Recession Turns Malls Into Ghost Towns

The Wall Street Journal - CHARLOTTE, N.C. -- Malls, those ubiquitous shopping meccas that sprang up in the 1950s, are dwindling in number, with many struggling properties reduced to largely vacant shells.

The long recession is helping to empty out the promenades. Some analysts estimate that the number of so-called "dead malls" -- centers debilitated by anemic sales and high vacancy rates -- will swell to more than 100 by the end of this year.

In the 12 months ended March 31, U.S. malls collectively posted a 6.5% decline in tenants' same-store sales, according to Green Street Advisors Inc., a real-estate research firm. The recent slump was led by an average 7.3% sales drop at Simon Property Group Inc., the operator with the largest number of mall locations.

The industry's woes are worsening. Thinning customer traffic, and subsequent hits to tenants' sales and profits, prompted Standard & Poor's Corp. last month to lower the credit ratings of the department-store sector. That knocked Macy's Inc. and J.C. Penney Co. into junk territory and pushed others deeper into junk. Sears Holdings Corp., a cornerstone tenant at many malls, is expected to close 23 stores this month and next.http://online.wsj.com/article/SB124294047987244803.html

Wal-Mart Says Its Market Share Is Rising

Wal-Mart, the giant discount chain and unofficial barometer of consumer spending, posted flat year-over-year earnings in its most recent quarter — an accomplishment in this economy.

Most retailers — even discount stores, which have been faring relatively well — are not expected to report year-over-year sales growth in the first months of their fiscal year.

Several chains, including Bon-Ton, Saks, Sears and Dillard’s, are not even expected to make a profit, according to Retail Metrics, a research firm.

For the three months ended April 30, Wal-Mart, the country’s largest retailer, had a profit of $3.02 billion, or 77 cents a share, compared with $3.02 billion, or 76 cents a share, for the period a year ago. In earlier reports, Wal-Mart had warned that results would be hurt by currency exchange rates. http://www.nytimes.com/2009/05/15/business/15shop.html?ref=business

State Law Targets 'Minimum Pricing'

In a move that could lead to lower prices for consumers across the country, Maryland has passed a law that prohibits manufacturers from requiring retailers to charge minimum prices for their goods.

The law, which takes effect Oct. 1, takes aim at agreements that many manufacturers have been forcing on retailers, requiring them to charge minimum prices on certain products. The practice has surged since a controversial 2007 U.S. Supreme Court ruling that no longer makes such agreements automatically illegal under federal antitrust law.

Under the new state law, retailers doing business in Maryland -- as well as state officials -- can sue manufacturers that impose minimum-pricing agreements. The law also covers transactions in which consumers in Maryland buy goods on the Internet, even when the retailer is based out of state. That could potentially affect manufacturers throughout the country.

Minimum-pricing agreements keep retail profit margins higher, which in turn keeps retailers from pressuring manufacturers to lower the wholesale prices they pay for those goods. Suppliers also think that eliminating pricing competition can help retailers spend more money promoting their products to consumers. But certain retailers -- particularly online ones -- that attract customers because of low prices say the agreements stifle competition and gouge consumers.

Maryland's legislation is one of a series of recent initiatives aimed at circumventing the Supreme Court decision. A congressional subcommittee is scheduled to hold a hearing today in which several opponents of minimum-pricing agreements are expected to testify, including eBay Inc. and Federal Trade Commissioner Pamela Jones Harbour.http://online.wsj.com/article/SB124087840110661643.html

In March Retailing Report, Bright Spots Are Few

Costco shoppers in Mountain View, Calif. Costco sales fell 5 percent in March.
The New York Times - Retailers posted another month of disappointing sales in March, signaling that consumers are not yet ready to come out of hiding.

Only a handful of chains on Thursday reported an increase in sales at stores open at least a year, a measure of retail health. Wal-Mart Stores, the nation’s largest retailer and a bellwether for the industry, had a 1.4 percent increase over March 2008, not including fuel. Other discount stores like TJX and Ross Stores, as well as some teenage apparel chains, also fared well.

But a majority of the nation’s retailers continued to suffer sales declines. Abercrombie & Fitch was most notable, with a stunning 34 percent drop that analysts attributed to its strategy of not offering the same deep discounts as its competitors. Sales at other mall apparel chains and department stores remained weak.

For the last few months, retailers have taken all sorts of measures to ride out the bleak economy. They have cut costs, hoarded cash and reduced inventory by cutting orders and running sales and unprecedented promotions. Now, they must wait.http://www.nytimes.com/2009/04/10/business/economy/10shop.html

Retailers Stop Making Sales Forecasts

The Wall Street Journal - After another round of weak monthly sales, more of the nation's major retailers are abandoning efforts to forecast short-term financial performance as a deepening recession makes their results increasingly unpredictable.

Wal-Mart Stores Inc.'s January sales for stores open at least a year came in slightly stronger than expected, rising 2.1% excluding gasoline sales, the retailer reported Thursday. Wal-Mart had estimated sales would increase up to 2%, and Wall Street analysts had predicted 1.1%.

Despite the positive surprise, Wal-Mart said it would no longer provide monthly sales forecasts, but would provide sales estimates four times a year.

"We believe this guidance is a more appropriate measure for our investors, particularly in volatile times when consumer swings are more difficult to predict," Wal-Mart Chief Financial Officer Tom Schoewe said in a statement.http://online.wsj.com/article/SB123383873406452067.html

Costco Leads Expected String of Retail Warnings

The Wall Street Journal - Costco Wholesale Corp. warned that its fiscal second-quarter profit will fall "substantially below" Wall Street estimates -- foreshadowing what's expected to be a glum parade of downbeat news in the January retail-sales reports that come out Thursday.

Costco, the nation's largest warehouse club chain by sales, had outperformed the retail pack for much of 2008. But Wednesday it said U.S. same-store sales in January were flat compared with a year earlier, while sales at its foreign stores, including markets such as the U.K. and Japan, fell 9%, partly because of unfavorable currency exchange rates.

Citing the "uncertainties surrounding the economy," Costco Chief Financial Officer Richard Galanti declared that the company will no longer publicly forecast financial performance for the remainder of its current fiscal year ending Aug. 30.

Most big retailers report January sales Thursday, and many analysts and consultants are predicting more companies will yank earnings forecasts altogether, as growing unemployment depresses consumer spending and clouds timetables for recovery from the recession.

At Costco, the recession cut into its sales of nonfood items and crimped profit margins in recent weeks as the company lowered prices to spur sales and boost market share, said Mr. Galanti.

Still, he struck an optimistic tone, saying that he believed the pressure on Costco's margins would soften in coming weeks as manufacturers lowered prices for retailers in response to falling commodity costs.

"Who knows where bottom is and how long it will last," Mr. Galanti said in an interview. "But relative to other retailers, we believe we are winning market share, not losing it."http://online.wsj.com/article/SB123373710879547371.html

Wave of Retail Bankruptcy Filings Expected

The Wall Street Journal - Drained by the worst consumer-spending slump in decades and burdened by debt, U.S. retailers are expected to begin a wave of post-holiday bankruptcy filings, altering the landscape at malls and on main streets across the country.

Retailers are particularly vulnerable in the current downturn after a decade of buoyant consumer spending, which encouraged them to overexpand and overborrow. Now, the banks and private investors who financed the boom are pulling back.

Several of the industry's biggest lenders, including General Electric Co.'s GE Capital, CIT Group Inc. and Wachovia Corp., are tightening lending terms and reducing exposure to retailers. Their tougher terms are making it harder for retailers to find capital to reorganize under bankruptcy-court protection, as they were able to do in the past, meaning there are likely to be more liquidations.

Circuit City Stores Inc., which filed for Chapter 11 protection in November, warned Friday that it risked liquidation if talks with two parties about a possible sale or cash infusion, weren't successful. Earlier last week, Goody's Family Clothing Inc., Knoxville, Tenn., announced it was liquidating its remaining 287 stores -- just three months after exiting bankruptcy. Last Monday, Against All Odds USA, a 64-store clothing chain based in New Jersey, said it was entering Chapter 11 proceedings in hopes of selling itself or reorganizing.

According to ratings company Standard & Poor's, nine U.S. retailers and restaurants, including off-price apparel chain Loehmann's Holdings Inc., drugstore operator Duane Reade Holdings Inc. and jeweler Finlay Enterprises Inc. are at significant risk of default, with junk-bond ratings of CCC, or "very weak." A year ago, S&P had six issuers on its list, including three that eventually filed for Chapter 11 protection: Linens 'N Things Inc., Vicorp Restaurants Inc. and Buffets Inc.http://online.wsj.com/article/SB123171955382272193.html

Test for Dwindling Retail Jobs Spawns a Culture of Cheating

The Wall Street Journal - When Anton Smith applied for hourly work at a Finish Line sneaker store in Charlotte, N.C., his first hurdle was showing he had the temperament for the job.

Finish Line Inc., like many other retailers, makes applicants take a personality test before it will consider interviewing them. The test asks whether they agree or disagree, and how strongly, with 130 statements.

But thanks to a little digging on the Internet by a friend, which turned up an unauthorized answer key, when Mr. Smith took the test in late 2007 he had a good idea what the employer wanted to hear.Statement: "You have to give up on some things that you start." Suggested response from the cheat sheet: "Strongly disagree."

Another statement: "Any trouble you have is your own fault." Suggested response: "Strongly agree."

The store hired Mr. Smith, 23 years old, for a part-time job, although the parent company later closed that outlet and Mr. Smith has moved on. His view of the pre-employment test: "It isn't useful. People are hip to it."

Many retailers have largely automated the hiring process with online personality tests such as Mr. Smith took. The system cuts the time store managers must spend in interviewing applicants. But the test also is creating a culture of cheating and raising questions for applicants about its fairness -- even as it becomes a critical determinant of who gets a job and who doesn't in a stressful era of rising unemployment.

Today, many retailers are cutting their work forces, but that just makes the test even more critical. So many people now are seeking what jobs remain in retail that the test's maker says it processed about 29 applications for every opening in 2008, up from 22 in 2007. Meanwhile, for the retailers, it has become doubly important now to employ only the most productive people.http://online.wsj.com/article/SB123129220146959621.html

Crowd Tramples Wal-Mart Employee to Death

A day after a worker was trampled to death, shoppers lined up outside a Wal-Mart on Saturday and police cars patrolled the area.


The New York Times - The throng of Wal-Mart shoppers had been building all night, filling sidewalks and stretching across a vast parking lot at the Green Acres Mall in Valley Stream, N.Y. At 3:30 a.m., the Nassau County police had to be called in for crowd control, and an officer with a bullhorn pleaded for order.

Tension grew as the 5 a.m. opening neared. Someone taped up a crude poster: “Blitz Line Starts Here.”

By 4:55, with no police officers in sight, the crowd of more than 2,000 had become a rabble, and could be held back no longer. Fists banged and shoulders pressed on the sliding-glass double doors, which bowed in with the weight of the assault. Six to 10 workers inside tried to push back, but it was hopeless.

Suddenly, witnesses and the police said, the doors shattered, and the shrieking mob surged through in a blind rush for holiday bargains. One worker, Jdimytai Damour, 34, was thrown back onto the black linoleum tiles and trampled in the stampede that streamed over and around him. Others who had stood alongside Mr. Damour trying to hold the doors were also hurled back and run over, witnesses said. http://www.nytimes.com/2008/11/29/business/29walmart.html?partner=permalink&exprod=permalink

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