Even though plans for new store openings are still outpacing store closings four to one, the numbers from the U.S. retail industry unfortunately won't dismiss all fears that the U.S. economy is sliding into a "W" recovery. With economic eyes from around the world focused on the U.S. retail industry for solid signs of recovery, what is seen are some surprising store closing announcements and a large number of U.S. retailers abandoning their own economy to defect to other countries, in search of customers with shopping dollars to spend.
Isn't that why the world's largest retailers used to want to set up shop in the U.S.?
Surprising Store Closing News
When Liz (LIZ) announced that it was closing all 87 of its outlet stores, it wasn't exactly a shock, but it was still a surprise. Outlet stores have been doing well in the frugal economy. Chains like Bloomingdale's are entering the outlet business because that's the direction where consumers have been headed with their shopping dollars. For a well-known apparel chain like Liz Claiborne to admit that it can't operate its outlet stores profitably is at least a little bit disconcerting.
The Claiborne people didn't - and shouldn't - point all of their fingers at the economy, however. The Liz Claiborne label has been attached to some questionable pieces of clothing in the recent past, and lots of loyal Lizzers have gotten confused and alienated because of that. Perhaps creative director Tim Gunn has spent too little time in the office, and too much time with wannabe designers in the Project Runway workrooms. Whatever the reason, a 31% year-over-year drop in quarterly sales proves that Liz Claiborne outlets could not "make it work" any more.
Another surprising store closings announcement came from Winn-Dixie (WINN). That supermarket chain has decided to close 30 of its 518 stores. While this is not even a 10% downsizing, what's surprising is that Winn-Dixie is generally perceived to be a low-cost place to buy groceries, and often the only grocery store in town. This is another case where the economy isn't the culprit, but rather, the store's own reputation and operational execution.
To read the customer and employee comments following news reports of Winn-Dixie's closings is to know the real story behind the underperformance of 30 Winn-Dixie stores. Apparently, no matter how low your prices are, customers do not like to shop in dirty, smelly stores that carry the lowest of low quality products. At least that's what the customer comments indicate. Who knew?
Despite Winn-Dixie's latest quarterly profit increase of 26%, there have been hints that the company outlook is not so sunny. There were 77,792 hints, to be exact. That's the number of shares of Winn Dixie stock that the company's own senior executives have sold off in 2010. As a matter of fact, CEO Peter Lynch sold 52, 360 shares at the beginning of July, prior to the store closing announcements at the end of July.
Winn-Dixe shares are actually selling for a slightly higher price today than Lynch got for his shares, but the other senior executives (including the CFO) saved themselves a bundle by selling when they did. Of course they all know more than we do. But looking at the seven big chunks of stock that have been sold should make all Winn-Dixie investors wonder exactly they what the Winn-Dixie executives do know.
Store Openings Continue at a Fearless Pace
Store openings in the U.S. are not so much surprising as they are fearlessly aggressive. Intent on snatching up the best of the vacant retail space deals available, retailers are ignoring "W" recovery possibilities, and boldly moving forward with their expansion plans.
Not included in the 864 newest additions to the 2010 Store Openings list are 555 Blockbuster kiosks that will start popping up at QuikTrip convenience stores across the U.S. It's not that these budget movie rental kiosks will be huge profit centers for Blockbuster. It's more of a defensive move that allows the struggling Blockbuster chain to establish a kiosk presence before it is completely shut out by Redbox. Even though Blockbuster has fallen far behind, they're desperately trying to stay in the race. And the key word in that sentence seems to be "desperate."
Riding the Subway to Global Retail Domination
Even though retail chains are expanding at a pace that is far ahead of the economic recovery reality, it is even more notable to observe the growing number of U.S. and global retail chains that continue to follow the money to other countries where consumer dollars are easier to capture. Just in July, major U.S. retailers announced new global expansion plans which will land U.S. retail chains within the borders of 14 different countries. This month's retail defectors include Blackberry, Domino's (DPZ), Tasti D-Lite, 7-11, Marshall's, and Subway.
The biggest global expander is Subway, which continues its quest for fast food world domination at a pace that even Wal-Mart could envy. Out of the 1,000 stores that Subway plans to open in 2010, only half of them will be located in the U.S. By the end of the year, Subway will have added more than 500 Subway restaurants to the 2010 Global Store Openings list from 11 different countries.
Even with more than 33,000 restaurants in 90 countries, CEO Fred DeLuca is clear that opening stores at a breakneck pace will not secure Subway's global domination forever. "The world doesn't stand still," DeLuca has been quoted as saying, "and we don't deserve to be where we are unless we stay ahead of things and take the necessary steps to remain competitive."
How is the seller of five-dollar footlongs "staying ahead of things?"
- A Subway iPhone app first developed in New Zealand allows customers to locate the nearest Subway, place their order before they get there, and bypass the line completely, even during the busiest of mealtime rush hours.
- The introduction of a breakfast menu instantly established Subway as the world's largest seller of breakfast sandwiches.
- "Drive views" allow Subway drive-through customers to see their sandwich being made, just like they can inside the store.
- Subway is the sponsor of a new multi-channel entertainment show called "Golf Therapy," which is still so abstract that it's difficult to describe (or understand), but is rumored to be on the leading edge of sponsored entertainment and quite buzzworthy.
- In order to establish their "healthy" brand in Japan, Subway is growing its own organic hydroponic vegetables on-site.
Right now it seems retail expansion has the ability to stimulate economic recovery more than economic recovery has the ability to revitalize the retail industry. But unless the wizards of the U.S. retail industry make an agreement to take on the burden of jump-starting the entire economy, it's tragically possible that the retail expansion that's been done this year will put some retailers into trouble again while recovery drags its feet. Beyond the economic impact, double-dipping into recession would take a great psychic toll on the American people.
That is definitely a price Americans can't afford to pay.
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Comments
I wonder what mysterious thing are happening in there..