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Big mall operator bankrupt

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In a sure sign of the recession's impact, a huge mall owner has filed for bankruptcy. General Growth Properties filed for Chapter 11 protection in what the Wall Street Journal is calling "one of the largest real-estate failures in U.S. history." General Growth is the nation's second-largest mall operator, behind Simon, and owns 200 malls including Boston's Faneuil Hall.

The bankruptcy filing is not supposed to affect mall operations or sales. But it could have an impact on consumer confidence, and shoppers may shy away from General Growth's malls, leading to a latent sales decline at the stores within them. The bankruptcy proceedings could take years due to the size of the company's holdings.

Facing the Muzak

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Muzak--purveyors of the soothing background music played in stores, medical offices and elevators everywhere--filed for bankruptcy to escape its debt. The company, which has been in business for 75 years, has two million songs playing at a wide variety of retail stores from Macy's to DSW Shoes. Muzak expects to successfully continue operations following the restructuring.

Pamida in fewer hometowns

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Regional value-and-convenience retailer Pamida is closing 11 of its 215 stores. Pamida cited "a negative drain on earnings" coming from the locations being shuttered. Pamida, which operates mostly in smaller towns, gets hurt whenever a Wal-Mart opens, and the economy's shift toward greater consumer value is forcing the closings.

As a small-town retailer, Pamida's news is indicative of the hyperlocal focus discussed here recently. View the store closing information as reported in Sioux City, IA; Norwalk, OH; southeast Iowa; and Park Rapids, ND.

Retail outlook, from retailers

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It's probably not a whole lot of fun at the Javits Center this week, where the National Retail Federation is having its annual meeting. One of the more interesting takeaways is the forecast for post-recession retailing given by several respected analysts. Among them: more one-stop shopping, less retailer loyalty, changes in locations from lease renegotiations and a bargain-hunting atmosphere that may last until 2010.

Bracing for Q1

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The New York Times posted a thorough report on "dismal" 2008 holiday retail figures and the coming fallout. Sales were down 2.2% nationwide, a striking drop for an industry that is usually up 3 to 6 percent annually. Many retail chains posted same-store declines of 10% or greater.

Several analysts quoted in the article expect the next few months to be worse than the holiday season, as consumers have less compelling reasons to shop than they do before the holidays. One analyst says, "Even the best of breed are closing stores. That inventory will need to be liquidated into a market where consumers have no desire to spend." The article goes on to speculate on further store closings and retailer bankruptcies by chains with unmanageable debt loads, and that sell-in by manufacturers will be lower in 2009 as retailers stock less merchandise.

Not all the news was bad: Buckle, Aeropostale (previously noted) and Hot Topic all posted strong sales increases. But when an article ends with a quote about a "blanket of gloom," it's hard to be upbeat.

Update, January 14: the official government figures for December 2008 put the decline at 2.8%, the worst on record. Mind you, the "record" only goes back 15 years or so, but it's still a confirmation of the bleak retail environment this past holiday season. (via TD correspondent Josey Miller)

Flexible pricing

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Shoppers bring haggling skills to the mall, Retailers are bending their own rules this season to secure sales. Asking for a better return policy, price match, or just a lower bottom line--all have become acceptable in the right situations. This is a stark shift from corporate policy, although for many consumers, it's not much different than simply waiting for an item to go on sale.

Retail coverage in newspapers

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Some interesting reading this weekend from two major newspapers.

Barron's: Struggling to Survive at the Mall. Summarizes a lot of what we've been seeing this season, and reports on a wide range of brands and department stores. Since it's Barron's, each company comes with a stock price evaluation as well.

New York Times: Handful of Niche Chains Stay Alive in Retailing. The teen market is doing better than most this season, particularly at Urban Outfitters, and other retailers (like Kohl's and Aeropostale) are well-positioned to weather the recession.

Consumer prices

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U.S. consumer prices dropped by a record 1.7% in November as the economy struggled with the immediate effects of the financial crisis. Economists keep a keen eye on prices; a steady decline creates deflation, which discourages consumer spending as people wait for prices to drop. This could have very real effects on the average shopper's in-store experiences, although this writer, who paid $1 for M&Ms from a newsstand yesterday, hasn't seen it yet.

Wholesale news

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Wholesale inventories fell a substantial 1.1 percent in October, the most since late 2001 following the September 11 attacks and dot-com slowdown. Sales by wholesalers dropped a record 4.1%. This points to lower production levels in 2009 and businesses trying to realign inventories to match lowered consumer spending.

Black Friday

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Retailers and economists watched Black Friday with nervous anticipation as consumers began their holiday shopping. (The Times also reported Friday on the striking product discounts in effect at many retailers.)

The New York Times reported typical crowds with fewer bags--an unnerving start to the season. More unnerving was the Wal-Mart employee trampled to death in a 200-person stampede for discounts. Four other people were injured in the melee, including a pregnant woman who reportedly lost her baby. (This author is not going to speculate on whether the frenzy was related to the economy.)

The day in bankruptcies, Nov. 20

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Perhaps none of these will heavily affect consumers, but a lot of filings came over the wires yesterday:

  • DayJet, a regional airline that closed up shop, filed for Chapter 7 liquidation
  • CPG Marketing, which processed rebates for third-party companies, filed Chapter 11 with heavy outstanding liabilities
  • Beaudry RV, a regional dealership, caught without money to repay debts
  • Getrag, transmission manufacturer (but it seems only for one plant)

Retail sales "collapse"

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Yesterday's industry-wide retail news was incredibly bleak--so much so that the nation's leading newspapers reached for uncommon adjectives to describe it.

Whatever the word, the industry's news was full of negative figures from a variety of retailers. Only discount chains like Wal-Mart were able to post gains in an industry that saw an 11.7% dip overall.

Among the reports:
  • Neiman Marcus -28% (WSJ: "staggering") including a 23% online and catalog decline
  • Abercrombie & Fitch -20%
  • Saks Inc. -17%
  • Gap -16%
  • Nordstrom -16%
  • J.C. Penney Co. -13%
  • American Eagle -12%
  • Kohl's Corp. -9%
  • Limited -9%
The Los Angeles Times' report does list a very good October for American Apparel, the lone brand with a double-digit increase.

Timely Demise tracks the retail industry as it changes with our unprecedented economic environment. Published by David Wertheimer. Did I miss something? Drop me a line.

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