The economic situation for U.S. retailers has gotten so bad that analysts have added a new word to an investor’s vocabulary: over-stored. That means just what it implies: there are too many retail stores in the United States.
So far this year, 14 retail chains have filed for bankruptcy protection or liquidation, according to a report issued last Friday by S&P Global Market Intelligence. In all of 2016, there were 18 filings. The highest recent total was 42 in 2010, and if 2017 continues on its current pace, that record is in serious danger.
The decline in retail fortunes comes as U.S. incomes are rising and so is Americans’ spending. Spending rose 0.2% in March while incomes rose 0.4%. So what’s happening?
According to S&P:
Retail’s troubles are manifold, and the diagnosis is different in each struggling company’s case, but it is widely agreed that the U.S. is over-stored and that the solution for flat or declining in-store sales resides to a significant degree online, where the most sales growth is now taking place.
If the solution is online growth, then the problem for traditional retailers becomes Amazon-ian. Amazon.com Inc. (NASDAQ: AMZN) reportedly grabbed 43% of online sales last year and 53% of online sales growth. While sales are indeed growing, just one company is boosting its share of the growing market at an even faster pace. It may not be impossible for traditional retailers to compete, but it will be a costly uphill battle all the way.
The largest bankruptcies so far this year, according to S&P, are privately held shoe merchant Payless, outdoor apparel chain Gander Mountain, and apparel retailer, BCBG Max Azria.
And the companies most at risk of joining the ranks of bankruptcy filers? That would be Sears Holdings Corp. (NASDAQ: SHLD), DGSE Companies Inc. (NYSEMKT: DGSE), Appliance Recycling Centers of America Inc. (NASDAQ: ARCI) and Bon-Ton Stores Inc. (NASDAQ: BONT).
S&P also noted knock-on effects as stores empty and real-estate vacancies increase putting pressure on real estate investment trusts (REITs) and commercial real-estate developers. Supplier risk also increases.
Travel Cards Are Getting Too Good To Ignore (sponsored)
Credit card companies are pulling out all the stops, with the issuers are offering insane travel rewards and perks.
We’re talking huge sign-up bonuses, points on every purchase, and benefits like lounge access, travel credits, and free hotel nights. For travelers, these rewards can add up to thousands of dollars in flights, upgrades, and luxury experiences every year.
It’s like getting paid to travel — and it’s available to qualified borrowers who know where to look.
We’ve rounded up some of the best travel credit cards on the market. Click here to see the list. Don’t miss these offers — they won’t be this good forever.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.