Poor Man Survival
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Dying retail: Investment
strategy 'checklist'
Retail as we have long known it is dying.
For investors, a portfolio shuffle may be in order.
The department store ruled our shopping experience since the late
18th century when it first appeared in London.
Up until then, consumers had to visit a variety of separate establishments
to do their shopping — the shoemaker, the haberdasher, the milliner, the
dressmaker, etc. It could be time-consuming and physically demanding.
The convenience of having all the shops under one roof and one
management caught on quickly and grew rapidly into the department stores and
malls of today.
The department store was born of the Industrial Revolution, which
created vast new wealth and a new consumer market — the middle class — which
had more money to spend and a desire to enjoy a better standard of life. The
department store fulfilled those desires. The rise of the shopping mall
anchored by one or more big department stores accelerated the suburban
migration from the central city.
I well remember the old Sears & Roebuck, which was the icon of
consumerism in America. It was an exciting adventure for many, visiting the
store downtown, smelling the wonderful aromas of new clothes with a hint of
sweet fragrance drifting over from the perfume counter and marveling at all the
amazing goodies there.
And for the times in between visits to the store, there was the
Sears & Roebuck catalog filled with enticing treasures that could be
ordered by mail and delivered right to your door. The catalog embodied the
American Dream as manifested in consumer goods. (In rural areas, it also often
served a useful purpose in outdoor johns.)
Today there are only 41 Sears retail stores operating in the
United States with 11 of those in California.
The list of large retailer brands closing stores (or that have
already closed some) runs long and is stretching longer. Bath & Body Works,
Macy's, Walmart, and Big Lots are among the chains shutting down stores. Bed
Bath & Beyond is planning to close 416 locations.
JoAnn Fabrics, Party City and Rite aid will all probably be gone
by the end of the year. Yes, strip malls are still being built, and there is an
inordinate number of mattress stores on seemingly every corner... but despite
that, big retailers are an animal that seems to be going extinct.
So what exposure should the average investor have?
Change of habits
The reasons for the decline of the big retailers are complex. The
knee-jerk analysis holds that it's Amazon's fault. It's true that consumers
love the convenience of point-and-click shopping online, and e-commerce is stealing
a huge share of the retail market. But that's an overly simplistic answer. You
can't try on a pair of pants at Amazon to see if they fit or look in a mirror
to see if the color of a blouse complements your complexion.
Besides, some brick-and-mortar retailers already offer e-commerce
"omni-channel" shopping where customers can buy online and pick up
the items in the store, or encourage "showrooming" where customers
can try clothes on in the store, then buy them online. Department stores now
derive 15 percent to 25 percent of their sales online.
Part of the problem for the big retailers is a change in consumer
shopping habits. People spend more on technology these days and have less to
spend on clothes. The shopping mall culture is fading as young people who used
to "hang out" at the mall now do so in social media. Discounts stores
like TJ Maxx take a bite from the traditional retailers, who are themselves
engaged in a "race to the bottom" to offer cut-rate promotional
prices every day instead of just for special sales events, thus cutting into
profits.
The big box itself turns off shoppers who have less patience with
roaming around acres of retail space to find what they're looking for when they
can pop online without moving from their sofa to buy the merchandise. The big
department stores also tend to carry much the same merchandise — not just the
same type of goods but even the same brands. According to consultancy
AlixPartners, traditional middle-of-the-road department stores have a 40
percent merchandise overlap — meaning they carry the same stuff.
Local department stores no longer differentiate by offering goods
appealing specifically to consumers in their community because consolidation of
the stores has centralized merchandising management, resulting in
"management by spreadsheet" without regard to localized preferences.
Then there's the fact that the little restaurants of the shopping
mall food courts discovered they could do better business as "food
trucks" and not bother with paying rent or having furniture. The smaller
shops of the malls found they could move into lower-rent strip malls. Chain
retailers flooded the markets with thousands of tons of consumer goods that
thrift stores sell used and, therefore, no one needs to go get this stuff from
the chain retailers anymore.
In a word, what is happening is a free market is coming into
existence right under everyone's noses and few see it.
The economy is not tanking. It is changing. And to some people, it
will look like it is collapsing. And it is — for them. For them, and the people
that rely upon them, it will be a disaster and they'll lose these figments of
their imaginations they call "fortunes." But the wealth does not just
disappear. It changes forms.
Reinvest in retail?
Investors have followed shoppers out the door. But whether you
prefer the real department store shopping experience or the virtual online
experience, I suggest you take a careful look at your investment portfolio to
see if adjustments are needed with regard to retail stocks.
That's not to say you should automatically dump all retail stocks.
But you certainly want to look at those old standbys you've held forever and do
some housecleaning. It's a stock-picker market in retail stocks, and passive
buy-and-hold strategies could cost you.
Retailers in home improvement, like Home Depot and Lowe's, that
have strong performance, are not growth stocks any longer, yet are at decent
valuations are equities to look into. You'll want to look at the big online
retailers like Amazon, of course, but also the infrastructure companies that
allow online shopping payments, for example, like Shopify, or shipping and
logistics companies. These are just ideas to consider, not recommendations. We
do not run a trading service, and we do not know your specific investment needs
and goals.
Still, you can evaluate your own risk tolerance and investment
desires with the advice of tech and consumer goods specialist Leo Sun, writing
for The Motley Fool, who offered his eight-point checklist for investing in
retail stocks:
1. How do its comparable-store sales measure up?
2. How many stores is the retailer opening and closing?
3. Does it have a meaningful e-commerce presence?
4. Are inventories rising too quickly?
5. Are gross margins holding steady as revenue rises?
6. Have you visited the stores?
7. Do you understand the competition?
8. Is the stock expensive relative to its industry peers?
There's still money to be made in retail stocks, but you'll need
to be conscientious about doing your homework.
Yours for the truth,
Bob Livingston
Editor, The Bob Livingston Letter®
NOTE:
I grew up as a ‘mall rat.’ Inside
shopping centers were a dream for us kids especially during winter months. Our 1st mall had a bowling
alley/pinball & pool tables in its basement. As I ready this piece for post I read of big
layoffs at Amazon, Facebook & more than 220 Brger Kings in MI are closing…
Frugal Habits That Just Aren't Worth It
Sure, you can save money doing these
things. But at what cost in time and happiness?
SIDEBAR
13 Things NOT To Do When Disaster Strikes
Plenty of attention is given to the things you should do when
disaster strikes. However, knowing what not to do can be just as important for
your survival. In this list, you’ll find 13 things that you should avoid doing
at all costs when disaster strikes.
1. Panic - Few things are more
likely to cost you your life when the chips are down than panicking. While fear
serves an evolutionary purpose in that it makes you aware of the danger, panic
is fear’s ugly cousin, dulling your senses and your survival instincts.
If disaster strikes, take a deep breath, stick to your plan, and
do your best to stay calm...
13 Things NOT To Do When Disaster Strikes
9 Ways to Keep Your Garden Soil Healthy
You chose a location that gets plenty of sunshine. You purchased
the best quality seeds and starter plants. You followed organic measures for
pest control. You monitored rainfall and watering carefully, even installing a
drip irrigation system.
Yet, despite all these “right” steps, your garden did not
flourish last spring and summer. In fact, despite another year of gardening
experience under your belt, your garden did more poorly than the year before.
Why?
As any experienced gardener knows, there could be a myriad of
reasons for a poor harvest. But one area to closely examine is the condition of
your soil. Healthy plants require healthy soil. This article examines nine ways
to keep your garden soil healthy year after year...
9 Ways to Keep Your Garden Soil Healthy
Container Gardening 101: Everything You Need to Get Started
Container gardening is a great way to bring a bit of nature into
your home. Whether you have an apartment balcony or a small backyard,
container gardens are easy to set up and maintain.
Plus, having your own homegrown fruits, vegetables, and herbs
can save you money and help you be more prepared and self-sufficient in the
long run.
But before you start planting your first garden, it’s important
to learn the basics. Read on for our beginner’s guide to container gardening...
Container Gardening 101: Everything You Need to Get Started
You may also like...
20 Best Fruits and Veggies to Grow in Buckets
How to Grow Anything: Your Best Garden
& Landscape DVD-Great Courses+Bonus
Declare
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Our
food supply chain has repeatedly proven how fragile it is.
Find freedom from the unstable food supply!
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Fatal Mistakes You Must Avoid at All Costs!
Whether it’s
an economic meltdown, pandemic, earthquake, or something else...
Way too many
people make these mistakes!
So... if you
don't want to be one of them...
Click on the
link below to discover:
4 Fatal Mistakes You Must Avoid at All Costs! <<
Why do you need an
emergency radio?
·
. Just
60 seconds of hand cranking provides more than 45 minutes of radio
Radios: Having a couple small, portable radios
on hand is going to be a must. If there’s a disaster, you’ll
need to listen to the radio to get news about what is happening around you….grab
a TacRight Emergency Radio:
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4Patriots Patriot Power Cell Solar
Phone Charger
USE THIS solar gadget to survive an emergency!
In 2022 alone there have been
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Oregon and Washington.
And according to national
security experts, this trend is only going to continue.
As America's power grid comes
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THIS is your lifeline
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It's peace of mind that you can...
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government, individual freedom!
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