Consumer Spending Woes Spark Retail Store Closures

by Burke Speaker | August 24, 2010 12:46 pm

Consumer Spending Woes Spark Retail Store Closures

Consumer spending remains weak, and as a result major retailers across the country – including big names such as Blockbuster (PINK: BLOK[1]), Winn Dixie (NASDAQ: WINN[2]) and Abercrombie & Fitch Co. (NYSE: ANF[3]) – are shuttering stores. For most retailers, second quarter earnings proved that to save profit margins, drastic cuts would be needed to combat consumer spending woes.

The economic recovery has proven slower than some experts and government officials had predicted, so industry analysts say retailers’ move to protect their overall earnings isn’t altogether unexpected. The companies plan to close the underperforming stores at hundreds of locations nationwide.

Many, such as Blockbuster, have already been closing stores. Still others say more store closings, in addition to the ones already planned, could be in the works for later in the year. Abercrombie & Fitch has plans to shut down nearly 60 of its poorest-performing stores (including its Hollister stores) by the end of this year, pointing out that some 50 have been targeted for closings in 2011. Already, the store has shut down 11 since the beginning of 2010.

Clothing stores are being hit the hardest. Ann Taylor Stores (NYSE: ANN[4]) is closing 56 stores by the end of this fiscal year; Men’s Wearhouse (NYSE: MW[5]) will close some 60 of its Tux stores, noting that many of its customers already shop at its Men’s Wearhouse base; American Eagle Outfitters (NYSE: AEO[6]) will end 28 M+O retailers, instead focusing on its youth-focused Aerie and 77kids chains; Charming Shoppes (NASDAQ: CHRS[7]) has previously said it plans to close up to 120 stores, unless it can acquire renewed lease deals with its landlords.

But some companies are hedging their bets that consumers still may spend, albeit at lower prices. Saks (NYSE: SKS[8]) is closing two stores, after shutting three over a month ago. At the same time, the high-fashion retailers plans to open more of its discount Off 5th outlets in several locations across the country. The move shows that the company is willing to make investments that could prove successful in today’s economic times. Similarly, Bebe Stores (NASDAQ: BEBE[9])’s PH8 stores all will close, although the company plans to convert some of those buildings into 2b Bebe discount stores.

Other notable grocery store closing includes the Great Atlantic & Pacific Tea Co. (NYSE: [10]GAP[11]), which will empty 25 stores by the end of the third quarter in five states. The company operates under the retail names A&P, Food Basics, The Food Emporium, Pathmark, Super Fresh, and Waldbaum’s.

In addition to stores that are closing, more stores may just be near that same decision. American Apparel (AMEX: APP[12]) is poised to default on loans and may be next to offer locations to the chopping block. And even normally secured Wal-Mart Stores (NYSE: WMT[13]) noted in a second-quarter earnings report statement that for the near future, they would be “cautious about spending.”

Until consumer confidence – and spending – turns around, all expect more cuts within their operating budgets.

As of this writing, Burke Speaker did not own a position in any of the stocks named here.

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Endnotes:
  1. BLOK: http://studio-5.financialcontent.com/investplace/quote?Symbol=BLOK
  2. WINN: http://studio-5.financialcontent.com/investplace/quote?Symbol=WINN
  3. ANF: http://studio-5.financialcontent.com/investplace/quote?Symbol=ANF
  4. ANN: http://studio-5.financialcontent.com/investplace/quote?Symbol=ANN
  5. MW: http://studio-5.financialcontent.com/investplace/quote?Symbol=MW
  6. AEO: http://studio-5.financialcontent.com/investplace/quote?Symbol=AEO
  7. CHRS: http://studio-5.financialcontent.com/investplace/quote?Symbol=CHRS
  8. SKS: http://studio-5.financialcontent.com/investplace/quote?Symbol=SKS
  9. BEBE: http://studio-5.financialcontent.com/investplace/quote?Symbol=BEBE
  10. : http://www.dailyfinance.com/quotes/great-atlantic-and-pacific-tea-company-inc-the/gap/nys
  11. GAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=GAP
  12. APP: http://studio-5.financialcontent.com/investplace/quote?Symbol=APP
  13. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  14. Click here to subscribe to Daily Trader’s Alert — it’s FREE!: http://investorplace.com/order/?sid=AD4304

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