In Manhattan, there are always a bunch of stores — aimed at tourists — that hang huge banners proclaiming “Going Out of Business Sale — huge discounts.”
Some of those stores have been in business, it seems, for decades.
The overall retail sector may have a lot in common with those stores.
According to “The Death of Retail is Greatly Exaggerated,”
As of early May, S&P Global Market Intelligence tallied a record 18 retail bankruptcies, already matching the total for all of 2016. The carnage is on full display in the new Fortune 500 list: Household names like Macy’s, Sears, and Kohl’s all took tumbles down the list, as did other struggling chains like GameStop (GME, -0.37%) (falling 19 spots, to 321) and Dillard’s (DDS, -0.94%) (which fell 37, to 417).
We began seeing/predicting the fact that retail would go through a rough 2017 back in Q1, and feel that it is a big issue because:
- The U.S. retail sector is a huge employer, including part-time and seasonal work: 15,836,200 as of May 2017 — down from Feb. 2017 of 15,887,600, which represents a loss of 51,400 jobs, a significant drop in a short time. (By the way, back in 2012, the sector employed 29 million people, according to the National Retail Federation.) According to the NRF, which does a tremendous job of tracking the state of the retail industry, the retail sector “is the largest private employer in the United States. Retail directly and indirectly supports 42 million jobs.” Basically 1/4 of all private jobs. We’ll get to directly and indirectly in our third bullet.
- The U.S. retail sector holds leases and owns a tremendous amount of real estate. According to one estimate, there are more than 1,000 malls in America and that doesn’t include downtown real estate holdings. In fact, Macy’s real estate holdings by themselves may be worth more than the actual retail side of the business, according to Fortune’s senior retail reporter, Phil Wahba, who also wrote the “Greatly Exaggerated” story. That said, those value and viability of those real estate holdings may be in jeopardy if suddenly they all came onto the market. We’ve already seen the impact of retail-store closings on Greenwich Village’s Bleecker St. in a New York Times article.
- The U.S. retail sector contributes $2.6 trillion annually to U.S. GDP, according to the NRF, approximately 15% of the total economy. That includes retailing companies along with other companies that support the retail industry, such as logistics, including trucking and shipping; warehousing; construction and maintenance; agriculture; manufacturing; technology; and health care. Basically, if the retail sector takes a hit, the rest of the economy will suffer.
Does this mean the retail sector is dying? Not really. The parts of the retail sector is somewhat cyclical and other parts are very sensitive to external factors — like the weather or other trends. So a downward trend, by itself, is not necessarily troubling. And some retailers continue to do well, including Walmart, Home Depot, Costco, TJ Maxx and Best Buy, according to Fortune.