You are using an older browser version. Please use a supported version for the best MSN experience.

4 retailers on the 2019 death watch

The Motley Fool 1/18/2019 Daniel B. Kline

America's malls and shopping centers said farewell to Bon-Ton, Toys R Us, Brookstone, Starbucks' Teavana, and Lowe's-owned Orchard Supply Hardware stores this year. That followed the relatively recent loss of Sports Authority, H.H. Gregg, Radio Shack, and a handful of others.

Quotes in the article

BKS

JCP

Some call it a retail apocalypse, but the reality is that's it's poor management and a lack of adapting to the current marketplace. Yes, more shopping takes place online, but brick-and-mortar chains that embrace the omnichannel model have thrived.

These retailers, however, have not done that, and their futures are very much in doubt. All of these companies were on many of the lists compiled last year for companies that may not survive 2018. You could congratulate each brand for making it, but none are in better shape than they were the year before, and one company (with two brands) will just barely make it.

Barnes & Noble

Barnes & Noble (BKS) has lost its way. The company hasn't had a full-time CEO since firing Demos Paneros over the summer, and it lacks a clear turnaround plan. During the second-quarter earnings call, CFO Allen Lindstrom laid out how the chain has been doing:

Consolidated sales decreased $20 million, or 2.5%, to $771 million. Comparable store sales declined 1.4%, our best quarterly comp results in over two years. Books decreased 3% for the quarter, helped by continued strength in hardcovers and the re-establishment of our bargain assortment. We also saw improvements in our trade paper, kids, and young adult category.

Non-book sales were up 1.9%, but the company's chairman, Leonard Riggio, has made public comments about focusing more on books. That's an odd strategy, because the retailer has largely been shut out of the digital-books market.

Barnes & Noble sales have steadily declined. The company hasn't done anything to reverse that trend other than undertaking some minor tests of selling alcohol in its cafes and adding expanded restaurants. There is no turnaround plan, and while the bookseller isn't in imminent danger of closing, it's hard to see how the brand recaptures any sort of relevance to reverse its slide.

J.C. Penney

There was a time when J.C. Penney (JCP) used the catch phrase "doing it right." Now the company can't seem to make the right moves to turn around its business, even when it appears to be doing what consumers want.

Through the first two quarters of the year, comparable-store sales were slightly better than even. That at least gave shareholders some hope. And then came a double-whammy. First, CEO Marvin Ellison resigned to take the same job at Lowe's. Then came the chain's Q3 numbers, showing that comp sales dropped by 5.4%, ending any hope of a rally.

Those two moves cast the entire future of the company into doubt. Ellison did a lot of smart things, including changing the merchandise mix in women's apparel, trying to turn its stores into destinations, and adding toy, baby, and electronics departments.

But none of it has worked. J.C. Penney has revised its full-year forecast to a low-single-digit drop, down from flat to a 2% gain. New CEO Jill Soltau doesn't have much room to change her company's fortunes, and consumers appear to have moved on.

Related video: With the demise of department stores, what will happen to malls? (provided by Fox Business)

Replay Video

UP NEXT

Cancel

With the demise of department stores what will happen to malls?

Fox Business

See more videos

What to watch next

UP NEXT

Sears/Kmart

Sears Holdings(SHLDQ), which own both the Sears and Kmart brands, looks as if it will barely survive 2018. The company has already declared bankruptcy, and its holiday sales have been disappointing. That makes it hard to know whether a shaky plan will fly from former CEO and current Chairman Eddie Lampert to buy about 500 of the chain's stores for $4.6 billion.

It's possible that the bankruptcy court judge handling the case could decide that liquidating the company's remaining assets offers more benefit for shareholders. It's also possible that the judge won't accept Lampert's bid, which is partly based on converting loans his hedge fund made to the company into equity.

Of course, with holiday sales coming in $225 million lower than initial projections, it's possible that even Lampert walks away. Sadly, that might be the right course, because nothing in the past five years has shown that Sears or Kmart has a path back to profitability.

A sad time

Any of these retailers could, in theory, reverse their fortunes. Best Buy was, for example, considered as good as dead a few years ago, and it has reversed its fortunes. Time, however, is running out for these four brands, and the odds are not in their favor.

Related gallery: Retailers closing the most stores in 2019 (provided by 24/7 Wall St.)

a sign above a store: This week, children’s clothing chain Gymboree is expected to file for bankruptcy protection and begin shuttering its 900 U.S. locations. The company had been in the process of closing hundreds of stores for months, but the mass liquidation was not enough cover liabilities. These closings are just the latest in a stream of closure announcements by major retailers. In what many have dubbed the “retail apocalypse,” brick-and-mortar retailers across the United States have been forced to reduce their footprint in order to maintain profitability in recent years. In the most extreme cases, several well-known brands have had no choice but to go out of business. Since the beginning of 2018, major companies, including Mattress Firm, Brookstone, Rockport, and Sears, have filed for Chapter 11 bankruptcy protection. In a handful of cases, store closings are the result of corporate mergers and acquisitions. In some instances, companies appear to be merely culling their most unprofitable stores while adding new ones elsewhere. However, many retailers on this list are closing locations as a result of falling revenue, largely brought on by the convenience and increasing popularity of online shopping. 24/7 Wall St. reviewed publicly available financial documents and corporate announcements to identify the retailers closing the most stores in 2019. Retailers shutting the fewest locations — less than a few dozen — tend to be those companies attempting to improve profitability. Companies closing several hundred locations, on the other hand, are either being bought out or are declaring bankruptcy and liquidating assets.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool recommends Lowe's. The Motley Fool has a disclosure policy.

SPONSORED: 10 stocks we like better than Sears Holdings

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market. David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now ... and Sears Holdings wasn't one of them. That's right -- they think these 10 stocks are even better buys. Click here to learn about these picks.

Go to MSN Home

AdChoices