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THE RETAIL DEATH RATTLE

Discussion in 'Coffee Shack (Daily News/Economy)' started by searcher, Jan 20, 2014.



  1. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    [h=3]THE RETAIL DEATH RATTLE[/h]
    Posted on 19th January 2014 by Administrator
    “I was part of that strange race of people aptly described as spending their lives doing things they detest, to make money they don’t want, to buy things they don’t need, to impress people they don’t like.”Emile Gauvreau

    [​IMG]

    If ever a chart provided unequivocal proof the economic recovery storyline is a fraud, the one below is the smoking gun. November and December retail sales account for 20% to 40% of annual retail sales for most retailers. The number of visits to retail stores has plummeted by 50% since 2010. Please note this was during a supposed economic recovery. Also note consumer spending accounts for 70% of GDP. Also note credit card debt outstanding is 7% lower than its level in 2010 and 16% below its peak in 2008. Retailers like J.C. Penney, Best Buy, Sears, Radio Shack and Barnes & Noble continue to report appalling sales and profit results, along with listings of store closings. Even the heavyweights like Wal-Mart and Target continue to report negative comp store sales. How can the government and mainstream media be reporting an economic recovery when the industry that accounts for 70% of GDP is in free fall? The answer is that 99% of America has not had an economic recovery. Only Bernanke’s 1% owner class have benefited from his QE/ZIRP induced stock market levitation.


    [​IMG]


    The entire economic recovery storyline is a sham built upon easy money funneled by the Fed to the Too Big To Trust Wall Street banks so they can use their HFT supercomputers to drive the stock market higher, buy up the millions of homes they foreclosed upon to artificially drive up home prices, and generate profits through rigging commodity, currency, and bond markets, while reducing loan loss reserves because they are free to value their toxic assets at anything they please – compliments of the spineless nerds at the FASB. GDP has been artificially propped up by the Federal government through the magic of EBT cards, SSDI for the depressed and downtrodden, never ending extensions of unemployment benefits, billions in student loans to University of Phoenix prodigies, and subprime auto loans to deadbeats from the Government Motors financing arm – Ally Financial (85% owned by you the taxpayer). The country is being kept afloat on an ocean of debt and delusional belief in the power of central bankers to steer this ship through a sea of icebergs just below the surface.

    The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions. The most amazingly delusional aspect to the chart above is retailers continued to add 44 million square feet in 2013 to the almost 15 billion existing square feet of retail space in the U.S. That is approximately 47 square feet of retail space for every person in America. Retail CEOs are not the brightest bulbs in the sale bin, as exhibited by the CEO of Target and his gross malfeasance in protecting his customers’ personal financial information. Of course, the 44 million square feet added in 2013 is down 85% from the annual increases from 2000 through 2008. The exponential growth model, built upon a never ending flow of consumer credit and an endless supply of cheap fuel, has reached its limit of growth. The titans of Wall Street and their puppets in Washington D.C. have wrung every drop of faux wealth from the dying middle class. There are nothing left but withering carcasses and bleached bones.

    The impact of this retail death spiral will be vast and far reaching. A few factoids will help you understand the coming calamity:



    • There are approximately 109,500 shopping centers in the United States ranging in size from the small convenience centers to the large super-regional malls.
    • There are in excess of 1 million retail establishments in the United States occupying 15 billion square feet of space and generating over $4.4 trillion of annual sales. This includes 8,700 department stores, 160,000 clothing & accessory stores, and 8,600 game stores.
    • U.S. shopping-center retail sales total more than $2.26 trillion, accounting for over half of all retail sales.
    • The U.S. shopping-center industry directly employed over 12 million people in 2010 and indirectly generated another 5.6 million jobs in support industries. Collectively, the industry accounted for 12.7% of total U.S. employment.
    • Total retail employment in 2012 totaled 14.9 million, lower than the 15.1 million employed in 2002.
    • For every 100 individuals directly employed at a U.S. regional shopping center, an additional 20 to 30 jobs are supported in the community due to multiplier effects.


    The collapse in foot traffic to the 109,500 shopping centers that crisscross our suburban sprawl paradise of plenty is irreversible. No amount of marketing propaganda, 50% off sales, or hot new iGadgets is going to spur a dramatic turnaround. Quarter after quarter there will be more announcements of store closings. Macys just announced the closing of 5 stores and firing of 2,500 retail workers. JC Penney just announced the closing of 33 stores and firing of 2,000 retail workers. Announcements are imminent from Sears, Radio Shack and a slew of other retailers who are beginning to see the writing on the wall. The vacancy rate will be rising in strip malls, power malls and regional malls, with the largest growing sector being ghost malls. Before long it will appear that SPACE AVAILABLE is the fastest growing retailer in America.


    [​IMG]


    The reason this death spiral cannot be reversed is simply a matter of arithmetic and demographics. While arrogant hubristic retail CEOs of public big box mega-retailers added 2.7 billion retail square feet to our already over saturated market, real median household income flat lined. The advancement in retail spending was attributable solely to the $1.1 trillion increase (68%) in consumer debt and the trillion dollars of home equity extracted from castles in the sky, that later crashed down to earth. Once the Wall Street created fraud collapsed and the waves of delusion subsided, retailers have been revealed to be swimming naked. Their relentless expansion, based on exponential growth, cannibalized itself, new store construction ground to a halt, sales and profits have declined, and the inevitable closing of thousands of stores has begun. With real median household income 8% lower than it was in 2008, the collapse in retail traffic is a rational reaction by the impoverished 99%. Americans are using their credit cards to pay their real estate taxes, income taxes, and monthly utilities, since their income is lower, and their living expenses rise relentlessly, thanks to Bernanke and his Fed created inflation.


    [​IMG]



    The media mouthpieces for the establishment gloss over the fact average gasoline prices in 2013 were the second highest in history. The highest average price was in 2012 and the 3rd highest average price was in 2011. These prices are 150% higher than prices in the early 2000′s. This might not matter to the likes of Jamie Dimon and Jon Corzine, but for a middle class family with two parents working and making 7.5% less than they made in 2000, it has a dramatic impact on discretionary income. The fact oil prices have risen from $25 per barrel in 2003 to $100 per barrel today has not only impacted gas prices, but utility costs, food costs, and the price of any product that needs to be transported to your local Wally World. The outrageous rise in tuition prices has been aided and abetted by the Federal government and their doling out of loans so diploma mills like the University of Phoenix can bilk clueless dupes into thinking they are on their way to an exciting new career, while leaving them jobless in their parents’ basement with a loan payment for life.


    [​IMG]



    The laughable jobs recovery touted by Obama, his sycophantic minions, paid off economist shills, and the discredited corporate legacy media can be viewed appropriately in the following two charts, that reveal the false storyline being peddled to the techno-narcissistic iGadget distracted masses. There are 247 million working age Americans between the ages of 18 and 64. Only 145 million of these people are employed. Of these employed, 19 million are working part-time and 9 million are self- employed. Another 20 million are employed by the government, producing nothing and being sustained by the few remaining producers with their tax dollars. The labor participation rate is the lowest it has been since women entered the workforce in large numbers during the 1980′s. We are back to levels seen during the booming Carter years. Those peddling the drivel about retiring Baby Boomers causing the decline in the labor participation rate are either math challenged or willfully ignorant because they are being paid to be so. Once you turn 65 you are no longer counted in the work force. The percentage of those over 55 in the workforce has risen dramatically to an all-time high, as the Me Generation never saved for retirement or saw their retirement savings obliterated in the Wall Street created 2008 financial implosion.


    [​IMG]



    To understand the absolute idiocy of retail CEOs across the land one must parse the employment data back to 2000. In the year 2000 the working age population of the U.S. was 213 million and 136.9 million of them were working, a record level of 64.4% of the population. There were 70 million working age Americans not in the labor force. Fourteen years later the number of working age Americans is 247 million and only 144.6 million are working. The working age population has risen by 16% and the number of employed has risen by only 5.6%. That’s quite a success story. Of course, even though median household income is 7.5% lower than it was in 2000, the government expects you to believe that 22 million Americans voluntarily left the labor force because they no longer needed a job. While the number of employed grew by 5.6% over fourteen years, the number of people who left the workforce grew by 31.1%. Over this same time frame the mega-retailers that dominate the landscape added almost 3 billion square feet of selling space, a 25% increase. A critical thinking individual might wonder how this could possibly end well for the retail genius CEOs in glistening corporate office towers from coast to coast.




    [​IMG]

    This entire materialistic orgy of consumerism has been sustained solely with debt peddled by the Wall Street banking syndicate. The average American consumer met their Waterloo in 2008. Bernanke’s mission was to save bankers, billionaires and politicians. It was not to save the working middle class. You’ve been sacrificed at the altar of the .1%. The 0% interest rates were for Jamie Dimon and Lloyd Blankfein. Your credit card interest rate remained between 13% and 21%. So, while you struggle to pay bills with your declining real income, the Wall Street bankers are again generating record profits and paying themselves record bonuses. Profits are so good, they can afford to pay tens of billions in fines for their criminal acts, and still be left with billions to divvy up among their non-prosecuted criminal executives.



    Bernanke and his financial elite owners have been able to rig the markets to give the appearance of normalcy, but they cannot rig the demographic time bomb that will cause the death and destruction of our illusory retail paradigm. Demographics cannot be manipulated or altered by the government or mass media. The best they can do is ignore or lie about the facts. The life cycle of a human being is utterly predictable, along with their habits across time. Those under 25 years old have very little income, therefore they have very little spending. Once a job is attained and income levels rise, spending rises along with the increased income. As the person enters old age their income declines and spending on stuff declines rapidly. The media may be ignoring the fact that annual expenditures drop by 40% for those over 65 years old from the peak spending years of 45 to 54, but it doesn’t change the fact. They also cannot change the fact that 10,000 Americans will turn 65 every day for the next sixteen years. They also can’t change the fact the average Baby Boomer has less than $50,000 saved for retirement and is up to their grey eye brows in debt.



    [​IMG]



    With over 15% of all 25 to 34 year olds living in their parents’ basement and those under 25 saddled with billions in student loan debt, the traditional increase in income and spending is DOA for the millennial generation. The hardest hit demographic on the job front during the 2008 through 2014 ongoing recession has been the 45 to 54 year olds in their peak earning and spending years. Combine these demographic developments and you’ve got a perfect storm for over-built retailers and their egotistical CEOs.



    The media continues to peddle the storyline of on-line sales saving the ancient bricks and mortar retailers. Again, the talking head pundits are willfully ignoring basic math. On-line sales account for 6% of total retail sales. If a dying behemoth like JC Penney announces a 20% decline in same store sales and a 20% increase in on-line sales, their total change is still negative 17.6%. And they are still left with 1,100 decaying stores, 100,000 employees, lease payments, debt payments, maintenance costs, utility costs, inventory costs, and pension costs. Their future is so bright they gotta wear a toe tag.



    The decades of mal-investment in retail stores was enabled by Greenspan, Bernanke, and their Federal Reserve brethren. Their easy money policies enabled Americans to live far beyond their true means through credit card debt, auto debt, mortgage debt, and home equity debt. This false illusion of wealth and foolish spending led mega-retailers to ignore facts and spread like locusts across the suburban countryside. The debt fueled orgy has run out of steam. All that is left is the largest mountain of debt in human history, a gutted and debt laden former middle class, and thousands of empty stores in future decaying ghost malls haunting the highways and byways of suburbia.



    The implications of this long and winding road to ruin are far reaching. Store closings so far have only been a ripple compared to the tsunami coming to right size the industry for a future of declining spending. Over the next five to ten years, tens of thousands of stores will be shuttered. Companies like JC Penney, Sears and Radio Shack will go bankrupt and become historical footnotes. Considering retail employment is lower today than it was in 2002 before the massive retail expansion, the future will see in excess of 1 million retail workers lose their jobs. Bernanke and the Feds have allowed real estate mall owners to roll over non-performing loans and pretend they are generating enough rental income to cover their loan obligations. As more stores go dark, this little game of extend and pretend will come to an end. Real estate developers will be going belly-up and the banking sector will be taking huge losses again. I’m sure the remaining taxpayers will gladly bailout Wall Street again. The facts are not debatable. They can be ignored by the politicians, Ivy League economists, media talking heads, and the willfully ignorant masses, but they do not cease to exist.




    “Facts do not cease to exist because they are ignored.”Aldous Huxley

    [​IMG]




    http://www.theburningplatform.com/2014/01/19/the-retail-death-rattle/
     
    Silvergun, blueice, Ragnarok and 19 others like this.
  2. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    But....but...but... The Ministry of Truth tells us the glorious 6 year recovery is at it's glorious peak and everything is golden and good. :confused:
     
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  3. Ahillock

    Ahillock A nobody Mother Lode

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    I think we have reached peak retail already.
     
  4. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    The entire economic recovery storyline is a sham built upon easy money funneled by the Fed to the Too Big To Trust Wall Street banks so they can use their HFT supercomputers to drive the stock market higher, buy up the millions of homes they foreclosed upon to artificially drive up home prices, and generate profits through rigging commodity, currency, and bond markets, while reducing loan loss reserves because they are free to value their toxic assets at anything they please – compliments of the spineless nerds at the FASB. GDP has been artificially propped up by the Federal government through the magic of EBT cards, SSDI for the depressed and downtrodden, never ending extensions of unemployment benefits, billions in student loans to University of Phoenix prodigies, and subprime auto loans to deadbeats from the Government Motors financing arm – Ally Financial (85% owned by you the taxpayer). The country is being kept afloat on an ocean of debt and delusional belief in the power of central bankers to steer this ship through a sea of icebergs just below the surface.

    What a paragraph!!

    Whew!

    and this:
    funny as hell
     
  5. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    I was going to make this an email and send it far and wide, but why bother?

    Nobody listened to the last couple dozen. Can I borrow 20 bucks?
     
  6. Goldhedge

    Goldhedge Moderator Site Mgr Site Supporter

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    Coined by Jim Sinclair back in 2008?

    i.e., MOPE


    Management Of Perspective Economics
     
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  7. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    I have become a fan of his prose,

    Content, zingers, and a few laughs along the way
     
  8. azxcvbnm321

    azxcvbnm321 Silver Member Silver Miner

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    Uh one problem, if you read the fine print of the first graph on retail sales and new openings, you'll notice it measures malls and large retailers. The trend has moved away from malls and large retailers (like Sears and JCPenny) towards smaller boutique and specialty stores. Retail sales overall are still growing.

    Always read the fine print

    I agree with the labor participation rates and savings rates though. Still the death of the economy is premature.
     
  9. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    Already been happening here for a while now, and heading for your state too.
     
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  10. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Some times discretion is the better part of valor. I stopped talking to people about the gov, politics, metals, money, etc a long time ago. It really doesn't pay. I have a few "like minded" friends but most of the people I know simply aren't interested in anything other than their jobs and being entertained. Really can't blame them. They're just trying to survive.
     
  11. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    Yeah same. I'm just a odd duck who looks for old coins with a overpriced toy and enjoys riding a big blue motorcycle around the woods.

    Drives an economy car and can't even afford to go out to dinner at the trendy places.

    Has a dumb phone he doesn't even carry around, FFS!

    Nothing to see here.
     
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  12. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    I spent a little time trying to find a retail sales ex the food,

    but so far nothing,

    retail ex food and ex autos would be the one I am trying to find,

    it would be an interesting follow up to azxcvbnm321's post about overall sales still increasing
     
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  13. JFN111

    JFN111 Silver Member Silver Miner

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    Here is one chart that breaks the sales down:
    retailsaleschg1213.jpg
     
  14. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    FWIW: Auto Sales http://online.wsj.com/mdc/public/page/2_3022-autosales.html
     
  15. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    Hey Irons,

    Note how groceries and LIQUOR were leading the pack,

    People drinking to drown their sorrows,

    it doesn't work, they are still there in the am

    but it is a huge bull market!

    nrt7224nsa.gif
     
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  16. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    Not surprised, the only store left in the strip malls are liquor stores. Also you can now buy all the liquor you want in gas stations.

    Michigan is like the old USSR these days. Keep them drunk and feed them garbage food until they die @ 45.
     
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  17. Argent Dragon

    Argent Dragon Site Support Site Mgr Site Supporter

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    Looks like consumables are up while the tangibles are down (i.e. keep that old dishwasher and old car just a year or two more).

    Replacement of goods is expensive when you're on a shoestring budget.
     
  18. Argent Dragon

    Argent Dragon Site Support Site Mgr Site Supporter

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    Retail ex food:

    chart-of-the-day-june-retail-sales-july-2012.jpg

    Retail ex autos:

    US-retail-sales-2012-0716.jpg
     
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  19. Argent Dragon

    Argent Dragon Site Support Site Mgr Site Supporter

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    Here's a bar graph (light blue = ex gas) that's more up to date:

    retail.14jan2014-thumb.gif
     
  20. Ahillock

    Ahillock A nobody Mother Lode

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    Another interesting take on the death of retail. Good article, but it doesn't really need its own so I thought I would add it to this discussion:

     
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  21. Ebie

    Ebie Midas Member Midas Member

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    Sales going up?
     
  22. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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  23. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    [h=1]The First Domino to Fall: Retail-CRE (Commercial Real Estate)[/h]

    [​IMG]
    Submitted by Tyler Durden on 01/21/2014 13:42 -0500


    Submitted by Charles Hugh-Smith of OfTwoMinds blog,

    The domino of retail CRE will not fall in isolation; it will topple the domino of debt next to it.

    That the retail trade is stagnating has been well-established: for example, The Retail Death Rattle (The Burning Platform).

    Equally well-established is the vulnerability of the bricks-n-mortar commercial real estate sector to this downturn: yesterday's analysis by Mark G. makes the case:After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position and Future Prospects.


    I'd like to extend Mark's excellent analysis a bit because it suggests that the retail CRE (commercial real estate) sector will likely be the first domino to fall in the next financial crisis--the one we all know is brewing.

    Let's start with two charts of retail that I have marked up: the first is a chart of retail traffic from The Burning Platform story above. Note the phenomenal building boom in retail space from 2000 to 2008: nine straight years of adding about 300 million square feet of retail space each year.

    [​IMG]

    The second chart shows department store sales, which fell by 15% during the retail building boom.

    [​IMG]

    It might be possible to argue that this additional 2.7 billion square feet of retail space was needed as competitors ate the department store chains' lunches, but let's start by considering the foundation of retail sales: consumer income and credit.


    One way to measure income to adjust it for inflation (i.e. real income) and measure it per person (per capita) on a year-over-year (YoY) basis. Notice how real income per capita has absolutely cratered in the "too big to fail" quantitative easing (QE) era masterminded by the Federal Reserve: if this is success, I'd hate to see failure.


    [​IMG]

    Another way to measure median household income:
    [​IMG]



    There's a big problem with both per capita and median income measures: a significant gain in the the top 10%'s income will mask the decline in the bottom 90%'s income.
    If households earning $150,000 annually get a boost to $200,000, that $50,000 increase not only offsets the decline of nine households who saw their income decline from $35,000 to $31,500 annually, but pushes both the median and per capita income metrics higher even as 9 of 10 households experienced a 10% decline in income.

    The point here is that the declines are far deeper for the bottom 90% than shown on these charts, as the top 10%'s increase in income has skewed median and per capita income higher. We can see this clearly in this chart:
    [​IMG]


    Notice how the income of the top 10% diverged from the bottom 90% once the era of financialization and asset bubbles started in the early 1980s.
    Each asset bubble--housing in the late 1980s, tech in the 1990s and housing again in the 2000s--nudged the incomes of the bottom 90% briefly into marginally positive territory while it spiked the incomes of the top 10% into the stratosphere.

    There are only two ways households can buy stuff: with income or credit/debt, as in charging purchases on credit cards. We've seen that income has tanked for the bottom 90%; how about credit/debt?

    Courtesy of Chartist Friend from Pittsburgh, we can see that revolving consumer credit has flatlined:
    [​IMG]


    There's another component to the erosion of bricks-n-mortar and the ascent of eCommerce, as Chartist Friend from Pittsburgh explains:





    This M2 (money) velocity chart is better because it reminds us of the days when you would drive to the mall to make a purchase, and while you were there you'd stop at the food court to have lunch, and then maybe you'd walk around afterwards and see some other item you wanted to buy, or run into friends and decide to catch a movie or have a drink, etc. At the mall there are lots of ways for money to change hands - online not so much.


    [​IMG]


    Fewer trips to the mall (correlated to maxed out credit cards, declining real disposable income and the ease of online shopping) also translates into fewer miles driven and fewer gallons of gasoline purchased:

    [​IMG]



    All this boils down to one simple question: can the top 10% (roughly 11 million households) support the billions of square feet of retail space that were added in the 2000s?
    If the answer is no, as it clearly is, then the retail CRE sector is doomed to implode.

    Let's try a second simple question: what's holding the retail CRE sector up? Answer: leases that will soon expire or be voided by insolvency, bankruptcy, etc. as retailers close stores and shutter their businesses.

    One last question: who's holding all the immense debt that's piled on top of this soon-to-collapse sector? The domino of retail CRE will not fall in isolation; it will topple the domino of debt next to it, and that will topple the lenders who are bankrupted by the implosion of retail-CRE debt. And once that domino falls, it will take what's left of the nation's illusory financial stability down with it.



    http://www.zerohedge.com/news/2014-01-21/first-domino-fall-retail-cre-commercial-real-estate
     
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  24. Ahillock

    Ahillock A nobody Mother Lode

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    Many have said commercial real estate was the next bubble along with student loans. Looks like CRE might be the first of those two to go.
     
  25. JustPassinThru

    JustPassinThru Gold Member Gold Chaser

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    What we have here is a convergence of two different issues. The retail decline is real; it's rooted in the generalized retraction of the economy, which is the result of consumers having MUCH less discretionary income. THAT, rooted in the trebling of the price of energy...and the slowly-leeching toxicity of ObombaCair.

    That's one issue. The OTHER...is that Sears has been Dead Store Opening for fifteen years now.

    They had a hard time getting with the times...when Wally World was riding a rocket up and Chinese goods were taking the place of domestic manufacture. Sears and its Big Book were slowly creeping towards irrelevance.

    Enter Kmart. Kresge's was early to flower (circa 1970 with the Kmart format) and early to fade...their stores were declining in the 1980s as the rest of retail was expanding mightily. Why? Lack of investment and upkeep in their aging, dingy stores...and games with prices. Often OBVIOUS games...when they wouldn't even bother to remove the old price sticker before putting on the HIGHER "REDUCED FOR CLEARANCE" price label on.

    I have worn Sears work boots in years past. No problems. I bought Kmart boots...ONCE. NEVER...AGAIN. They hurt so bad, they were in the Goodwill box in a month.

    Kresge's went through the management games...new name (Kmart Corp.) and new signage...and finally, bankruptcy. With their debt discharged and a business plan, they were off and running.

    What they did was buy the gently-falling Sears from grateful shareholders and lenders. And since...they've been using Sears' credit; exploiting their brand loyalty; milking the outfit dry for all they could. For the benefit of an unsustainable business model and the ethics...of a grave robber; the ethics Kmart always had.

    It's their bad luck they came to the end of that road just as the economy is in free-fall. The old Sears, Roebuck survived Roosevelt's Depression; but the clever operators of Kmart are not going to make it through this one.
     
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  26. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    This is from May of last year: Delinquent Student Loans Hit Record, 30% Of 20-24 Year Olds Are Unemployed And Not In School
    http://www.zerohedge.com/news/2013-...20-24-year-olds-are-unemployed-and-not-school

    This is from Jan 16, 2014: Student Loans, the Next Big Threat to the U.S. Economy?
    http://www.businessweek.com/article...he-next-big-threat-to-the-u-dot-s-dot-economy
     
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  27. Ahillock

    Ahillock A nobody Mother Lode

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    Graduates aren't finding jobs or they are finding jobs where they are underemployed. How are they suppose to pay back loans when they don't have a job and are living in their parents basement?
     
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  28. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail



    [​IMG]
    Submitted by Tyler Durden on 01/22/2014 11:23 -0500


    Submitted by Charles Hugh Smith from Of Two Minds
    Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail


    Retail CRE is highly leveraged and loaded with staggering amounts of debt that rests on leases that are only as good as the retailers' profit-loss statements and solvency.

    The decay of the "build it and they will come" model of commercial real estate is gathering speed for a simple systemic reason: the decline is self-reinforcing in several critical ways.

    Before we start the analysis, let's ask a basic question: How much of the stuff and services purchased at retail outlets, malls, strip malls, etc. is absolutely necessary and how much is excess consumption?

    Conventional "Growth by any means" Cargo Cultists such as Paul Krugman never ask this basic question, because the answer (very little is essential, most is excess consumption) undermines the entire narrative that all growth is good, even the most marginal, unsustainable, wasteful and fiscally imprudent.

    I've captured the essence of retail in America with this photo:
    [​IMG]


    Put another way: what if Degrowth is the future, for a variety of structural reasons
    ? If so, the need for billions of square feet of commercial space will implode.

    Degrowth, Anti-Consumerism and Peak Consumption (May 9, 2013)


    Looming U.S. Retail Implosion: DeGrowth 2014
    (December 4, 2013)


    There are two primary self-reinforcing dynamics in retail CRE (commercial real estate): consumerist and financial. Let's start with the consumerist dynamic, which is composed of several interlocking feedback loops.

    1. As the cost of big-ticket household expenses such as healthcare, energy, college, etc. rises while real income declines for the bottom 90%, households have less disposable income to spend on excess consumption--another tattoo, skinny-triple-mocha-fudge-lattes, 13th pair of shoes, etc.

    I addressed the decline in real income yesterday in The First Domino to Fall: Retail-CRE (Commercial Real Estate).


    2. The rise of eCommerce is eroding the desire to drive to the mall, strip mall, etc. when the goods can be delivered to one's door by the Brown Truck Store (Mark G.'s phrase).


    3. As anchor chain stores and other key retailers reduce inventory and slash investment in maintenance and store improvement, the attractiveness of these physical places declines dramatically. Shopping in a decaying sepulchral cavern with little inventory on the shelves is not very appealing.


    4. As chains close anchor stores in malls, foot traffic declines and the feeding chain of smaller retailers starves. The "cool/fun" factor of a mall declines exponentially with store closings. It's just not much fun to stroll through a huge space filled with closed storefronts and few other shoppers. In fact it can be a quite depressing experience.


    The financial self-reinforcing dynamics are equally pernicious. Correspondent Chris H. (U.K.) recently described the precarious dependence of property valuations on long-term leases:




    The book value of the properties is based on the attainable rents. If just one property in the portfolio has to settle for a lower long-term rental rate, that will devalue the entire 'book to market' portfolio. Just a few low 'book to market' evidence-based valuations and the whole sector could collapse.


    One way to dodge that bullet is to not offer any long-term leases. Another is to entice major tenants to sign high-value leases with various guarantees (that the mall will maintain a certain occupancy rate, etc.).

    The primary point here is that CRE is highly leveraged and loaded with staggering amounts of debt that rests on leases that are only as good as the retailers' profit-loss statements and solvency.

    As Mark G. noted in his overview After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position and Future Prospects, the standard commercial real estate loan is not a 30-year mortgage; it's a short-term mortgage ( 5 to 10 years) with a huge balloon payment that's due at the end of the term--a balloon payment that requires refinancing.

    That need to refinance will force lenders to examine mall owners' leases and the valuations that are based on high occupancy and lease rates. As anchor tenants vacate and smaller tenants close up in their wake, how many of these retail properties will justify their previous valuations? What happens to these properties when the balloon payment can't be paid because the owners cannot refinance?

    There are three other financial factors to consider:

    1. Many of the healthiest malls are "premium outlets" that cater largely to foreign tourists and the dwindling class of upscale American households. Should a global recession occur, tourism will take a hit, along with the ability of foreign tourists to buy thousands of dollars of luxury brand handbags, etc.


    2. Since the top 10% of U.S. households is heavily dependent on bonuses, ownership of stocks, real estate appreciation, etc. for their income gains, a rollover in equities and residential real estate would negatively impact the "wealth effect" that has powered their five-year long shopping spree.


    3. Much of the "growth" reported by retailers has resulted from poaching existing store sales: The American Model of "Growth": Overbuilding and Poaching (November 19, 2013).


    Once the wheels fall off this model of "growth," chains will enter a cycle of closing marginal stores to boost profits. That will place additional pressure on retail properties as once-reliable chain tenants exit marginal properties en masse.



    http://www.zerohedge.com/news/2014-01-22/dead-mall-syndrome-self-reinforcing-death-spiral-retail
     
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  29. Treasure Searcher

    Treasure Searcher Gold Chaser Platinum Bling

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    IMHO, just make the best of it. When a Big Box goes under in your area and sells off its merchandise CHEAP, go shopping.

    Used to work at Kame Apart (KMart). When it went broke I laughed. WalMart walked all over them. I went to the closest KMart in my area that was being closed. Stocked up on items that were sold at a big discount.
     
  30. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    A 'tsunami' of store closings expected to hit retail


    Published: Wednesday, 22 Jan 2014 | 12:58 PM ET
    By: Krystina Gustafson | Content Editor


    [​IMG]

    Play Video


    Big retailers to close stores: Pro
    Wednesday, 22 Jan 2014 | 10:06 AM ET


    John Kernan, Cowen & Co. vice president, discusses if turning retailers like Sears and J.C. Penney into a REIT-like entity is an alternative.

    Get ready for the next era in retail—one that will be characterized by far fewer shops and smaller stores.

    On Tuesday, Sears said that it will shutter its flagship store in downtown Chicago in April. It's the latest of about 300 store closures in the U.S. that Sears has made since 2010. The news follows announcements earlier this month of multiple store closings from major department stores J.C. Penney and Macy's.

    Further signs of cuts in the industry came Wednesday, when Target said that it will eliminate 475 jobs worldwide, including some at its Minnesota headquarters, and not fill 700 empty positions.

    Experts said these headlines are only the tip of the iceberg for the industry, which is set to undergo a multiyear period of shuttering stores and trimming square footage.

    Shoppers will likely see an average decrease in overall retail square footage of between one-third and one-half within the next five to 10 years, as a shift to e-commerce brings with it fewer mall visits and a lesser need to keep inventory stocked in-store, said Michael Burden, a principal with Excess Space Retail Services.



    [​IMG]


    Getty Images



    "I believe we're going to hear a lot more announcements in the coming months," Burden said. It's "an indication that there is a shift in the retail environment and it's one that will continue."



    (Read more: 5 problems retailers must fix in 2014)


    January is typically a busy month for retailers to announce store closings. According to the International Council of Shopping Centers, 44 percent of annual store closings announced since 2010 have occurred in the first quarter. But this year's closings are likely indicative of a new trend, sparked by more and more shoppers turning to the Web, experts said.

    This holiday, online spending increased by 10 percent on desktop devices—a number that will likely grow another 2 percentage points when factoring in the role of mobile devices, according to data tracker comScore. Paired with a compressed holiday shopping calendar and a spate of freezing weather across much of the U.S., online shopping contributed to a nearly 15 percent decline in foot traffic this past holiday season, according to ShopperTrak.

    "Stores are making a long-term bet on technology," said Belus Capital Advisors analyst Brian Sozzi. "It simply doesn't make strategic sense to enter a new 15-year lease as consumers are likely to continue curtailing physical visits to the mall."



    [​IMG]
    Play Video





    Future of American malls


    Rick Caruso, Caruso Affiliated founder and CEO, discusses the future of American malls and explains what shopping malls need to do to become relevant again. "Retail brick and mortar has a great future," Caruso says.


    Sozzi said that after a profitable but below-expectations holiday season, the retail industry will face its second "tsunami of store closures across the U.S.," only a few years after what he called the "fire sale holiday season of 2008."

    During the recession, the number of shopping center vacancies rose by 5.5 percentage points to 11 percent, according to ICSC data, and has since recovered only 2.1 percentage points.

    In addition to J.C. Penney—which announced last week that it will close 33 stores—there are about a dozen retailers that still have too many stores, Sozzi said. Among them: American Eagle, which needs to move some of its aerie lingerie locations into its main stores; Aéropostale, which is on track to close 175 stores over the next few years; and Wal-Mart, which has about 100 stores in the U.S.
    producing same-store sales declines deeper than 3 percent, Sozzi said.


    (Read more: JC Penney closing 33 stores, slashing 2,000 jobs)


    As for Penney's, Wells Fargo analyst Paul Lejuez said that its store closures are a step in the right direction, but they barely scratch the surface of how many are needed.

    "With mall traffic trends very challenging and J.C. Penney facing its own significant company-specific issues, we do not believe a 1,000-plus store fleet is appropriate," Lejuez said in a research note. "In our view, the company needs to close several hundred stores to operate more efficiently, but that is not easy to accomplish overnight."


    Retailers need a new approach

    That's not to say there aren't a number of young retailers who still have plenty of room to build their store base, Lejuez said. Among them: Lululemon and the fashion-forward Michael Kors and Vince brands, which both recently went public. Kors, which increased its store base by nearly 100 stores last year, is on track to open 50 U.S. stores in 2014.

    In a separate note, Lejuez said that the ideal way for young brands to build a retail business today is very different than it was 20 years ago. These days, he said, it makes more sense for a retailer to have half the number of stores they once thought appropriate, and instead concentrate on a small store network and e-commerce business. This will take time to accomplish, however, as the vast majority of store locations are leased and not owned, making them harder to unload, he said.

    "There is often a mismatch between the number of stores retailers operate today compared to how many they would choose to operate if they had to do it all over again," Lejuez said.


    (Read more: Without rebirth, malls face extinction: Developer)


    But it's not just the number of stores that are shrinking—it's also their size, said David Birnbrey, chairman of retail real estate advisory group The Shopping Center Group. As fewer shoppers buy items at the physical store, retailers don't require the same inventory levels to be kept in an attached storage room.



    [​IMG]Play Video





    Buy retailers with strong e-commerce: Trader



    CNBC's Courtney Reagan dissects the latest action in the retail sector, saying retailers need to ensure a strong online presence. FMHR trader Pete Najarian agrees the best names in e-commerce are buys.



    By placing more of their stock in fulfillment centers, they can shrink their stores to cut back on commercial real estate expenses, Birnbrey said. Although retail rents are still well below where they were prior to the recession, they have begun to stabilize, and are expected to show a slight uptick in 2014, according to CB Richard Ellis.


    "I think stores are typically downsizing right now, and I think they're doing it because they had unsustainable inventory levels," Birnbrey said.




    Steering clear of traditional malls


    One big shift in store closings has come from retailers shying away from indoor malls, instead favoring outlet centers, outdoor malls or stand-alone stores. Although new retail construction completions are at an all-time low, according to CB Richard Ellis, the supply of new outlet centers has picked up in recent quarters.


    "There's no question that mall stores are closing quicker than open air, as far as the department stores," Birnbrey said.



    (Read more: Showrooming left in the dust as shoppers go online)


    Rick Caruso, founder and CEO of Caruso Affiliated, said at the recent National Retail Federation convention that without a major reinvention, traditional malls will soon go extinct, adding that he is unaware of an indoor mall being built since 2006.


    "Any time you stop building a product, that's usually the best indication that the customer doesn't want it anymore," he said.


    But retailers aren't throwing in the towel just yet. Turning brick-and-mortar shopping into a retail experience was one of the main topics discussed at the NRF convention this month, with retailers brainstorming ways to integrate targeted mobile couponing and high-tech gadgets to entice shoppers who may have been lost to the Web.



    "They're not giving up at all," Birnbrey said.



    —By CNBC's Krystina Gustafson. Follow her on Twitter
    . UPDATE: This story was updated to include a comment from Target.


    Vid at link:
    http://www.cnbc.com/id/101353168
     
  31. Ahillock

    Ahillock A nobody Mother Lode

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    [​IMG]
     
  32. EO 11110

    EO 11110 He Hate Me Mother Lode

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    dead retail buildings in my area are bought by the myriad of gov entities -- to serve the booming market of the free sh-t army :finger:
     
  33. Ahillock

    Ahillock A nobody Mother Lode

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    The Chinese will start buying them and setting them up as outposts. :cool:
     
  34. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    02 03 14 - Macro Analytics - THE RETAIL CRE DOMINO

    [video=youtube_share;ZIGF_CLuLIU]http://youtu.be/ZIGF_CLuLIU[/video]

    http://youtu.be/ZIGF_CLuLIU
     
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  35. platinumdude

    platinumdude Gold Chaser Platinum Bling

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    Radio Shack is closing 500 stores. But who really shops there?
     
  36. JustPassinThru

    JustPassinThru Gold Member Gold Chaser

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    I was in one a year ago...needed a sound meter. Surprise!...they had one in stock and it was cheaper than any other I was quoted. HALF as cheap, and did the job fine.

    That was a shock. Radio Slack always had overpriced, low-quality products. The draw was the components drawers; for finished product you were better off at Sears or the other big-box stores of the time.

    I guess they decided, too late, to try offering VALUE - after all else has failed. :confused:
     
  37. voodoo1951

    voodoo1951 Silver Member Silver Miner

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    Here is the whole story in pictures for ya'...
     

    Attached Files:

  38. JustPassinThru

    JustPassinThru Gold Member Gold Chaser

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    It's not that easy.

    I, for one, like to actually LOOK at the physical product I was buying. Back about nine years ago, I needed a cell-phone accessory from Verizon. An external antenna, since I lived in a fringe area, worked on-call and was living in a temporary arrangement so didn't want to get a landline.

    The Verizon "store" didn't have it or most items in stock. I could pay for it and it would be shipped to my home.

    Aside from the difficulty of being home to let the Brown Truck dude into the apartment complex...which I managed, with difficulty...when I got the item it was completely incompatible with the phone. Never mind what their internal website said; it DID NOT WORK.

    So, ANOTHER 20-mile trip into town to go yell at the Verizon manager. It was not the last time I had to get in their face, either; and it ended with me breaking a contract.

    But, my point is: Buying online is much riskier, in terms of getting the right item, than just picking it out in a shop.
     
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  39. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    The death of retail: What do RadioShack and J.C. Penney say about the future consumer economy? Low wage retail work to take a hit.


    • Posted by



    [​IMG][​IMG]

    RadioShack recently announced that it will be closing 1,100 of its 5,000 stores. Holiday sales were dismal and shares were pummeled dropping by 24 percent. The problem of course is that these 1,100 store closures will result in many Americans out of jobs in one of the biggest employment sectors in the country, retail. Yet this one company is indicative of a much larger trend in consumer buying. People are choosing to opt to buy from other avenues especially online via big giants like Amazon. However you do not need a large workforce when you have incredibly efficient supply chains as Amazon has in place. This will only create a greater divide on inequality in our nation since blue collar work has been gutted and even low wage labor is taking a hit. For example, Amazon generates about $600,000 in sales per employee. That is very hard to compete against. Even J.C. Penney’s recent run up in stock value does not reflect a longer term decent. At one point a few years ago J.C. Penney was trading at $41.55 a share while today it trades at $8.30 (an 80 percent drop). In a consumer addicted economy like the U.S. seeing retail take a hit signifies some bigger changes to our workforce. It also makes you wonder who will be buying all this stuff if more people are out of work or living day to day on smaller paychecks.

    The death of retail

    Efficiency and automation has replaced many jobs in the current economy. A large part of manufacturing has been offshored and what has remained allows a few high skilled workers to operate large plants with less frontline workers. This becomes problematic in a consumer economy where people need money to spend. Many of the new jobs are now low wage jobs in retail and other service sectors. As we recently discussed personal income had a first year-over-year drop since the recession hit. At the same time, household debt increased for the first time in four years largely driven by student debt and auto loans. It looks like Americans are tapped out and simply leveraging debt to fill the gap from lower wages and stagnant income growth.

    Retail is facing some dramatic changes. People simply shop differently. Many are opting to shop online. RadioShack is simply one of many operations that will face dramatic changes ahead. This is an issue given that “retail trade” is one of our largest employment sectors:

    [​IMG]
    Source: BLS


    This is an important chart. The BLS puts out a decade long projection of certain industries. Our two biggest employment sectors are very low wage sectors (retail trade and leisure/hospitality). Even in healthcare, a large part of the growth is going to come in the form of “health aides” which are very low wage positions. The BLS does not have perfect 20/20 vision in seeing the future. Think of radical changes like Netflix on the movie rental market. How many stores and companies were impacted by this more efficient company?

    So when we look at employment growth over various fields, it becomes more apparent that retail is changing dramatically in the US:

    [​IMG]
    Source: BLS, employment, thousands


    So you have to ask what other industries are going to fill the gap when retail employment hits a wall? When you have income inequality as we do in the current economy you begin gutting your consumer base. Big money then begins to fill the vacuum. I think a parallel can be drawn with Wall Street buying up a large portion of single family homes in the US. At latest count, investors are buying up close to 30 percent of all single family homes. This is unheard of in the US housing market but your regular American is cash strapped and swimming in debt. Hence home prices are up while homeownership is down. It also highlights an interesting dichotomy of witnessing a record high in the stock market but then realizing that only half of Americans actually own any stocks at all.

    We are likely to see some dramatic changes to retail in the years ahead. RadioShack is merely one company of a larger trend. For example, Target when the recession hit started focusing on adding groceries to their stores. This never went away. Shifting from discretionary items to daily use items seems to be a trend. For other purchases, people are opting to shop online via big supply chain giants like Amazon. When one of your biggest employment sectors is facing changes like this, you have to wonder what is in store for retail.


    http://www.mybudget360.com/death-of-retail-low-wage-jobs-and-future-of-retail-sector-us-employed/
     
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  40. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    [h=1]Staples Celebrates The Recovery With 225 Store Closures, Sales Plunge[/h]

    [​IMG]
    Submitted by Tyler Durden on 03/06/2014 10:59 -0500



    Nothing says global 'economic recovery' like a major retailer drastically missing revenue expectations, slashing earnings projections and announcing it will shutter 225 stores nationwide. Staples, the largest US office supplies retailer, hit the triple whammy and didn't blame it all on the weather as the CEO notes "our customers are using less office supplies." Or maybe there are just less office workers? Isolating Staples is a little unfair but as the largest (and most belwhether-ish), it is perhaps time to question the constant meme of escape velocity, improving fundamentals, and cleanest-dirty-shirt growth...

    The results:




    The company forecast earnings of 17-22 cents per share for the first quarter. Analysts on average were expecting 27 cents per share, according to Thomson Reuters I/B/E/S.Staples' revenue fell 10.6 percent to $5.87 billion in the fourth quarter ended Feb. 1, below the average analyst estimate of $5.97 billion.

    Excluding the impact of an extra week in the year-earlier quarter, sales declined 4 percent.

    Same-store sales in North America, excluding sales through Staples.com, fell 7 percent as Staples sold fewer business machines, technology accessories, office supplies and computers.

    Revenue at the company's international division fell 13 percent, hurt by weakness in Europe and Australia.


    But apart from that - it was great:




    Staples Inc, the largest U.S. office supplies retailer, forecast another quarter of sales decline as it loses customers to mass market chains and e-retailers, and the company said it would close up to 225 stores in North America by 2015.

    The closures represent up to 12 percent of the company's 1,846 stores in the United States and Canada.

    "Our customers are using less office supplies...

    Staples said it had initiated a multi-year cost reduction plan that was expected to generate annualized pretax cost savings of about $500 million by 2015.



    So less Capex, fewer stores, less sales... time to announce a dividend hike and massive buyback program?

    The stock is not happy...at 15 month lows... (-16% today)

    [​IMG]

    http://www.zerohedge.com/news/2014-03-06/staples-celebrates-recovery-225-store-closures-sales-plunge
     

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