Retailers Likely to Close Stores in 2010

Barnes & Noble

Barnes & Noble (BKS), the largest book store company in the U.S., recently disclosed that sales from Nov. 1, 2009 to Jan. 2, 2010 were down 5% to $1.1 billion. Same-store sales were off 5.1%. BKS is up against a rapid increase in book sales over the internet which is dominated by Amazon and includes large retailers such as Wal-Mart. The rise of the e-reader and e-books is also in the process of undermining “bricks-and- mortar” book buying traffic. BKS peer Borders recently closed 200 of its Waldenbooks outlets and fired 1,500 people. Barnes & Noble has 775 outlets and 636 college bookstore. BKS will have to push online sales, marketing of it Nook e-reader, and close at least 100 stores.

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Hot Topic

Hot Topic (HOTT) shares were recently downgraded by Needham and Boenning & Scattergood. The firm posted awful results last year. Same-store sales were down 12% in November and 10% in December. The company lowered its earnings forecasts for the holiday period and revenue dropped almost 10% to $119 million for the last month of the year. The firm has been squeezed by competition in the “hip” clothing segment of young people’s clothes. As of Jan. 2, 2010, the company operated 681 Hot Topic stores in all 50 states and Puerto Rico, 156 Torrid stores. Hot Topic says the ”idea behind the Hot Topic concept essentially began in the 1960s with bootleggers selling tee shirts at concert venues.” It had better go back to the original model. The company is in such bad shape it will have to close 200 stores this year.

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Dillard's

Dillard's (DDS) has 315 stores in 29 states. Sales dropped 8% in December to just above $1 billion. Same-store sales were off by 7% for the five weeks ending January 2. For the 48-weeks ending the same day, sales dropped 13% and same-store sales by 11%. S&P recently put the company on positive credit watch, and now it needs to do what it can to stay in the rating’s agency’s good graces. Deutsche Bank recently upgraded Dillard’s and said it is looking at its underperforming stores. It will end up closing at least 25 to stay in good shape.

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JC Penney

JC Penney (JCP) same-store sales were down an average of about 5% in the fourth quarter of last year, but during the middle of the year the number was closer to 12%. JCP recently narrowed its expectations for the last quarter of 2009 which pushed it below Wall St. expectations. JC Penney is still profitable, and it only real problem is that it is spread too thin. The firm has just over 1,100 stores and needs to “right size” itself to the economy by cutting 75.

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Abercrombie & Fitch

Abercrombie & Fitch (ANF) posted the worst same-store sales results of any large retailer in America during 2009. Measured on this basis, volume was down between 15% and 17% in the fourth quarter. Caris & Co, the research firm, recently expressed strong doubt about how it might recover. The firm operates a number of brands including Abercrombie & Fitch, abercrombie, Hollister, and RUEHL. ANF sales dropped 15% to $765 million in the quarter ending October 31. Same-store sales were down 22% for that period. The company has 1,129 outlets and will have to retreat to its early 2007 store count of 950. In the mean time, it is hard to see how the management team at ANF keeps its jobs.

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Zales Jewelers

Zale (ZLC) fired its CEO and the two senior retail executives who work for him. Information from industry sources indicates the cause of their departure was a critical shortfall in the company’s holiday sales. The firm’s revenue dropped almost 10% in the quarter ending Oct. 31. Zale has 1,930 outlets operating under the names Zales Jewelers, Zales Outlet, Gordon’s Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Revenue for November and December was down 15% to $494 million and same-store sales fell 12%. Zale will have to close its 200 worst- performing stores before the year is over.

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Stein Mart

Stein Mart (SMRT) ended the year with moderate drops in same store sales, but it cut its outlets from 278 to 267. In the quarter ending October 31, Stein Mart reported revenue off by almost 10% to $270 million. Same-store sales for the company dropped 6.2%. Stein Mart was on life support early last year and was near filing for bankruptcy. Net income is still extremely modest, and was only $3 million in the last reported quarter. Stein Mart has no reason to believe that its sales will recover sharply in an environment where retail revenue in general is likely to be under pressure. Stein Mart will close another 35 stores to get reasonable margins for 2010.

Signet Jewelers

Signet Jewelers (SIG) had a same-store sales drop of almost 16% in the fourth quarter. Signet announced it would suspend its dividend to preserve cash. For the firm's fiscal quarter which ended November 1, revenue fell 7% to $629 million. Signet had a modest operating loss of $14 million. The firm's balance sheet is in relatively good shape. Signet has about 2,000 outlets operating under a variety of names. It has more than 17,000 employees. Right now, Signet might get by with a modest downsizing of 5% or 10%.

Next: Coach

Coach

Coach (COH) recently dropped its profit outlook and said same-store sales for December were down 13%. The rich are not getting richer. But, the market has not entirely turned away from the company. Shares trade at almost $18, down from a 52-week high of just over $37. That may seem awful, but the stock is not off as much as some others in the sector. Coach has over 500 stores and specialty outlets and 5,600 workers. Its finances are considered solid so it might get away with cutting 10% of its locations, or 50 outlets.
Next: Best Buy

GameStop

GameStop (GME), the massive video-game retailer, said its holiday 2009 results were a disappointment. The company also said the fourth quarter sales would be below forecast. The entire video game industry is in trouble. The largest game manufacturer, Electronic Arts warned on earnings twice late last year. Its smaller competitors, Take-Two Interactive and THQ, have warned of poor results. Video game console sales by Nintendo, Microsoft, and Sony have been soft for a year. GameStop has 6,200 stores worldwide and 24/7 Wall St. expects that at least 400 of those will be closed.

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Pushed to the Brink

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