Skip to main content

7 popular retail brands that may be on the brink of disappearing

  • Nearly 10,000 stores have closed their doors in 2019, including Gymboree, Payless ShoeSource and Dressbarn.
  • For every 1% increase in online sales, roughly 8,000 to 8,500 stores will shutter, particularly clothing retailers, consumer electronics companies and home furnishing businesses.
  • By 2026 the number of store closures is expected to hit 75,000.
  • Since reaching a peak in January 2017, retail has lost more than 197,000 jobs, according the U.S. Department of Labor.

The retail apocalypse hasn't shown a lot of mercy.

Year to date nearly 10,000 stores have announced closures, according to Kevin Cody, senior consultant with CoStar Portfolio Strategy. That's an all-time high, and its a serious blow to the job market in the retail sector. Since reaching a peak in January 2017, retail has lost more than 197,000 jobs, according to the U.S. Department of Labor.

Some, like Victoria's Secret, are falling prey to changing times, failing to reconnect with shoppers as lingerie trends focus more on body positivity. Others, like GameStop, have struggled to compete with mobile gaming and other changes in consumer behavior.

But one of the biggest culprits, of course, is the proliferation of online sales, which accounts for 16% of total retail sales in the U.S. today, according to UBS estimates. That number is expected to rise to 25% by 2026. Based on this projection, UBS estimates the number of store closings will hit 75,000 in just six years.

Retailers getting hit the hardest include clothing brands, consumer electronics companies and home furnishing businesses. Longtime, familiar retail names, including Payless ShoeSource, Dressbarn and Henri Bendel, have already vanished into memory; other popular companies are nearing that same precipice, fighting for their survival in a hostile environment.

Here are seven companies of popular brands (though this list could easily have so many more) that find themselves at a crossroads, close to having their bones picked clean by creditors and bargain hunters at clearance sales. Some are in Chapter 11 bankruptcy already. All are in the midst of turnaround plans. Some might manage to rise up, others won't, and still others could be acquired by competitors.

GameStop

The video game retailer, which offers new and preowned video gaming consoles, accessories and video game titles in both physical and digital formats, was the hub of the video game world just a few years ago. Then console makers began to offer players the chance to digitally download games, giving them near-instant gratification on their mobile devices eliminating the risk that a store would be sold out of the title they wanted. This shift in mobile gaming has hurt the retailer.

Headquartered in Grapevine, Texas, GameStop currently operates about 5,600 stores across 14 countries, with around 4,000 in the U.S. and Canada. This is down from 7,100 locations worldwide in the third quarter of 2018.

According to its latest earnings report, GameStop's hardware sales plunged more than 45%, its software sales were cut by a third, and both accessories and preowned games were each down 13% for the period. This sent its third-quarter currency-adjusted revenue tumbling 24.7%, to $1.4 billion.

In its earnings call, CEO George Sherman said the cause of GameStop's dismal earnings was "the unprecedented decline in new hardware sales seen across the market as the current generation of gaming consoles reach the end of their life cycle and consumers delay their spending in anticipation of new hardware releases."

The company is trying to regain its status as a hub, focusing on the culture of video games and making its return policy more generous. The video retailer is hoping to improve its annual profit generation by $200 million by fiscal 2021.

Sears

Once one of the biggest retailers in America, Sears hasn't turned a profit since 2010. (The company, which is now privately held, no longer discloses sales.)

Much of the decline stems from well-capitalized competitors like Walmart and Target, which have poured money into private-label brands and are investing in technology to offer two-day free delivery as well as same-day.

Things seemed promising for parent company Transformco (previously Sears Holdings), which owns both Sears department stores and Kmart, after chairman Eddie Lampert's ESL Investments fund helped bring the dying retailer out of bankruptcy earlier this year — the $5.2 billion deal was expected to keep 425 Sears and Kmart locations operating, along with 45,000 jobs.

Sears operated about 700 stores and had more than $7 billion in assets when it filed for bankruptcy, making it the biggest of a series of retail bankruptcies in recent years.

Today things don't seem much better: The deal has been protested by unsecured creditors, and in November the parent company of Sears was granted a $250 million lifeline and the company announced plans to shut 96 more stores, leaving the business with 182 locations.

In addition, the company now has been without a CEO for the last 12 months, despite Lampert's promises to the bankruptcy judge he would find a top-level executive to run the company. Lampert had stepped down as CEOon October 15, 2018, while remaining chairman of the board, as part of bankruptcy actions.

JC Penney

This holiday season could be a crucial one for the retailer. In September the 117-year-old department store chain spoke with creditors on ways to ease its debt load so it didn't have to worry about that as the holiday season approached. A bankruptcy filing was not the focus of those talks, but questions remain if its new CEO, Jill Soltau, can turn around a sinking ship that has roughly $4 billion in debt coming due in the next few years, with more than $1.5 billion currently available under a revolving credit line, according to SEC filings.

Under Soltau's leadership, the company has done everything from redesigning its dressing rooms to hosting classes in its home department to woo back customers. Roughly 175 stores have closed in the past three years and the company also got out of the appliance business, but J.C. Penney stock still hovers around $1 per share on the New York Stock Exchange.

Yet J.C. Penney reported a narrower-than-expected loss in third-quarter fiscal 2019. The hope is that its turnaround efforts will gain some traction. According to Zacks Equity Research, Soltau's efforts to partner with largest fashion resale marketplace thredUP; significant changes in leadership, including a new chief digital officer; optimization of inventory levels and closing of underperforming stores may be contributing to results.

Total revenues in the third quarter were $2.5 billion, which declined 8.5% from the prior year quarter's figure. Total net sales of $2.4 billion fell 10.1% year-over-year.

GNC

With competition from superstores, warehouse retailers and e-tailers, GNC's market share has been declining for the past three years. But the global health-and-wellness brand may finally be seeing some progress: This month the company reported a net loss of $2.4 million in revenue for the third quarter of 2019 compared with a net loss of $8.6 million in the prior year's same-quarter results.

GNC's biggest problem is the paradigm shift in the retail landscape. A staple in shopping malls nationwide, the company has been particularly hard-hit by the decrease in mall foot traffic. Of GNC's approximately 4,100 U.S. locations, 28% are in malls, according to the company's CEO, Ken Martindale. Another, roughly 60% are in strip centers.

In July, Martindale told investors it expects to close 900 stores (mall and non-mall) by the end of 2020.

"I think it could be likely that we'll reduce our mall count by nearly half," said Tricia Tolivar, GNC's chief financial officer, on a recent earnings call. "So we've got a little over 800 malls today, and over the long term we could bring that closer to 400 to 500."

The Pittsburgh-based chain closed 192 company-owned and franchise locations in the first six months of 2019. Nevertheless, the company is betting on a turnaround with its store optimization initiatives, including partnerships with Dick's Sporting Goods and 250 Hudson News outlets, which sells newspapers and magazines and other sundry items in airports, bus terminals and train stations.

Forever 21

At its peak in 2015, Forever 21 was bringing in more than $4 billion in sales annually. But after its rapid expansion internationally took a toll on the company's bottom line — its expansion made it unable to invest in its supply chain, making it more difficult to get fresh styles of clothes to market — the fast-fashion retailer filed for Chapter 11 bankruptcy protection in late September.

Earlier this month, the company cut its sales forecast by 20%, to $191 million, and renegotiated a loan to avoid defaulting on it.

During its bankruptcy proceedings, Forever 21 said it plans to exit most of its businesses overseas in Asia and Europe and shutter many of its stores in the U.S. This will reduce the number of stores to between 450 and 500 stores globally, down from its current total of about 800, said a Forever 21 spokesperson. But it plans to continue operating in Mexico and Latin America, where sales continue to be strong.

Once declared by analysts as "the most transformative concept in retail," Forever 21 became overexposed in U.S. malls and seemed to fall out of step with customers, who drifted over to competitors such as H&M, Zara and even Target. Young shoppers are also much more socially conscious these days, and the fast-fashion retailer has been under scrutiny for their ethical standards regarding how their clothes are made.

Another burden for the company is its massive store footprints, many of which are more than 100,000 sq ft. By going smaller, the chain is hoping to cut costs.

"The entry of Forever 21 into Chapter 11 bankruptcy is a consequence of both changing trends and tastes within the apparel market and of missteps by the company," said Neil Saunders, managing director of GlobalData Retail, in a research note. "Slimming down the operation and reducing costs is only one part of the battle. The long-term survival of Forever 21 relies on the chain creating a sustainable and differentiated brand."

Victoria's Secret

Once America's most famous lingerie retailer, Victoria's Secret is struggling, receiving backlash from customers, frustrated that the company continues to feature superslim models in racy undergarments instead of adapting in the era of #MeToo and body positivity.

"There's a big belief in the company that we need to evolve," said John Mehas, head of Victoria's Secret Lingerie, speaking at L Brands' Investors Day in September.

This year tumbling sales have forced the Columbus, Ohio-based company to close 53 of its stores — roughly 4% of the company's 1,143 Victoria's Secret stores worldwide — and cancel its runway fashion show, an annual event since 1995. In November executives stated they will be evaluating every element of the brand, be it merchandising, pricing or format. Victoria's Secret just recently started featuring its first plus-size model.

Parent company L Brands met analyst consensus in its third-quarter earnings, though revenue fell short, coming in at $2.68 billion vs. an expected $2.69 billion. (Same-store sales were down 2%.) And L Brands shares have fallen more than 34% this year.

Meanwhile, online lingerie start-ups such as Adore Me, Lively, Aerie and ThirdLove are thriving, promising female shoppers extended bra sizes and products in more neutral colors, catering to women in all shapes and sizes.

Pier 1

There aren't a lot of positive signs at this home decor chain. It reported a net loss of $100.6 million on sales of $304.6 million in its second fiscal quarter, which ended Aug. 31. Year to date, Pier 1 Imports net sales are down 14.9%, from $727.2 million to $618.9 million. In June it completed a 1-for-20 reverse stock split to avoid being delisted from the New York Stock Exchange. And it has shut down 70 of its 951 stores this year.

To turn things around, it sold off slow-moving merchandise at clearance prices to make way for new products. The company says the response been good so far. But it's too early to know if that's the beginning of a turnaround or just a short-term bump — and even company executives are striking a cautious tone.

"We all know that turnarounds take time, but I want to assure you that our teams are working with a sense of urgency," said interim CEO Cheryl Bachelder in a September earnings call. "While we anticipate that our merchandising and marketing initiatives will start to gain traction during the second half, we expect a gradual recovery and believe we'll be positioned to demonstrate year-over-year improvement in company comparable sales and gross margin rate beginning in the fourth quarter."

For more on tech, transformation and the future of work, join CNBC at the @ Work Summit in New York on April 1–2, 2020.

Source: Read Full Article

Comments

Popular posts from this blog

Fears coronavirus will spark divorce surge as couples self-isolate for months

Coronavirus is "very likely" to lead to an increase in marriage break-ups because of people being confined together for long periods in self-isolation, a leading divorce lawyer has said.Baroness Shackleton of Belgravia, whose previous clients have included Sir Paul McCartney, the Prince of Wales, Madonna and Liam Gallagher, revealed the view of the profession as a growing number of households go into voluntary lockdown in a bid to curb the spread of infection.Official health advice states that if one person in a property has a persistent cough or fever, everyone living there should stay at home for 14 days.Nicknamed the "Steel Magnolia" for her skills and charm, Lady Shackleton told peers at Westminster: "The prediction amongst divorce lawyers is that following self-imposed confinement it is very likely that the divorce rate will rise."Our peak times are after long exposure during the summer holidays and over Christmas."One only has to imagine what i…

Tax dodging: Indonesia's luxury car 'owners' cry foul

JAKARTA (AFP) – No one was more surprised to learn that Dimas Prayitno owned a Rolls-Royce than the 21-year-old Indonesian himself, who was baffled when told he owed US$15,000 (S$20,800) in taxes on the luxury vehicle.But a look at the construction worker’s home in a rundown neighbourhood quickly convinced officials that Prayitno was the latest victim of tax evasion by one of Jakarta’s wealthy elite.Rampant tax dodging costs Indonesia billions of dollars in lost revenue annually and it has taken on a renewed urgency as Jakarta moves to pass a raft of bills aimed at revving up Southeast Asia’s biggest economy and adding millions of poor to the middle class.“I was shocked and asked them ‘what car’?” Prayitno told AFP about his visit from tax officials.“How could I afford a car when you see me living in a house like this?”Prayitno – whose top pay is about 150,000 rupiah (S$14.70) a day – later learned he’d been duped by a former boss who took his government ID card ostensibly for a legit…

The US Strategic Petroleum Reserve: 5 facts

Challenges lie ahead for oil industry in short run: American Petroleum Institute senior vice presidentAmerican Petroleum Institute Senior Vice President Frank Macchiarola discusses the sharp downturn in oil prices and the short-term impact it will have on American producers.The Strategic Petroleum Reserve (SPR) is the world’s largest supply of emergency crude oil owned by the US government.Continue Reading BelowWhy was the SPR created?It was established in 1975 in the aftermath of the OPEC oil embargo, primarily to reduce the impact of disruptions in the sale of commercial oil and to carry out obligations of the United States under the International Energy program.Where is the SPR?Crude oil is stored at the SPR in underground salt caverns at four major oil storage facilities in the Gulf Coast region of the United States, two sites in Texas (Bryan Mound and Big Hill) and two sites in Louisiana (West Hackberry and Bayou Choctaw).GET FOX BUSINESS ON THE GO BY CLICKING HEREHow much oil is…