You don’t need to be a soothsayer, a psychic or a super-intelligent visitor from another planet to know that some of America’s greatest and most iconic retailers are on their last legs.
And so, as we all get increasingly caught up in the hysteria of the holiday shopping season, perhaps it’s time to pause for a moment and realize that this may be the last go-around for at least four of these onetime retailing giants: Sears, Kmart, Lord & Taylor and J.C. Penney.
No doubt stores with those names over their front doors, and atop their websites, will be around for the conceivable future in one form or another, but these retailers as we know them – as we have known them for the better part of a century – could quite possibly be throwing on their tinsel for the last time.
This is said even as we all know it is nearly impossible to make guaranteed predictions when it comes to the lifetimes of businesses, particularly retailers. If we had sat here a year ago and said Toys ‘R’ Us would not be around this holiday, most would have found it hard to believe. Same for Bon Ton, another long-rumored demise that seemed to go out with a whimper earlier this year.
Likewise, there are others who have counted out some of the names in this gang of four – particularly Sears and Kmart – for the past two or three Decembers, predicting it was their last yuletide gasp.
So none of this set in stone — much less bricks and mortar. But the handwriting is clearly on the hang tags that the end is increasingly near for some, if not all, of these retailers. How many others join in remains to be seen.
The Sears/Kmart debacle is certainly the easiest to forecast. Down to just around 500 stores – combined – these two venerable nameplates are mere shadows of their former selves when each was at one time the largest retailer in America.
It doesn’t take an accountant – even a Sears Holding accountant – to figure out that when you’ve just taken out a loan at 10% interest to keep your doors open that the math doesn’t add up. If the Doubledead Twins had been throwing off that kind of cash to pay off debt in the first place it wouldn’t be in the shape it finds itself in today.
Look for a TRU-type mea culpa to rear its ugly little head come sometime during the first quarter of next year when Sears admits, you know what, we can’t do this anymore. The fact that it will have all those holiday cash receipts in hand will be just coincidence.
The situation at Penney is not quite as clear-cut. The store is still fighting the good fight, bringing in new management in an effort to find a winning strategy. Sadly, Mrs. Ellison didn’t raise any stupid kids and when Marvin Ellison bailed out of Plano earlier this year, it was a clear signal that there was no way out.
Penney’s business is not terrible, but it’s not exactly sustainable either. The problem is the company’s debt load and the fact that big chunks of it come due in 2019. Lenders who got burnt on Toys, Bon Ton and Sears are probably going to be in no mood to restructure all that debt without something pretty definitive on how they are going to get their money back out of this thing.
Whatever happens with Penney, it will probably not be a liquidation – at least not the first time around. There will be store closings, some debt refinancing and other assorted bankruptcy court manipulations.
And in the end, it probably won’t matter. Like Radio Shack and some other long lost brands, Penney has become irrelevant in the retail marketplace to all but a small – and declining – base of shoppers. No matter how clean it can make its balance sheet coming out of Chapter 11, the basis for an ongoing business remains a difficult challenge.
Much of the same can be said for Lord & Taylor, the unit of Hudson’s Bay Corp. that is closing its landmark Fifth Avenue flagship in New York City after this Christmas. Once home to some of the most magical window displays in town, as well as another loyal but aging customer base, L&T has become lost over the past years. One can trace that decline back to its days under May Co. ownership when its corporate overlords dumbed down its merchandising assortment to make it fit into the infamous May Matrix. HBC hasn’t done it any favors since acquiring it, continually failing to establish a compelling positioning for the store. Putting its brand on the Walmart website wasn’t exactly the cure for its troubles, that’s for sure.
HBC has its own debt problems and it stands to reason that it will have to find a financial scapegoat to help dig itself out of the mess it created by leveraging up its balance sheet with all those acquisitions. Selling half its German operation was part of that but one has to think shutting down Lord & Taylor is a realistic next step.
And again, the timing points to what looks like a slower economy in 2019 when marginal stores aren’t going to be able to ride out the storm.
Who else could conceivably join these four nameplates? The apparel space is rife with teetering operations, from Gap to even Victoria’s Secret. In the home space, Pier One always seems to turn up on somebody’s short list.
Which is not to say we won’t be sitting here again a year from now, drinking eggnog and lamenting another list of victims – potential and otherwise – that may or may not include any of the above.
That said, the holiday period has a long history of rewarding the nice and punishing the naughty. Tis the season.
Date: December 6, 2018