Have you been to the mall lately? If not, you might be surprised to find some familiar faces missing on your next visit. A number of pretty big national and regoinal retailers have gone under in just the past few months.
Linens n Things filed Chapter 11 earlier this year, leaving consumers holding the bag on $42 million in unredeemed gift cards. Did you know that retail gift cards often become worthless in a bankruptcy, by the way? Might be a good reason to just give cold hard cash to that hard to buy for loved one next time around.
Then there was Sharper Image-- it wasn't too long ago that a weary shopper could rest her bones in a massage recliner at a Sharper Image in just about any major mall from coast to coast, but within weeks the last of the fire sales will be over and Sharper Image will be no more: gone, Chapter 11 bankruptcy. Even the old Sharper Image mail order business is shuttered.
California-based department store Mervyn's filed Chapter 11 bankruptcy last week covering the chain's 177 locations. You can still buy a gift card at their website... consider it likely a donation to Mervyn's creditors if you do so, however. Founder Mervin Morris, still alive at 88, said simply "today is a very sad day for me."
Shoe Pavilion went Chapter 11 a couple days ago, and is planning to close 71 of 117 stores. 150 million dollars in shoe sales per year, but it just wasn't enough to quite cover the bills, and then the credit markets tightened up at the same time that the high gas prices hit the consumer. You used to be able to buy it under ticker symbol SHOE on the stock market, but no longer-- it trades on the "pink sheets" now, a market wasteland where publicly traded companies go to die after being banned from the stock exchanges. Shoe Pavilion trades at four cents per share, but you might just as well toss those four pennies in the fountain at your disturbingly deserted local mall.
Disturbingly deserted, indeed-- by retail outlets, not just shoppers. Retail space is being abandoned at the highest pace ever since analysts began tracking the statistic 28 years ago. Big malls already have as much empty space as they have had since 2002, and smaller malls are seeing vacancy rates they have not seen since 1995. And it seems likely that shopping centers will gain many more empty storefronts in the coming months, as even surviving retailers slash unprofitable stores and cut back on new locations. For just one example, the once mighty Starbucks announced today that it failed to turn a profit in it's last quarter for the first time ever, and so it's closing 600 money-losing shops and scaling back plans to open new ones. Familiar mall outlets planning mass store closures include Foot Locker (planning to close 140 stores), Lane Bryant/Fashion Bug (150), Ann Taylor(117), and Zales Jewelers(100), just to name a few.
The rate of store closings might be picking up. Huge retailers like Circuit City are speculated to be nearing bankruptcy, and there's been rumblings that even the once bulletproof Target is seeing its prospects weaken markedly of late. Perhaps most notably, stock guru Jim Cramer recently called Target "roadkill".
Retailers sometimes get a bad rap from those who focus on the excesses of consumerism in the United States, and I'm sure some people won't be able to muster many tears over the hard times of big corporate retailers, but retail trade is a large part of the economy, and the implications of a sick retail sector will have implications beyond the mall. Retailers employ over 11% of the workforce, and when stores close, workers lose their jobs. Roughly 100,000 retail jobs disappeared from the economy last quarter. Other side effects of a retail depression are more insidious: slower retail sales means lower sales tax receipts for state and local government, while lower profits for retailers means less state and federal corporate income tax is paid. And high vacancy rates at local malls may cause entire malls to close up, leaving empty eyesores hulking over weed infested asphalt, serving only to exacerbate the problem of declining residential property values in nearby neighborhoods.
Until our underlying economy begins to improve organically, you can stick a fork in retail. They can send out stimulus checks till the cows come home and it's not going to save a lot of these retailers some serious pain.