3 Retailers That Should Just Call It Quits

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This past weekend, Green Street Advisors called out a handful of retailers that had simply lost more than their fair share of sales per square foot — a key measure of productivity among retailers — since 2006, when online shopping reached a critical mass and began to take a real toll on brick and mortar retailing.

3 Retailers That Should Just Call It Quits (SHLD, BBY, ANF)

Not surprisingly, Sears Holdings Corp (SHLD) earned a spot on the list. The once-iconic retailer has turned an operation that was driving $49 billion worth of sales as of 2006 into an outfit that only did $25 billion worth of business last year. While Sears has closed stores at a pretty good clip during that time, sales have fallen at a much faster pace than store closures have mounted.

Also making Green Street’s list of big losers was Macy’s, Inc. (M) and JCPenney Company Inc (JCP).

Those three names aren’t necessarily the most dire lost causes within the world of retailers, however. Here’s a closer look at the three names that should hang it up before they do any more damage to themselves, or to shareholders.

Sinking-Ship Retailers: Sears Holdings Corp (SHLD)

Sinking-Ship Retailers: Sears Holdings Corp (SHLD)

While appearing on Green Street’s list of disappointing retailers may not inherently mean that organization would be better served by closing shop, in the case of Sears, it is the best choice.

Sears is in a cash-burning rut, and rather than fixing it’s retailing problems, it’s pouring gasoline onto a fire.

As was noted, Sears has managed to turn a $42 billion business as of 2006 into a company that did $25 billion worth of business in its most recently reported year. All of that decline was ultimately driven by hedge fund manager Eddie Lampert, who started out as a destructive activist investor, but began inflicting more damage when he made himself CEO in early 2013.

Since 2009 he’s been banging a “transformation” drum, but if his brand of overhaul was going to work, we would have seen some glimmer of hope by now.

The sad irony is, Sears is still a well-loved name among retailers, and possibly could have been revived and turned back into something viable in the right hands. Since Lampert has been calling the shots, he’s closed roughly 700 Sears or Kmart stores, sacrificing opportunities to rekindle potential sources of much-needed revenue and profits.

It will cost a fortune to replace those stores.

Sinking-Ship Retailers: Best Buy Co Inc (BBY)

Sinking-Ship Retailers: Best Buy Co Inc (BBY)

Best Buy (BBY)? Isn’t the company in the midst of a turnaround? No, it’s in the midst of a turnaround effort, but after nearly four years, that effort isn’t really taking hold.

Just as a refresher, it was in August of 2012 Hubert Joly was poached from restaurant and hotel company Carlson to head up the then-flailing consumer electronics retailer. BBY shareholders were stoked, as Joly was billed as something of a turnaround specialist.

And to be fair, Joly did some great things for Best Buy, including reeling in costs to match its level of revenue, and instituting a price-match program that let it be more competitive with online shopping alternatives.

The initiatives did indeed slow the bleeding, but they didn’t stop it.

That’s because the bleeding can’t be stopped. The sheer cost of operating brick-and-mortar electronics stores is an expense the likes of Amazon.com, Inc. (AMZN) simply don’t incur, meaning sooner or later, something has to give.

It will be the bottom line. Better to switch gears, revamp, liquidate, or whatever while there’s still some value to the name, and before the market starts to realize the top and bottom line are still dwindling, which could really take a toll on the stock.

All the same, pulling the plug before the company just can’t fiscally function anymore is a tough idea to get behind. This will help: The retailer saw fit to shutter 30 stores last year, and plans more closings this year. There’s a reason.

Sinking-Ship Retailers: Abercrombie & Fitch Co. (ANF)

Sinking-Ship Retailers: Abercrombie & Fitch Co. (ANF)

Last but not least, the once-iconic Abercrombie & Fitch (ANF) may also be better off by calling it quits, rather than trying to make a go of it just to end up slipping back into quicksand.

Giving credit where it’s due, Abercrombie’s Hollister brand is still a compelling draw. Hollister can’t carry all the weight forever, though, which is the way it would have to be for a long while if ANF were going to have any shot at pulling itself out of a slow, grinding death spiral.

And make no mistake — ANF is circling the drain.

Last year’s top line of $3.5 billion and bottom line of $35.6 million both topped off three-year losing streaks. It was the lowest profit in over a decade, and the weakest revenue since 2011.

Some would argue that there’s evidence the turnaround effort is finally taking hold, by virtue of its sales growth logged in the holiday quarter of last year. That was relatively low hanging fruit though. Abercrombie is still (literally) the least favorite among specialty retailers in the United States, with echoes of former-CEO Michael Jeffries’ insulting comments still ringing clearly.

The company may never get over his gaffes. Never mind the still-dated fashion looks the stores are peddling, despite efforts to freshen them up.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/04/retailers-shld-bby-anf-stock/.

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