US retail sales were up 0.8% in November vs. an expected 0.3% increase, a good sign for the economy in Q4 provided that a vast majority of those sales don't end up getting returned immediately after the holidays. The link has an interesting chart. It doesn't appear, however, that European retailers like Hennes & Mauritz AB (H&M) can revel in the news. The company - previously blamed for the decline of fashion retail in the US due to its fast trend-based innovation and production - reported dogsh*t numbers earlier this week. Notably, "[t]he H&M brand’s online sales and sales of the group’s other brands continued to develop well. Meanwhile, the quarter was weak for the H&M brand’s physical stores, which were negatively affected by a continued challenging market situation with reduced footfall to stores due to the ongoing shift in the industry." The company may be forced to slow expansion plans and close stores. 90 is the number currently floated. We expect there to be more.
Bon-Ton Bankruptcy Coming to a Mall Near You Around January 15 2018
Bon-Ton Department Stores Inc. ($BONT) filed a notice with the SEC indicating that it is using its 30-day grace period to delay making a $14mm interest payment. It had gotten a small reprieve in December to bridge it through the holidays as vendors were clamoring for more friendly terms. Presumably, factorers were tightening terms as well. It seems like that the company will file for bankruptcy on or around January 15.
We've been concerned about New York City since we started and it finally seems like others are coming around to realize how much this retail situation is affecting things. "One by one, cherished local shops are disappearing, replaced by national chains or, worse, nothing at all." Welcome to the party pal. And so the New York Times proposes some solutions, including a "vacancy tax." Good luck with that.
H&M is Latest Brick-and-Mortar Retailer to Feel Pain
Before the "Amazon Effect" dominated the #retailapocalypse narrative, commentators liked to say that (predominantly European-based) fast-retailers like H&M, Zara, and Uniqlo were killing brick-and-mortar American retailers. They innovated faster, many said, keeping more to-date with fast-changing fashion changes. You know, like, athleisure pants that droop from the a$$ so you can look as moronic as Justin Bieber. What a model: recognize (cough, copy) a trend, develop it and ship within weeks. Rinse, wash and repeat. Curious, though, that H&M's numbers (continue to) look like dogsh*t, with profits down 20% YOY. The company has expanded its physical footprint dramatically - now up to 4100+ stores - and is only now realizing it needs to rapidly expand its e-commerce capability. Sound familiar?
Ah, Poor Headlines...
Bloomberg is getting a little lax here with this headline, "Filing 'Chapter 22' Becomes Enticing Option for Ailing Retailers." We get what they're TRYING to say here which is that restructuring retail right now is really tough. And that a number of retailers, e.g., Wet Seal, American Apparel, General Wireless & Eastern Outfitters, have filed for bankruptcy twice in a short time span. Get it? Chapter 11 + Chapter 11 = Chapter 22. So creative these restructuring folk. Anyway, we've highlighted this issue too (see "Rewind II" here). But to suggest that filing a 22 is "enticing" is a bit of a stretch, yeah? All four of those businesses are effectively gone now and a lot of investor money was lost along the way: not much "enticing" about any of that. But they make tons of money and we do a free newsletter so what the hell do we know? P.S. the article short-changed the industry-agnostic, cough, appeal, of a chapter 22: it neglected to mention Venoco LLC and the possibility of a few solid oil and gas 22s to come.
Retail (Get New Sheets, Bed Bath & Beyond Sh*t the Bed)
We have a rock-solid "because of Hurricane Irma" excuse in the books, ladies and gentlemen. Bed Bath & Beyond ($BBBY) reported numbers on Tuesday and the market promptly pushed down the stock double-digit percent. Naturally the chorus of "#retailapocalypse"started dropping left and right (blah, blah Amazon). Revenue missed by $70mm and growth projections were ratcheted down.
We admit it. There were a few folks on the team who used to do the whole vitamin thing. We were pumping iron, man-scaping, and trying everything and anything to "get shredded" like Brad Pitt in Fight Club. Now we just drink Soylent and Juicero.
No, we're not serious. About the Soylent part. And, CLEARLY, the Juicero part.
Anywho, the vitamin/nutrition space has gotten hammered and...hold on to your butts...another retailer is filing for bankruptcy. Enter Vitamin World which, per this Reuters report, may file bankruptcy as soon as this month to effectuate the closure of some of its 345 stores. Apparently, they've spent the better part of the last several months trying to negotiate themselves out of some onerous leases (query: who is their real estate advisor? Update: RCS Real Estate Advisors) and haven't been successful enough to thwart a bankruptcy filing. What's interesting about this is that Portrait Innovations filed for chapter 11 earlier this week for the same reason. Apparently landlords are convinced they can get better rent elsewhere. Maybe they think Square ($S) will be opening up more brick-and-mortar. But we digress.
Look, "the Amazon effect" is real and Vitamin World probably won't be the last vitamin/nutrition business to wear the dreaded Scarlet BK. Seriously, look at these 1-year charts: blood red everywhere...
This won't be the last distressed situation you hear about in the vitamin space.
Correction: it was brought to our attention that the original piece gave the impression that all the stores are closing. We have edited the above to indicate that the plan is to effectuate some closures.
Amazon ($AMZN) reported earnings earlier this week and while the market didn't respond favorably to what it heard, Amazon's revenue generating machine is undeniable. The issue was profits. To wit, this chart, clearly demonstrates that Amazon is selling, selling selling and then investing, investing, investing. In what? Crushing everyone else, obviously.
TheRealReal plans to followup on the reported success of its Manhattan-based pop-up with a brick-and-mortar location in SoHo. This is good news for those who feel as retail has absolutely nothing positive going for it these days.
That said, we can't help but wonder if the sudden and shocking closure of 2nd Time Around might have a negative effect on this initiative, as consignors got BURNED. Time will tell, we suppose, but those looking to enter into consignment agreements ought to protect themselves accordingly.