Prepare for More Retail Store Closings

Mike Shedlock
Nov 15, 2011

Lowe's reported a 44% decline in store profits today and blamed store closings. What are other retailers doing?

First consider Store Closings Slam Lowe's Profit http://online.wsj.com/article/SB1000142 ... s_business

Lowe's Cos.' fiscal-third-quarter earnings fell 44% as store-closing charges masked the home-improvement retailer's slightly improved same-store sales.

Ricky Damron, Lowe's store-operations executive, told analysts during a conference call that same-store sales mostly improved as customers along the U.S. East Coast bought roofing products, dehumidifiers and cleaning supplies to prepare for and clean up flooding damage in the region. Large discretionary products, however, remained pressured.

"Our performance is not at the level we expect relative to the market," said President and Chief Executive Robert Niblock. He said the company is making changes to reduce the size of its organization ...

Reduce Size of Organization

The key phrase in the above article is easy to spot "reduce the size of its organization". Will other stores do the same?

JC Penny 3rd Quarter Loss

Please consider the decline in profits came on the heels of an outright 3rd Quarter Loss at JC Penny. http://www.sfgate.com/cgi-bin/article.c ... e=business

J.C. Penney Co., the retail chain led by the former head of Apple's retail operations, reported a third-quarter loss, citing costs from an early-retirement plan amid weaker spending.

The net loss of $143 million (67 cents per share) compares with profit of $44 million (19 cents) a year earlier, J.C. Penney said Monday in a statement. The 109-year-old department-store chain forecast fourth-quarter profit that trailed some analysts' estimates.

Sales of basic items were weaker as shoppers defer some purchases, Chairman Myron Ullman said during an analyst call. J.C. Penney, led by Ron Johnson, who took over as CEO on Nov. 1, is shedding smaller business lines and hiring former Apple executives to help revive sales. Johnson said Monday he wants to transform the chain, without providing details.

Innovation to Lead the Way?

Inquiring minds are mocking the idea New J.C. Penney CEO Counts On Innovation http://online.wsj.com/article/SB1000142 ... 83546.html

J.C. Penney Co.'s new chief executive, Ronald Johnson, said Monday that he is out to "re-imagine" the department store, using current operations as his starting point.

In his first public comments since becoming Penney's CEO on Nov. 1, Mr. Johnson said he plans to foster an environment in which employees "think differently and work creatively" to turn the chain, which reported a loss for the fiscal third quarter, into a major innovative force.

"I get more excited every day about the potential of J.C. Penney," the former retail chief of Apple Inc. told analysts on a conference call.

Will innovation help JC Penny? How? Why?

Certainly innovation is a major force at Apple. However, is innovation going to help the average brick-and-mortar store that competes against Target and WalMart on some items and Amazon on others?

If anything, that set of silly statements by CEO Johnson should cause investors to dump the stock. JC Penny is not a technology company. It needs to stock products at competitive prices that consumers want.

Retail Store Closings Roundup

Inquiring minds are also investigating the 2011 Retail Store Closings Roundup http://retailindustry.about.com/od/stor ... siness.htm

Even though the number of retail store openings by major U.S. retail industry chains is expected to far outnumber the number of store closings in the 2011 calendar year, both large and small retail chains will still be struggling to hold onto their domestic retail presence, keep stores open, and grow sales and turn a profit. The number of U.S. retail industry store closings planned for 2011 will not be insignificant, particularly in an economy that is still plagued by high unemployment.

Many experts believe that the number of retail establishments per capita in the United States was excessive even before the economy recessed. According to the 2007 Economic Census, there were 1,122,703 retail establishments in the United States and a total of 14.2 billion square feet of retail space.

Per Capita Retail Space Comparison

US 46.6 square feet
India 2.0 square feet
Mexico 1.5 square feet
UK 23.0 square feet
Canada 13.0 square feet
Australia 6.5 square feet

It seems to me stores have a major problem here. The problem is increasing competition for customers who have no job and/or retirees with little need for anything but food and shelter.

Store Closings
405 Blockbuster
633 Borders
200 GameStop
189 Gap
160 f.y.e.
117 Anchor Blue
117 Foot Locker
100 Talbot's
71 A.J. Wright
69 Metropark
63 Friendly's
60 Rite Aid
52 Destination Maternity
50 Abercrombie & Fitch
50 Hot Topic
45 Big Lots
45 Family Dollar
43 Select Comfort
43 Sonic Drive-In
35 Denny's

That is a partial list. The report did say there are far more store openings than closings. However, they are all competing for the same customers.

No Driver for Jobs

I keep stating, housing is not coming back in a major way nor is commercial real estate. So what is the driver for jobs?

There is no driver for jobs. However, there is a driver for more store closings, increased competition, and falling prices.

Expect all three as deflation kicks in again with a vengeance.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

http://finance.townhall.com/columnists/ ... page/full/