MALL IN CRISIS: $JCP to Shutter 14% of Stores

I was actually in a $JCP the other day, perusing around. It was absolutely dreadful. I don’t know how these stores stay open.

The company released earnings this morning and announced they were going to close 14% of their stores, or about 140 and do so immediately. They’re retiring 6,000 workers and will save $225m in cost savings.

Recently, Macy’s announced similar plans, store closures, as well as Sears and Kohls. Which begs the question: what will the shopping mall look like in ten years?

Anyone ever notice how much square footage these mega stores take up? How on earth can these mall operators stay in business when the mega stores go?

I suppose it’s like investing half of your portfolio in one stock. If that stock was Amazon, you’d be considered a genius. But for the mall operators, the REITs like $SPG, $GGP, $CBL, $PEI and $WCG, their investments were literally $M, $SHLD and $JCP.

Thus far, analysts don’t think it’s an issue.

Source: Morgan Stanley

Of the 269 malls owned by REITs with Sears, 79% have < $500 sales/square foot (ssf)… Our analysis shows significant overlap between Macy’s and Sears with 45% of REIT malls having both as a tenant. We do not envision a material impact to earnings, and some REITs could also be opportunistic, but it could lead to continued pressure on multiples as SS-NOI (same-store net operating income) decelerates.

Sounds a bit delusional to me. The trend isn’t grim for just the big box stores, but just about every single store in these malls — restaurants included.

I remember like it was yesterday, pre financial crisis, when retail was the darling of Wall Street — the single most important place to invest.

Now it’s in ruins.