The Retail Apocalypse

[AlbertC]

Gap Inc. says some stores will never reopen

Dive Brief:

• Gap Inc. on Thursday disclosed that this month it stopped paying rent, saving about $115 million per month in North America alone, according to a filing with the Securities and Exchange Commission. In more than 90 countries, the company runs about 3,300 stores, 2,785 of them in North America, and franchises about 570 stores globally.
• The retailer also said it's negotiating with landlords on lease terms, including rent, but may close some stores permanently where that isn't fruitful, according to the filing.
• Gap — having already furloughed workers, suspended stock repurchases, deferred and suspended dividends, reduced 2020 capital expenditures by about $300 million, cut executive pay, shifted inventory and tapped its entire $500 million revolving credit facility — said it must consider doing more, including new debt or other short-term credit, further spending cuts, workforce reductions, merchandise delays and vendor payment extensions.

Gap Inc. says some stores will never reopen

The apparel retailer is withholding rent and talking to landlords, but warns that the steps it's taken so far have been no match for lost sales.

www.retaildive.com

 

[SunriseChampion]

Hahah, bums. I hope Gap go out of business.

Any bum corporations not paying rent can sod off.

 

[TheKingEast]

Hahah, bums. I hope Gap go out of business.

Any bum corporations not paying rent can sod off.

I don't. That's a lot of people out of work.

 

[SunriseChampion]

Yeah, and what, not paying rent doesn't have any potential downstream effects on people's livelihoods?

We need to stop coddling corporations using jobs as an excuse unless we're willing as a society to move towards a proper command economy.

SNC Lavalin was a great example of "jobs" being of such paramount importance that government interference in judicial affairs was seen as justified. That's just messed up. I don't want to live in such a society.

 

[pw20]

Yeah, and what, not paying rent doesn't have any potential downstream effects on people's livelihoods?

We need to stop coddling corporations using jobs as an excuse unless we're willing as a society to move towards a proper command economy.

SNC Lavalin was a great example of "jobs" being of such paramount importance that government interference in judicial affairs was seen as justified. That's just messed up. I don't want to live in such a society.

1. There is a difference between government interference in judicial affairs and a policy response to a pandemic causing all retail and and hospitality establishments to close
2. The same thing that's happening to the gap is also happening to your local shop or restaurant, which also still has to pay rent, and which cannot open
3. This is not about coddling corporations, this is recognizing an extreme situation that has stopped an entire industry from literally making money. The retail industry accounts for 100B of Canada's GDP?

 

[TheKingEast]

Yeah, and what, not paying rent doesn't have any potential downstream effects on people's livelihoods?

We need to stop coddling corporations using jobs as an excuse unless we're willing as a society to move towards a proper command economy.

SNC Lavalin was a great example of "jobs" being of such paramount importance that government interference in judicial affairs was seen as justified. That's just messed up. I don't want to live in such a society.

Huge difference between SNC Lavalin and Gap who had its business shut down by the government. Businesses can't survive with no revenue for 2 months...and it's not their fault. SNC Lavalin is just poorly run and should be left to die, but I also understand the amount of jobs they are responsible for....

Some of these big corporations do not deserve bail outs or if they do get them, there need to be strings attached.

 

[AlbertC]

Retail apocalypse? B.C. stores don't know if shoppers will return

Wednesday, April 22, 2020 5:14PM PDT

VANCOUVER -- COVID-19 store-closures have forced shoppers to turn to online retailers. That has stores with brick-and-mortar locations wondering if they will come back when the pandemic is over.

“I think the convenience of going digital and ordering these things and they show up really quickly, I think that’s going to mean that some of these behaviors are going to stick around for the long term,” said Kate White, a professor of marketing and behavioural science at the University of British Columbia.

“COVID is putting us right on the precipice of a total retail apocalypse,” said retail analyst David Ian Gray. “We’ll probably have fewer stores.”

If retailers decide not to re-open or find there aren’t enough customers to keep a brick-and-mortar location and end up closing for good, it would leave shopping districts with a glut of vacant storefronts.

“What used to be a very dominant position for landlords to basically dictate, ‘Here’s what you’re going to do in our space and how much you’re going to pay us,’ I think that may be shifting overnight,” said Gray, who believes tenants will be in the driver’s seat when negotiating leases.

“I think landlords are going to obviously want to have their spaces occupied, rather than vacant,” said Charles Gautier, the CEO of the Downtown Vancouver Business Improvement Association.

He’d also like to see cities give stores a break on their property taxes. If retailers can reduce their expenses, he’s optimistic shoppers will return.

Retail apocalypse? B.C. stores don't know if shoppers will return

COVID-19 store-closures have forced shoppers to turn to online retailers. That has stores with brick-and-mortar locations wondering if they will come back when the pandemic is over.

bc.ctvnews.ca

 

[taal]

So you have to wonder, fast forward 3-6 months and assume this passes i.e. restrictions are gone and consumers are just as willing to shop in stores; Assume that even with all the subsides quite a large percentage of tenants don't make it and fold (purely due to the carrying expenses, stress, ...), this probably includes medium size landlords as well who can't pay their loans.

Ok so that will surely lead to cheaper rents all around ... is the market now ripe for new entrepreneurs who can get it and likely sign leases for quite a bit less than today ?

 

[SunriseChampion]

I'm afraid allowing corporations to abrogate their responsibilities, whether legal, ethical, or financial because of "jobs" is bad joo joo, regardless of the context.

Anyway, I don't see what The GAP ending has to do with the 100B in GDP contribution that the retail industry in Canada has. What's The GAP to that? Doesn't matter in any case, because if you think that them unilaterally witholding rents due so they can save some money as a corporation is a perfectly reasonable thing to do, then economics doesn't come into it, does it?

What of the revenue the landlord is expecting so as to, you know, contribute their fair share to the GDP?
What does a typical REIT, for example, do with profits?

Reinvest them into development or refurbishment, thus creating more of your vaunted GDP numbers!
And when not doing that, paying out dividends to shareholders who can then either spend that money, sending it back to The GAP even (!) or investing it and creating more of you vaunted GDP numbers! Magic!

And, if we're going to be so caught up on differing context then perhaps you should recognise the structural differences between massive corporations like The GAP and my local restaurants, shops, and service providers.

The GAP doesn't care about their employees anyway. I thought that would be obvious from what we read above, seeing as they are not paying rent and thus giving up on certain locations.

You guys have lost the plot.

 

[SunriseChampion]

Ok so that will surely lead to cheaper rents all around ... is the market now ripe for new entrepreneurs who can get it and likely sign leases for quite a bit less than today ?

That's exactly what will happen.
The old will die and the young will take their place.

It's a universal truth that spans existence, in business as in biological life terms.

Things end and new things start. Change happens. Etc.

It will be interesting, for sure.

 

[pw20]

I'm afraid allowing corporations to abrogate their responsibilities, whether legal, ethical, or financial because of "jobs" is bad joo joo, regardless of the context.

Anyway, I don't see what The GAP ending has to do with the 100B in GDP contribution that the retail industry in Canada has. What's The GAP to that? Doesn't matter in any case, because if you think that them unilaterally witholding rents due so they can save some money as a corporation is a perfectly reasonable thing to do, then economics doesn't come into it, does it?

What of the revenue the landlord is expecting so as to, you know, contribute their fair share to the GDP?
What does a typical REIT, for example, do with profits?

Reinvest them into development or refurbishment, thus creating more of your vaunted GDP numbers!
And when not doing that, paying out dividends to shareholders who can then either spend that money, sending it back to The GAP even (!) or investing it and creating more of you vaunted GDP numbers! Magic!

And, if we're going to be so caught up on differing context then perhaps you should recognise the structural differences between massive corporations like The GAP and my local restaurants, shops, and service providers.

The GAP doesn't care about their employees anyway. I thought that would be obvious from what we read above, seeing as they are not paying rent and thus giving up on certain locations.

You guys have lost the plot.

If you don't think that the Gap is indicative of EVERY other (non grocery) retailer in this country (both major, local and regional) of which employ 2.2M people in Canada (that's hourly retail employees - not head office) than I'm not sure what to tell you. The structural challenge for EVERY retailer is that they are paying rent, and paying for shipping/buying goods, on stores that have been shut down by government decision (with good reason).

I'm not quite sure what the policy response should be in this rather once in a life-time situation to be totally honest. But the "let the bums die" mentality isn't helpful; if every major retailer goes bankrupt you'll see the decimation of an entire industry that employs millions of people, who have mortgages and the like. This is all, in my opinion, a calculated cost. You could "let the bums" die and hope that the market eventually evens out - new retailers pop up in six months to a year - but then you'll have an interim situation with millions of unemployed.

As for impact on REITs and property owners, I suspect some would rather forgo 2 or 3 months of rent in order to see key retailers survive. Given the disruptive state of the retail industry, who's going to re-rent a shuttered Staples in a B-Tier mall? Who's going to rent a 100,000 square foot department store in Centrepoint mall 12 months from now if the bay goes bankrupt? REITs can adapt sure, and commence redevelopment (which is a good thing) but there will be a significant shock to their system as well; also shuttered retail establishments mean lower tax revenue for local governments in a time when they are dealing with an unemployment crisis. This pandemic will essentially speed up a lot of the systemic changes which were about to hit the retail industry in general (ecommerce automation) and that will have a lot of truly problematic impact on a lot of industries and communities and employees.

To me, it's not so easy as let the bums die without understanding or thinking about the snowball effects.

 

[SunriseChampion]

The point is that there are snowball effects from corporations unilaterally deciding they just won't pay rents.

Who the hell is paying a mortgage on a retail salary? Not in Toronto, surely.

Anyway, bye GAP.

I didn't say anything about not helping companies pay their rents during this government-mandated closing of business....I only said that them unilaterally deciding they won't be paying rent is poor form in the case of big companies such as GAP.

Anyway, people losing their jobs in retail might entice them to, for example, get a job in the trades where manpower is consistently lacking. The pay is actually decent, speaking of paying mortgages.

 

[AlbertC]

Adidas warns worse to come as Q1 profits plunge 97%

April 27, 2020

Dive Brief:

• Adidas on Monday reported plunging sales and profit in the first quarter, and, blaming the pandemic, warned the current quarter is likely to be worse. Revenue in the quarter fell 19% to €4.75 billion ($5.15 billion at press time), with Adidas down 20% and Reebok down 12%.
• Currency-neutral e-commerce sales rose 35% but the digital strength couldn’t make up for store declines, the company said. More than 70% of the company’s stores remain closed worldwide.
• Net income from continuing operations in the quarter plunged 97% to €20 million, according to a company press release. Operating profit fell 93% to €65 million, representing an operating margin decline of 13.5 percentage points to 1.4%, from 14.9% last year.

Adidas warns worse to come as Q1 profits plunge 97%

Strength in e-commerce wasn't enough to offset sales lost to store closures, as the athletic retailer also took a nearly 20% hit to revenue in the quarter.

www.retaildive.com

 

[AlbertC]

Macy’s Suppliers Lose Backstop Insuring Payment for Goods

April 28, 2020

(Bloomberg) -- In a sign of how dire things have become for U.S. retailers, insurance companies that guarantee vendors get paid are now refusing to write policies covering Macy’s Inc. and other chains once considered sterling credits.

Coface SA and Euler Hermes Group SAS, two of the largest providers of credit insurance for vendors, have stopped writing policies covering Macy’s, according to people with knowledge of the matter, who asked not to be identified because the process isn’t public.

The loss of credit insurance could complicate the ability of retailers to bounce back after the economic shutdown triggered by the Covid-19 pandemic. Such insurance protects suppliers if a retailer fails to pay them. Losing coverage means vendors will likely seek quicker payment from retailers, which would be a drain on their liquidity, or ship them fewer goods.

Macy’s Suppliers Lose Backstop Insuring Payment for Goods

(Bloomberg) -- In a sign of how dire things have become for U.S. retailers, insurance companies that guarantee vendors get paid are now refusing to write policies covering Macy’s Inc. and other chains once considered sterling credits.Coface SA and Euler Hermes Group SAS, two of the largest providers

ca.finance.yahoo.com

 

[Johnny Au]

Adidas warns worse to come as Q1 profits plunge 97%

April 27, 2020

Dive Brief:

• Adidas on Monday reported plunging sales and profit in the first quarter, and, blaming the pandemic, warned the current quarter is likely to be worse. Revenue in the quarter fell 19% to €4.75 billion ($5.15 billion at press time), with Adidas down 20% and Reebok down 12%.
• Currency-neutral e-commerce sales rose 35% but the digital strength couldn’t make up for store declines, the company said. More than 70% of the company’s stores remain closed worldwide.
• Net income from continuing operations in the quarter plunged 97% to €20 million, according to a company press release. Operating profit fell 93% to €65 million, representing an operating margin decline of 13.5 percentage points to 1.4%, from 14.9% last year.

Adidas warns worse to come as Q1 profits plunge 97%

Strength in e-commerce wasn't enough to offset sales lost to store closures, as the athletic retailer also took a nearly 20% hit to revenue in the quarter.

www.retaildive.com

More people staying home means shoes don't get worn as often.

Even those who wear shoes in their homes have their shoes not worn as quickly as if the same shoes were worn outdoors.

Most people don't wear outdoor shoes indoors anyways, thereby hurting sales for athletic shoe companies.