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.
