Now, thanks to the Covid-19 pandemic, it's time to pay the piper.
American department stores, once all-powerful shopping meccas that anchored malls and Main Streets across the country, have been dealt blow after blow in the past decade. J.C. Penney and Sears were upended by hedge funds. Macy’s has been closing stores and cutting corporate staff. Barneys New York filed for bankruptcy last year.The hedge funds and vulture capitalists put the retail chains into the same position as people with a lot of credit-card debt: One has to pay it or sink as there is no cushion of savings to draw on.
But nothing compares to the shock the weakened industry has taken from the coronavirus pandemic. The sales of clothing and accessories fell by more than half in March, a trend that is expected to only get worse in April. The entire executive team at Lord & Taylor was let go this month. Nordstrom has canceled orders and put off paying its vendors. The Neiman Marcus Group, the most glittering of the American department store chains, is expected to declare bankruptcy in the coming days, the first major retailer felled during the current crisis.
It is not likely to be the last.
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[N]one of them were in as immediate dire straits as Neiman Marcus, which has both an enormous debt burden — approximately $4.8 billion, thanks in part to a leveraged buyout in 2013 by the owners Ares Management Corp. and Canada Pension Plan Investment Board — and a raft of expensive rents in the most high-profile shopping destinations, signed during boom times.
So they're going to sink. Even if they restructure through Chapter 11 and shed a bunch of stores, the landlords whose shopping centers those chains anchor will be stuck with large stores that will be very hard to re-rent. Even if they do, it'll likely be to discount retailers that'll pay a small fraction of the rent that the higher-end retail chains did. A shopping mall anchored by large discount stores will have a hard time attracting the smaller stores that sell to middle/upper end shoppers. Hell, a lot of those discount stores close off the access to the rest of the mall, so having a discount place as an anchor tenant doesn't benefit the rest of the mall's tenants.
Which will set off a downward spiral, resulting in more malls that fail.
I think it the inevitable result of overconsumption. More accurately from supplying the demand. Not to be confused with satisfying a demand, a need, a genuine need. The chicken and egg problem with the cult of of overconsumption, overproduction. Which comes first? Much of it is waste, is throw-away, single-use, plastic. Is there really a demand for it, or does it just appear to be a demand for it. One of the things I would like to see come of this Great Pause is the open question "do we really need all this shit?"
ReplyDeleteNostalgic, but not necessarily sympathetic.
On the one hand, I can't find much sympathy for Nieman-Marcus because they represent the worst of wretched excess consumerism. On the other, they treat customers well. One year, I bought a rather expensive holiday-themed crystal serving plate as my mother's birthday present for her to serve her Christmas cookies. When the order arrived, there were two plates in the box. I called their customer service to report the situation, and the operator said, “Now your mother has two plates. Tell her happy birthday from Nieman-Marcus.” Some capitalist pigs actually have hearts.
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