RETAILERS ARE CLOSING UP SHOP. HERE'S WHY...

Original Story: cnbc.com

When it filed for Chapter 11 bankruptcy protection last month, teen name Delia's said it will seek court approval to close all of its stores.

Also last month, Aéropostale said it would close 120 stores soon, a significant increase from the 40 or 50 it had originally planned. The company will also close about 125 of its P.S. by Aéropostale children's stores by the end of the month. A Business Transactions lawyer represents clients in commercial disputes and business litigation matters.

Sears, which is trying to turn around its performance after a string of declining sales reports, said last month it would accelerate the number of closings during the year, from 130 to 235.

And RadioShack, which is negotiating with lenders to gain approval to shutter 1,100 stores, said last month that it had closed 175 locations in 2014.

Several macroeconomic factors are driving this push toward a smaller store base, analysts said. For one, retailers simply have too many stores, particularly as more consumers shop online. For another, the demographics no longer make sense for stores to exist in certain suburban locations, as more young Americans are flocking to cities and staying there longer.

But it's more than just external factors. Many of the retailers closing stores are facing company-specific problems that in some ways forced them to downsize. An Atlanta Business Lawyer provides experience in all aspects of corporate and business law.

"When you have a fleet of 1,000 stores, you're going to have some in lousy locations," said Craig Johnson, president of Customer Growth Partners. "That's a tiny subset of the issue."

Supply outweighs demand

One of the biggest issues is that retail is simply overstored, Johnson said. He attributed this supply versus demand imbalance to the fact that retail sales growth has been too tepid to account for an increase in retail real estate. The situation developed even though 2014 saw limited new construction, according to Jesse Tron, a spokesman for the International Council of Shopping Centers.

"If we start most broadly, you have a retail sector that has basically been in slow-growth, no-growth mode for a number of years," Johnson said. "Meanwhile, store square footage has kept expanding."

Location also plays a role. Belus Capital Advisors analyst Brian Sozzi said suburban markets are particularly vulnerable, as more Americans move into cities. He used Target as an example; although the discounter announced a round of store closures in November, it's also opening new stores in urban markets. An Atlanta banking lawyer assists clients in commercial lending, loan workouts, and real estate matters.

Johnson added that mall-based locations are facing greater challenges than off-mall concepts, which are stealing share.

It should also come as no surprise that the rapid growth of the Web is causing a traffic decline at physical stores. Johnson said that for the merchandise category, online sales now account for about 13 percent of all retail sales.

Not everyone is hurting

While there are certainly external factors to blame, it's important to note that the companies shuttering a large quantity of stores are also victims of their own mistakes.

For example, much of the trouble facing teen retailers is the fact that their target demographic no longer finds their product appealing. Instead, they've begun shopping at fast-fashion stores such as H&M and Zara—which, in contrast, are growing their U.S. square footage.

In a similar vein, Johnson pointed out that department stores' woes are due, in part, to the fact that their overall share is shrinking. A few years ago, these big-box locations accounted for well over 10 percent of the retail market; now, it's about 3 percent, he said.

"[J.C. Penney] has to shrink the size of its store base to fit the addressable demand that it can reasonably capture," he said.

Not all store closings should be viewed as a sign of distress for the retailer. That's because the beginning of the year is when most retailers evaluate their portfolios. According to preliminary estimates from ICSC, about 45 percent of last year's announced store closings occurred in the first quarter.

Companies that close underperforming stores to strengthen their portfolio stand in sharp contrast to names such as RadioShack, which "need the store closures to stay alive," Sozzi said.

Although analysts have long been calling for retailers to trim their square footage, it does come with pitfalls. Closing a store cannot only cause someone to switch to a competitor—it can also limit a company's distribution network.

"If you're aggressively closing stores, well now you can't do this ship from store," he said.

Where there's death, there's life

The past four years have seen the death of more than two dozen indoor malls, with another 60 teetering on the edge, according to data from Green Street Advisors that was first reported by The New York Times. But ICSC's Tron said he does not foresee a year when the industry will post a net decline in retail space.

He added that occupancy rates were at 92.5 percent in the third quarter, which is back above prerecession levels.

"We kind of see this every year," he said. "[In the] first quarter a bunch of stores close and there's a little bit of panic. And then new retailers emerge."

Among new tenants filling these vacancies are gyms, minute clinics, clicks-to-bricks concepts such as Rent the Runway, and international retailers such as Primark. The latter signed a deal for space in seven Sears locations last year.

"For all these deaths there will be life," Sozzi said.

No Solid Sales for Sears

First appeared on Yahoo! News

Sears Holdings Corp will close as many as 120 of its Kmart and Sears discount and department stores after its holiday sales slumped, sending its shares sliding more than 27 percent to their lowest level in three years.

The retailer, which is controlled by its chairman, the hedge fund manager Edward Lampert, has seen sales decline every year since the $11 billion merger of the two chains in 2005, and likely faces further closings to cut expenses, preserve cash and push back against rivals such as Wal-Mart Stores Inc and Amazon.com Inc, analysts said.

Sears also disclosed on Tuesday that it tapped its credit line to borrow cash and forecast that fourth-quarter earnings would fall by more than half.

Under Lampert, the company, once one of the most successful U.S. retailers with a history going back to 1886, has let stores deteriorate, said analysts, who also faulted poor locations and ho-hum merchandise for its ongoing problems.

"They've neglected this business for so long," independent retail analyst Brian Sozzi said, adding that he expects more closings. "They are letting Kmart and Sears die on the vine."

In a memo to staff obtained by Reuters, Chief Executive Lou D'Ambrosio, who took the job in February, blamed the economy for some of Sears' problems but acknowledged "we also did not execute with the consistency or speed necessary" in areas under Sears' control. "We will do better," he continued.

But Credit Suisse analyst Gary Balter is not so sure. "We do not see how they dig out of these problems," he wrote in a client note.

Same-store sales at Kmart were down 4.4 percent in the eight weeks that ended Christmas Day, and down 6 percent at Sears' U.S. stores. Overall, they were down 5.2 percent compared with the same period a year ago.

The closings follow Sears' announcement last quarter it would shut 10 stores. Kmart and Sears have a combined 2,177 big-box locations.

A list of stores affected will be available at www.searsmedia.com once the retailer decides on the locations.

The declines at Kmart were led by drops in electronics and clothing sales as the low-price chain, founded in 1962, faced stiff competition from a resurgent Wal-Mart which resumed its layaway program this year to make it easier for low income shoppers to make purchases by paying in installments.

Kmart has found itself squeezed between Wal-Mart's low prices and Target's trendier offerings, while Sears has faced more intense competition for electronics and lower prices, and less demand for household appliances.

Sears blamed electronics sales for more than half of the decline in its namesake chain's domestic same-store holiday sales.

Sears' shares finished the day down 27.2 percent at $33.38, their lowest level since December 2008, and have fallen 65 percent since a 52-week high in February.

At the current stock price, Sears Holdings -- home to brands including Craftsman tools and Kenmore appliances -- has a value of $3.57 billion.

The value of Lampert and his hedge fund's stake in the company has plunged nearly 75 percent to $2.25 billion since 2005, when his holdings were worth around $8.5 billion. The stake was worth as much as $12.7 billion in April 2007.

The drop in shares is also a big blow for fund manager Bruce Berkowitz's Fairholme Capital, Sears' second-biggest shareholder with 15.2 percent. Fairholme's stake was worth about $570 million on Tuesday, a potential loss of almost $180 million since the end of the third quarter.

Sears' problems also hit shares of appliance maker Whirlpool Corp, which last year derived 8 percent of sales through the retailer. Whirlpool shares fell 8.9 percent to close at $46.62.

FALLING FURTHER BEHIND

Sears' empire was once so sprawling that it owned everything from a radio station (WLS in Chicago) to Allstate Insurance Co and Coldwell Banker Real Estate Group.

But now the chain, founded in Chicago 125 years ago, acknowledges it has to downsize. Its standard practice in the past would have been to give weak stores time to improve, but the economy is too tough to do that this time, Sears said.

Sozzi, the analyst, went to a Sears in Bayshore, New York, on Monday, one of the busiest days of the retail season, and said it was "deserted." At the northern end of the state, in Plattsburgh, a Sears was similarly quiet.

Wall Street analysts have long faulted Sears for letting its stores become stale, even as rivals ranging from Macy's Inc and J.C. Penney Co Inc to Target Corp and Wal-Mart remodeled and spruced up their stores.

Last fiscal year, Macy's spent $505 million to improve its namesake and Bloomingdale's stores, while Sears spent $441 million despite having more than three times as many stores.

Sears is "effectively asking customers to pay for a poorer shopping environment", Credit Suisse's Balter said.

Balter was also surprised that Sears would borrow money during the holidays, which are typically a peak cash flow period. Sears had $483 million of borrowings outstanding as of December 23, compared with zero a year earlier.

As of October 29, Sears had cash and cash equivalents of $624 million, down from $790 million a year earlier.

Sears Holdings said the lower sales and margin pressure would lead to adjusted fourth-quarter earnings before interest, debt and amortization of less than half of the year-ago quarter's $933 million figure.

The retailer expects to earn $140 million to $170 million by selling off inventory in affected stores and selling or subleasing store space.

Sears also expects to record a noncash charge of $1.6 billion to $1.8 billion in the fourth quarter related to a valuation allowance on certain deferred tax assets.