2009: The Year That Ruined Retail

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You could call 2009 the annus horribilis for retailers, with many consumers returning to the virtues of extreme frugality whether they wanted to or not. Many retailers struggled, and while a good number of them were able to improve profitability by cutting costs, the real nerve-wracking question for investors was (and remains) when they can actually boost sales and customer traffic again.

A wacked out 2008 might have been preferable in terms of being entertained; 2009 was melancholy, for the most part. Here are a few of 2009's interesting and notable moments in the retail sector.

  • Chilling tidings: Whoa. In testament to economic collapse, McDonald's (NYSE: MCD  ) moved out of Iceland. Granted, the tiny country only had three restaurants in the first place (run by a franchisee), but still. Given the ubiquity of McDonald's (check out this McDonaldland map from Wired, if you dare), if there isn't one, that locale's condition must be serious.
  • Depends on how you define "healthy": Whole Foods Market (Nasdaq: WFMI  ) has a reputation for healthy foods, even though CEO John Mackey admitted some of its wares are "junk" earlier this year. Then he sparked controversy in a Wall Street Journal op-ed piece voicing his views on health care. The intro of the piece (a quote from former British Prime Minister Margaret Thatcher including that hot-button s-word, socialism) was probably enough to cause an interesting and rather Pavlovian phenomenon I'd like to dub the Thatcher freak-out response from some folks before they even took the time to rationally read the rest. Personally, I respected and admired his frankness and his position, but the threat of boycotts (and the risks inherent in having an occasionally controversial CEO heading a company) was solid food for thought for shareholders.
  • Depends on how you define "socially responsible": Wal-Mart Stores (NYSE: WMT  ) was the antithesis of what many would consider a socially responsible company for a long, long while. I know I've pitched more than one verbal fit about Wal-Mart's thuggish practices over the years, but I've had a change of heart about the company more recently. The fact that it provides necessities at rock-bottom prices is arguably a legitimate form of social responsibility, given bona fide hard times for many consumers. Given such strange turns of events and unpleasant realities, I guess they don't call economics "the dismal science" for nothing. (Let's not talk about what they call me.)
  • On second thought ... : Lots of specialty retailers tried out all kinds of neat-o new "concepts" during the bubble times. In 2009, some retailers decided to shutter a few of these ancillary concepts. In just a few examples, we bid adieu to Tiffany's Iridesse and Abercrombie & Fitch's Ruehl. (Maybe this could be considered a victory for people who abhor nonsensical, pretentious names for things.) Interestingly enough, cash-rich Gap (NYSE: GPS  ) bucked the trend, showing the audacity to try a new concept.
  • Identity crisis: Starbucks (Nasdaq: SBUX  ) made a splash earlier this year when it opened up a few test stores with some local flair ... and didn't use the Starbucks name anywhere within or without. What's with mimicking mom-and-pop shops? It's not hard to imagine why that struck some of us as sort of tricky, sort of lame, sort of ... well, FAIL.
  • This means war: Price wars. Lots of price wars.
  • This one goes to (chapter) 11: Some well-known retailers filed for Chapter 11 bankruptcy protection. These included Eddie Bauer, Ritz Camera, Gottschalks, and The Walking Co. It's not hard to imagine more bankruptcies are on the way in 2010, given the number of overly indebted retailers with weak brands, compounded by the fact that there are lots of consumers out there who simply can't afford to spend like drunken sailors anymore. And given the absurdity of the excesses, resulting in the prevalence of purse dogs (more fashionably attired than I can ever manage) and gas-guzzling, road-hogging Humvees giving all appearances that urban warfare's imminent at any second, I might have just insulted drunken sailors' spending habits. Sorry, folks.

On a lighter note ...
All's not lost, though. Some retailers performed remarkably well operationally (even boosting same-store sales) despite the very difficult climate in 2009. A few good examples are McDonald's, The Buckle (NYSE: BKE  ) , and Aeropostale (NYSE: ARO  ) .

Retail remains a risky sector, but investors who look for the strongest companies with great managements, strong brands, and little or no debt should do well over the long haul, notwithstanding weird, wacked-out, and just plain bad years.

That's what I remember; what about you? Did I miss any wild, wacky retail news items that deserve to be remembered or pondered from 2009? Discuss the year that was in the comments boxes below.

Starbucks and Whole Foods are Motley Fool Stock Advisor recommendations. Wal-Mart is an Inside Value recommendation. The Fool has an options position on Abercrombie & Fitch. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Whole Foods Market and Starbucks. The Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (10)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 29, 2009, at 6:05 PM, vetcor wrote:

    I agree. Wal-Mart is back on my "good" retailer list. I found clothes neatly sorted by sizes (most retailers don't bother), and return process was outstanding. Registers 12-20 RETURNS ONLY. Besides, were it not for them, many folks here would not have work. (Online, it's for just about everything.) When your counting pennies, savings is what it is all about.

  • Report this Comment On December 29, 2009, at 7:52 PM, madmilker wrote:

    How can tis be on a good list for jobs in America...

    "Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China."

    Read "The Flow of Trade in a Global Economy" by Lance Winslow. There is one quote from his article tat comes in mind. "Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what's in the best interests, and we should make sure that trade is not only free, but fair too."

    Also, think for a moment about George Washington....yes the man tat is on the US dollar bill.... "Washington had been reelected unanimously in 1792. His decision not to seek a third term established a tradition that is now embedded in the 22d Amendment of the Constitution. In his Farewell Address of Sept. 17, 1796, he drew on the results of his varied experience, offering a guide for both present and future. He urged his compatriots to cherish the Union, support the public credit, be alert to the “insidious wiles of foreign influence,” respect the Constitution and the nation’s laws, abide by the results of elections, and eschew political parties of a sectional cast. Asserting that the United States and Europe had different interests, he declared that it “is our true policy to steer clear of permanent alliances with any portion of the foreign world,” trusting to temporary alliances for emergencies. He also warned against indulging in either habitual favoritism or habitual hostility toward particular nations, lest such attitudes should provoke or involve the country in needless wars."

    Take the time to read his farewell address after only eight years of serving his country and than ask yourself tis....How do you think George feels being sent overseas in return for all tat foreign so-call cheap items and being left in a foreign bank because the American worker doesn't make anythig for the foreigners to buy. Cheap items didn't make tis great union of 57...oops! 50 states the greatest place on the face of tis Earth.....the American worker (union and non-union) did.

    You can't have a strong country without having a strong currency and you can't have a strong currency unless you keep it floating around within your 50 states. Tis is why the store with the star in the name puts 95% China made items in their stores in keep their "yuan" in their country helping the nice people there. And with only 5% left for all the other 182 country's tat make stuff including the United States of America....tat doesn't produce very many jobs outside of China.

    Being an old person myself and knowing how it wus back in the 40's, 50's and 60's in tis union of 50 states....I look at George each time I pull him out of my billfold and make a promise to send him out for items made in America so after floating around helping each hand he touches jus maybe one day he will shake mine again.

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