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.
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.
J.C. Penney has struggled to turn around its business fortunes. Image source: J.C. Penney.
Barnes & Noble
Barnes & Noble (BKS +0.00%) 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 +0.00%) 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.
Sears/Kmart
Sears Holdings (SHLDQ +0.00%), 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.
