The troubles at the American mall are coming to a boil – another big-name chain announced hundreds of new store closings and still others moved aggressively to recalibrate their businesses for the online shopping stampede

The troubles at the American mall are coming to a boil

A fresh round of distress signals sounded in the retail industry this week, as another big-name chain announced hundreds of new store closings and still others moved aggressively to recalibrate their businesses for the online shopping stampede.

Payless ShoeSource filed for Chapter 11 bankruptcy and outlined plans to immediately close nearly 400 of its 4,400 stores globally. Ralph Lauren is shuttering its flagship Polo store, a foot-traffic magnet on tony Fifth Avenue in Manhattan, the latest step in a massive cost-cutting effort. Big-box office supplies stalwart Staples is reportedly considering putting itself up for sale.

The shakeout among retailers has been building for years and is now arriving in full force.

The retrenchment comes as shoppers move online and begin to embrace smaller, niche merchants. As a result, many major chains find themselves victims of a problem of their own making, having elbowed their way into so many locations that the United States has more retail square footage per capita than any other nation. To use the industry vernacular, they are simply “overstored.”

Many have begun cutting back, sending ripples through the economy. The wave of store closures by Macy’s and Sears alone will empty 28 million square feet of retail real estate, according to an analysis by research firm CoStar. Often those vacancies are slow to fill, leaving shopping centers less hospitable to the chains that remain, feeding even more departures and job losses.

The malaise has spread even as the economy overall grows stronger and the stock market marches higher. Just this week, Urban Outfitters reported that in the current quarter to-date, its comparable sales are “mid single-digit negative.” The women’s clothing chain Bebe said in a regulatory filing Wednesday that it is closing 21 locations. Last week, yoga clothier Lululemon chief executive Laurent Potdevin acknowledged that the chain had seen “a slow start to 2017.”

Few traditional retailers are immune: The Limited filed for bankruptcy and shuttered all 250 of its stores. Hudson’s Bay, the parent company of Saks Fifth Avenue and Lord & Taylor, announced a $75 million annual cost-cutting effort. Banana Republic and Abercrombie & Fitch each named a new chief executive, leadership changes that were precipitated by ongoing struggles to connect with customers.

In a report published in late February, Standard & Poor’s said it had already lowered ratings 20 times on various retailers this year. S&P analysts wrote that they expect to see “increased levels of stress for the sector in 2017.”

As big retail closes stores, it has cost many Americans their jobs. So far in 2017, retailers have announced plans to slash more than 38,000 positions, according to data from job placement firm Challenger, Gray & Christmas. And yet some of those losses have probably been offset by new jobs at start-up retailers and e-commerce operations. Amazon.com, for example, said this year that it expects to create 100,000 full-time roles over 18 months.

Retailers are deploying different kinds of firepower to try to regain some momentum. J. Crew announced this week that it is parting ways with its longtime creative director, Jenna Lyons, a change that effectively concedes that it needs to fix its fashion if it wants to boost its sales. Still other companies are exploring branching into different kinds of retailing formats: Ralph Lauren, for example, said it is exploring new opportunities for its Ralph’s Coffee concept. Macy’s is selling off some of its lucrative real estate portfolio, hoping to strengthen its balance sheet.

Another chain, J.C. Penney, looks to be trying to position itself to take advantage of fallout from the turmoil: The retailer has started to carry large appliances again, a potentially shrewd move that could fill a void in the marketplace as Sears and HHGregg close stores.

It doesn’t help any of these legacy bricks-and-mortar companies that customers are increasingly seeking out under-the-radar labels with a more specialized, boutique feel. The likes of Bonobos, Warby Parker, Shinola and Marine Layer are picking off shoppers that might once have filled their closets with goods from more ubiquitous chains.

Meanwhile, as worries mount for bricks-and-mortar players, Amazon’s stock hit an all-time high Wednesday. While others pare back, the Seattle company announced a deal to stream NFL games, a milestone that underscores the e-commerce giant’s growing muscle. (Jeffrey P. Bezos, the chief executive of Amazon, owns The Washington Post.)

According to research from Slice Intelligence, Amazon captured 38 percent of all dollars spent online during the holiday season. The next-closest retailer, Best Buy, had a mere 3.9 percent.

And now the old guard has to worry about Amazon encroaching in new ways: It is branching into physical retailing, including opening several bookstores. In Seattle, it is preparing to open a concept called Amazon Go, a technology-powered grocery store that would not require shoppers to go through a checkout line.

All of this change is not just pushing traditional retailers to reduce their overall numbers of stores — it is also forcing them to rethink what their stores should look like. Office Depot, for example, is converting some stores to a smaller footprint of just 15,000 square feet. Target recently announced that it is testing a new store prototype in which there will be a separate entrance and dedicated parking for shoppers looking to retrieve a “buy online, pick up in store” order.
https://www.washingtonpost.com/news/business/wp/2017/04/05/the-troubles-at-the-american-mall-are-coming-to-a-boil/?utm_term=.071ba5831a4b

JPMorgan: The odds of a recession starting in 12 months has hit a high On the heels of the disappointing jobs report, the risk of a recession within the next 12 months hits a new high

The probability of a recession occuring within the next 12 months has never been higher during the current economic recovery. This is according to the economists at JPMorgan.

“Our preferred macroeconomic indicator of the probability that a recession begins within 12 months has moved up from 30% on May 5 to 34% last week to 36% today,” JPMorgan’s Jesse Edgerton wrote. “This marks the second consecutive week that the tracker has reached a new high for the expansion.”

JPMorgan’s proprietary model considers the levels of several economic indicators, including consumer sentiment, manufacturing sentiment, building permits, auto sales, and unemployment.

This comes on the heels of Friday’s disappointing May jobs report. According to the Bureau of Labor Statistics, US companies added just 38,000 nonfarm payrolls during the month. Economists were expecting 160,000. Meanwhile, the unemployment rate fell to 4.7% in May from 5.0% in April, but this was largely a function of 458,000 workers dropping out of the labor force.

JPMorgan notes that nonfarm payrolls is actually not part of the model. But the unemployment rate is. Interestingly, a low unemployment rate can be considered an ominous sign.

“The unemployment rate enters the model in two ways,” Edgerton explained. “As a near-term indicator, we watch for increases in the unemployment rate that occur near the beginning of recessions. So this morning’s move down in the unemployment rate lowered the recession probability in our near-term model. But we also find the level of the unemployment rate to be one of the most useful indicators of medium-term recession risk. So the move down in unemployment raises the model’s view of the risk of economic overheating in the medium run and raises the ‘background risk’ of recession.”

Indeed, recessions begin when things are very good. It’s only when reports come in that the data has turned that we realize we’ve been in a recession.

Even Warren Buffett will tell you that a recession will inevitably come. For him, that won’t be for a while.

But if it turns out that the recent slew of disapppointing data becomes a trend, the bulls may be forced to change their tune.

http://finance.yahoo.com/news/jpmorgan-recession-risk-new-high-160251309.html