaza/

  31. Mar 15, 2017 at 3:18 am

    Hey, I’m a long time fan and reader of your blog, first time commenter. Just wanted to say this post really hit home with the stuff I’ve been looking into. Thanks man

  32. Jonathan
    Mar 17, 2017 at 12:03 am

    Even here in Singapore which has the #1 if not the #2 densest population per area, the retail scene is show signs of dying unless they are one of these:

    -Big chain supermarket
    -Food outlet
    -Medical clinic
    -Lottery outlet
    -Highly suspicious money laundering front

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