IS THE SKY FALLING?

Implications: This analysis, as is the case with most of my analyzes for GLG News, could properly be classified under several different overly restrictive GLG News "Subjects".  It involves important impacts in "Retailing", "Finance",Stock Market Activity, and Shopping Center Real Estate(which as yet is not a separate category). Instead I chose to label it under the REITs category.  However, whichever category the GLG reader is interested in, the primary import of this article remains the same: ALL RETAILERS ARE NOT CREATED EQUALLY AND RETAILERS ARE NOT COMMODITIES! The author, who should know better but has been previously found guilty of spicing up headlines to increase her readership, treats the closing of a 1000 sq. ft. store in a strip center with the same import as the closing of a 150,000 sq. ft. department store anchor in a regional mall.  Therefore the meaning becomes garbled. I will attempt to clarify. 

Analysis: If Ms. Misonzhnik, the writer of this article, is to be believed, the closing of up to 6500 retail stores, or less than 1% of the total number of existing stores, is a major news story. However those of us who have been around the industry for more than a few years, see it in an entirely different light.

For one thing, most of the store closings that have been announced or that are rumored to be announced before the end of the year, are stores that have been losing money and/or market share for many years. Every single company now being written about, was overdue to go bankrupt at the first slowdown or increase in the cost of money.

For another thing, the article misses the most important impact that some of these store closings will have on large segments of the economy. For example 69 Goody's Family Clothing, Inc. are being eliminated. The impact that these anchor department stores (or in some instances, anchor Junior Department Stores) will have on the regional malls in which they have been operating for many years, will be enormous.  Not only will there be a serious drop in sales for the adjoining specialty stores but the likelihood of finding a replacement anchor anytime in the near future is negligible. 

The closing of these 69 Goody's stores, which is only mentioned in passing, is in my opinion, of far more import than the 200+ Linens 'n Things (most of which were in strip centers or free standing) or 200+ Sharper Image stores combined.

So I say to the astute GLG News reader,"Dear Reader, the sky is not falling. However, let me suggest you should start keeping track of the Mall REITS you may be invested in to watch which of them are most vulnerable to the continued closing of anchor department stores, particularly of the closings promised by Mr. Lampert and Mr. Dillard."