It's not the department store that's dying. It's the whole mall!
We keep hearing that it's Macy's (M) or J.C. Penney (JCP) or Neiman Marcus or Kohl's (KSS) or Nordstrom (JWN) that are in trouble. Well, no kidding. They are disasters. I can't believe how quickly it took for them to falter. Neiman's was dumb enough to take down a lot of debt and go private, something that has been the kiss of death for so many retailers. Macy's is seeking $5 billion to save itself. Bond salespeople are amazing. They can wine and dine anyone into buying anything. But I this era of Covid-19, can they zoom anyone into anything? I guess so. People bought Penney bonds not that long ago when that seemed -- and was --pathetic. But there is simply no way any investor should buy those bonds unless it turns out that the president has a soft spot for his old partner.
Kohl's just took down a lot of debt, so it can stay closed, but it puked up that dividend that drew me to it at one time. The issue there is why bother to open at all. We lived without you just fine. And it even turns out we didn't need you to turn back Amazon (AMZN) stuff. We found other ways. There was no raison d'etre given, you can get almost everything from Amazon that you could get from Kohl's. Oh, and Kohl's Cash. Monopoly money, I guess.
Nordstrom's problems did surprise me, given the service level. But then again, the late Bruce Nordstrom told me that as great as I thought his customer service was, Amazon's was better. Who am I to argue with him?
None of these places have any more raison d'etre than the indispensable department stores than Lit's, where my mom sold women's lingerie and Gimbel's, where my father was fired from his job selling gaberdine trousers.
Those are all obvious dinosaurs. What we didn't count on was the lack of need of the other stores in the malls, both new and old, in the Covid-19 era. This morning Sycamore, the leveraged buyout king, is trying to get out of its deal to buy L Brands' (LB) Victoria's Secret. No kidding. Who wouldn't? You want to go try on a bra at a closed mall? VF Corp (VFC) and Tapestry (TPR) are both seeing big number cuts. PVH (PVH) saw the same thing when we had CEO Manny Chirico on "Mad Money" not that long ago.
The mall is filled with places we simply do not need.
I remember when the Cherry Hill Mall, an indoor palace that generated tremendous excitement, opened in October 1961. I was there. Store after store. One after another. Shoppers' paradise.
It was unique. Stunning. Then they put up hundreds of Cherry Hills malls. They killed the golden goose of uniqueness. They made them mediocre.
Oh sure, they tried experiential. I loved the mixed use concept of Federal Realty; I think that can work. But I read a note last night about EPR Properties, formerly one of my favorite real estate investment trusts, that it collected only 15% of April's rents for its properties. Movie theaters are 45% of the deadbeats. You know they were on their way out anyway, too expensive, too limited, too noisy. Better to watch a movie of your choice, via Netflix, on a big screen with your own choice of candy and tap water.
Other malls tried to save leasing to experiential outfits like gyms. Other than the Governor of Georgia most people think that gyms are Covid-19 franchises. Pet stores had a shot until Chewy (CHWY) .
Not working.
Right now, you either have scale with essentials, or direct-to-consumer. That means Costco (COST) and Walmart (WMT) and Amazon. I do think Home Depot (HD) and Lowe's can make it. Target, too.
Incredibly though, at this very moment? That may be it, other than off-price stores who can sell all of the excess inventory that the great retail crash creates. And, not matter how they try, all of the Treasury's horses and all of the Congress's men couldn't put the Humpty Dumpty of retail back again.
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