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A Third Of All U.S. Shopping Malls Are Projected To Close As ‘Space Available’ Signs Go Up All Over America

Abandoned Shopping Mall - Photo by Jeff TankIf you didn’t know better, you might be tempted to think that “Space Available” was the hottest new retail chain in the entire country.  As you will see below, it is being projected that about a third of all shopping malls in the United States will soon close, and we just recently learned that the number of “distressed retailers” is the highest that it has been since the last recession.  Honestly, I don’t know how anyone can possibly believe that the U.S. economy is in “good shape” after looking at the retail industry.  In my recent article about the ongoing “retail apocalypse“, I discussed the fact that Sears, J.C. Penney and Macy’s have all announced that they are closing dozens of stores in 2017, and you can find a pretty comprehensive list of 19 U.S. retailers that are “on the brink of bankruptcy” right here.  Needless to say, quite a bloodbath is going on out there right now.

But I didn’t realize how truly horrific things were for the retail industry until I came across an article about mall closings on Time Magazine’s website

About one-third of malls in the U.S. will shut their doors in the coming years, retail analyst Jan Kniffen told CNBC Thursday. His prediction comes in the wake of Macy’s reporting its worst consecutive same-store sales decline since the financial crisis.

Macy’s and its fellow retailers in American malls are challenged by an oversupply of retail space as customers migrate toward online shopping, as well as fast fashion retailers like H&M and off-price stores such as T.J. Maxx. As a result, about 400 of the country’s 1,100 enclosed malls will fail in the upcoming years. Of those that remain, he predicts that about 250 will thrive and the rest will continue to struggle.

Can you imagine what this country is going to look like if that actually happens?

Shopping malls all over the United States are literally becoming “ghost towns”, and many that have already closed have stayed empty for years and years.

The process usually starts when a shopping mall starts losing anchor stores.  That is why it is so alarming that Sears, J.C. Penney and Macy’s are planning to shut down so many locations in 2017.  According to one recent report, 310 shopping malls in America are in imminent danger of losing an anchor store

Dozens of malls have closed in the last 10 years, and many more are at risk of shutting down as retailers like Macy’s, JCPenney, and Sears — also known as anchor stores — shutter hundreds of stores to staunch the bleeding from falling sales.

The commercial-real-estate firm CoStar estimates that nearly a quarter of malls in the US, or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor store.

Once the anchor stores start going, traffic falls off dramatically for the other stores and they start leaving too.

Four years ago in “The Beginning Of The End” I warned that empty storefronts would soon litter the national landscape, and now that is precisely what is happening.

Now that the Christmas season is over, some retailers that have been around for decades have suddenly decided that it is time to file for bankruptcy.  Sadly, one of those retailers is HHGregg

HHGregg Inc., the 61-year-old seller of appliances and electronics, is moving closer to Chapter 11 after announcing a store-closing plan, according to people with knowledge of the matter.

The filing may come as soon as next week, said the people, who asked not to be identified because the matter isn’t public. Bloomberg previously reported that HHGregg might file for bankruptcy in March if it couldn’t reach an out-of-court solution.

Another retailer that was once riding high but is now dealing with bankruptcy is BCBG

BCBG, the California-based fashion retailer that had acquired fashion design firm Herve Leger in 1998, and that once had more than 570 boutiques globally, including 175 in the US, and whose cocktail dresses and handbags were shown off by celebrities, filed for bankruptcy on Wednesday.

It is buckling under $459 million of debt. It has 4,800 employees. Layoffs have already started. More layoffs and other cost cuts are planned, according to court documents, cited by Bloomberg. It started closing 120 of its stores in January. It wants to sell itself at a court-supervised auction. If that fails, it wants to negotiate a debt-for-equity swap with junior lenders owed $289 million.

If the U.S. economy was actually doing as well as the stock market says that it should be doing, all of these retail chains would not be closing stores and going bankrupt.

But of course the truth is that the stock market has become completely disconnected from economic reality.

We live at a time when middle class consumers are tapped out.  According to one recent survey, 57 percent of all Americans do not even have enough money in the bank to write a $500 check for an unexpected expense.

And people are falling out of the middle class at a staggering pace.  The number of homeless people in New York City recently set a brand new record high, and city authorities plan to construct 90 new homeless shelters within the next five years.

On the west coast we are also seeing a dramatic rise in homelessness.  The following comes from an article by Dan Lyman

Citizen journalists have captured stunning images and video of homeless encampments that are spiraling out of control in the shadows of Disneyland and Anaheim Stadium in California.

The tent city has recently sprung up along the Santa Ana riverbed, near a busy convergence of three major California highways known as the “Orange Crush,” at the border of Anaheim and Santa Ana, the latter a “sanctuary city.”

Homeless activists estimate that as many as 1,000 people are camped in the region.

You can see some video footage of this homeless encampment on YouTube right here

Incredibly, the Federal Reserve is almost certainly going to raise interest rates at their next meeting even though the U.S. economy is faltering so badly.  That only makes sense if they are trying to make Donald Trump look as bad as possible.

Even though this giant bubble of false economic stability that we are currently enjoying has lasted far longer than it should have, the truth is that nothing has changed about the long-term economic outlook at all.

America is still heading for “economic Armageddon”, and the retail industry is a huge red flag that is warning us that our day of reckoning is approaching more rapidly than many had anticipated.

Retail Apocalypse Gains Momentum As David Stockman Warns ‘Everything Will Grind To A Halt’ After March 15th

Retail Apocalypse 2017 - Public DomainJ.C. Penney and Family Christian Stores are the latest retail giants to announce widespread store closings. As you will see below, J.C. Penney plans to close between 130 and 140 stores, and Family Christian is closing all of their 240 stores. In recent months the stock market has been absolutely soaring, and so most people have simply assumed that the “real economy” must be doing well. But that is not the case at all. In fact, the retail apocalypse that I have been documenting for quite some time appears to be gaining momentum.

J.C. Penney is not in as rough shape as Sears is just yet, but it is definitely on a similar trajectory. In the end, they are both headed for bankruptcy. That is why it wasn’t too much of a surprise when J.C. Penney announced that they are getting rid of about 6,000 workers and closing at least 130 stores

J.C. Penney (JCP) plans to close 130 to 140 stores and offer buyouts to 6,000 workers as the department-store industry sags in competition with online sellers and nimble niche retailers.

The company said Friday that it would shutter 13% to 14% of its locations and introduce new goods and services aimed at the shifting preferences of its customer base.

Meanwhile, many observers were quite surprised when Family Christian Stores decided to fold up shop for good. They were known as the largest Christian retailer on the entire planet, but now after 85 years they are going out of business forever

Family Christian, which bills itself as the “world’s largest retailer of Christian-themed merchandise,” announced Thursday it is closing after 85 years.

The non-profit company, employing more than 3,000 people in 240 stores in 36 states, said in a brief statement that the retailer had been facing declining sales since filing for bankruptcy protection in 2015 and had no choice but to shut down.

These two announcements are part of larger trend that we have been witnessing all over the country. As I have documented previously, Macy’s announced that it would be closing 100 stores earlier this year, and about the same time Sears said that it would be closing another 150 stores.

Back in 2010, Sears had a staggering 3,555 stores.

Before their recent announcement, Sears was down to 1,503 stores, and now this latest round of cuts will leave them with somewhere around 1,350.

Of course it won’t be too long before Sears has zero stores, and my regular readers know that I have been talking about the demise of Sears for a very long time.

The cold, hard truth of the matter is that the “real economy” is a total mess, and that is one of the primary reasons why these ridiculous stock market valuations that we are seeing right now are not sustainable.

One expert that agrees with my assessment is former Reagan Administration White House Budget Director David Stockman. In a recent interview, he explained why he believes that “everything will grind to a halt” after March 15th…

Stockman, who wrote a book titled “Trumped” predicting a Trump victory in 2016, says, “I don’t think there is a snowball’s chance in the hot place that’s going to happen. This is delusional. This is the greatest suckers’ rally of all time. It is based on pure hopium and not any analysis at all as what it will take to push through a big tax cut. Donald Trump is in a trap. Today the debt is $20 trillion. It’s 106% of GDP. . . .Trump is inheriting a built-in deficit of $10 trillion over the next decade under current policies that are built in. Yet, he wants more defense spending, not less. He wants drastic sweeping tax cuts for corporations and individuals. He wants to spend more money on border security and law enforcement. He’s going to do more for the veterans. He wants this big trillion dollar infrastructure program. You put all that together and it’s madness. It doesn’t even begin to add up, and it won’t happen when you are struggling with the $10 trillion of debt that’s coming down the pike and the $20 trillion that’s already on the books.”

Then, Stockman drops this bomb and says:

“I think what people are missing is this date, March 15th 2017. That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop. The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion a month rate. By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obama Care repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”

In that same interview, Stockman also predicted that “markets will easily correct by 20% and probably a lot more“, and he noted the glaring disconnect between current stock prices and how the U.S. economy is actually performing

“The S&P 500 has been trading at 26 times earnings while earnings have been dropping for the past six or seven quarters. There is no booming recovery coming. There is going to be a recession and there will be no stimulus baton to bail it out. That is the new fact that neither Trump nor the Wall Street gamblers remotely understand.”

It is very difficult to argue with Stockman on this.

There are some people out there that seem to think that Donald Trump can miraculously turn the U.S. economy around just because he is Donald Trump.

It doesn’t work that way.

We are 20 trillion dollars in debt, and we are currently adding about a trillion dollars a year to that total. There is no possible way that Trump can cut taxes, increase military spending, build a border wall, spend much more on veterans and spend an extra trillion dollars on rebuilding our crumbling infrastructure.

We are flat broke as a nation and there simply is not money available to do everything that Donald Trump wants to do.

So we shall see what happens after March 15th.  Unfortunately, I happen to agree with Stockman that economic reality is about to come knocking and Trump and his supporters are about to get a very rude wake up call.

Why Are Wal-Mart And Boeing Laying Off Workers If The U.S. Economy Is In Good Shape?

wal-mart-photo-by-mikemozartjeepersmediaThe stock market has been on quite a roll in recent weeks, but signs of trouble continue to plague the real economy.  Earlier this week, I talked about the “retail apocalypse” that is sweeping America.  Major retail chains such as Sears and Macy’s are closing stores and laying off workers, but I didn’t think that Wal-Mart would be feeling the pain as well.  Unfortunately, that is precisely what is happening.  USA Today is reporting that approximately 1,000 jobs will be cut at Wal-Mart’s corporate headquarters in Bentonville, Arkansas by the end of this month…

Walmart’s plan to lay off of hundreds of employees is the latest ripple in a wave of job cuts and store closures that are roiling the retail industry.

The world’s largest retailer is cutting roughly 1,000 jobs at its corporate headquarters in Bentonville, Ark., later this month, according to a person familiar with the matter who was not authorized to speak about it.

The company is saying that these cuts are necessary because Wal-Mart is always “looking for ways to operate more efficiently and effectively“.  But something doesn’t smell right here.  You don’t get rid of 1,000 employees at your corporate headquarters if everything is just fine.

I have driven past Wal-Mart’s headquarters in Bentonville a number of times, and it is in a beautiful part of the country.  Bentonville and the surrounding areas had been booming, but it looks like times may be changing.

Meanwhile, there are signs of trouble out on the west coast as well.  The Los Angeles Times is reporting that there is going to be a new round of engineering job cuts at Boeing…

Boeing Co. has internally announced a new round of employee buyouts for engineers companywide, including in Southern California, and warned that layoff notices will follow later this month to engineers in Washington state, where the company has a large presence.

Management did not cite a target for the number of projected job cuts.

The news comes after company Vice Chairman Ray Conner and the new chief executive of Boeing Commercial Airplanes, or BCA, Kevin McAllister, warned in December of the need to aim for further cuts in 2017.

And according to Boeing spokesperson Doug Alder, similar job cut announcements are coming for other classes of workers as well.

So why is Boeing getting rid of so many employees?

Well, the truth is that Boeing’s business is way down.  The following comes from Wolf Richter

Business has been tough. In 2016, deliveries fell by 14 jets from a year ago, to 748. Net orders dropped 13% from an already rotten level in 2015, to just 668, down 53% from 2014. And the lowest level since 2010!

When the economy is doing well, air traffic tends to rise, and when the economy is doing poorly it tends to go down.

Needless to say, the fact that Boeing is doing so poorly does not bode well for the future.

In addition to Wal-Mart, another major retailer that is letting people go is Petco

Petco is cutting 180 positions with about 50 at its San Diego headquarters, the pet supply retailer confirmed Wednesday.

The company made the cuts across its workforce and include both existing and open positions.

Petco has about 650 workers at its headquarters in Rancho Bernardo. It employs 27,000 in the U.S.

My wife and I have three cats, and even though Petco tends to be a bit overpriced we have always appreciated the work that they do.

Unfortunately, when the economy gets tough spending on pets tends to be one of the first things to get cut back, and this current trouble at Petco could be a sign that rough sledding is ahead for the entire economy.

Of course your personal perspective on these things is likely to be very heavily influenced by your immediate surroundings.  Those that live in wealthy enclaves of major cities such as San Francisco, New York City or Washington D.C. may be wondering how anyone could possibly be talking about economic trouble right now.

But if you live in economically depressed areas of Appalachia or the upper Midwest, it may seem like the last economic recession never even ended.

There have been pockets of economic prosperity in recent years, and this has resulted in some people becoming exceedingly wealthy.  Meanwhile, things have just continued to become even tougher for millions of other families as the cost of living always seems to grow faster than their paychecks do.

If you are in the top one percent of all income earners, maybe to you it seems like things have never been better.  But most of the country is living paycheck to paycheck and is just struggling to survive from month to month.  The following comes from CNN

The rich are money-making machines. Today, the top mega wealthy — the top 1% — earn an average of $1.3 million a year. It’s more than three times as much as the 1980s, when the rich “only” made $428,000, on average, according to economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman.

Meanwhile, the bottom 50% of the American population earned an average of $16,000 in pre-tax income in 1980. That hasn’t changed in over three decades.

The workers being laid off at the companies discussed above are real people with real hopes and real dreams.  Perhaps many of them will be able to land other employment fairly soon, but the truth is that the job market is really tough in many areas of the country right now.

Finding a good job that will allow you to pay the bills and support your family is not easy.  You may find that out the hard way if you end up losing your current job during the economic troubles that will come in 2017.

Earlier today, I came across an excellent article by Gail Tverberg that detailed a whole bunch of reasons why a significant economic downturn appears to be imminent in 2017.  If you would like to read it, you can find it here.  She points to many of the same things that I have been pointing to for a very long time.

Even though economic conditions were fairly stable throughout 2016, our long-term problems just continued to get even worse.  So the truth is that we are more primed for a major crisis today than we have been at any point since the last recession.

My hope is that things will not be nearly as bad in 2017 as Gail Tverberg and others are projecting that they could be, but the warning signs are definitely there, and it isn’t going to take much to push the U.S. economy off the rails.

It’s A Retail Apocalypse: Sears, Macy’s And The Limited Are All Closing Stores

retail-apocalypse-public-domainIt has only been two weeks since Christmas, and already we are witnessing a stunning bloodbath of store closings.  Macy’s shocked the retail industry by announcing that they will be closing about 100 stores.  The downward spiral of Sears hit another landmark when it was announced that another 150 Sears and Kmart stores would be shutting down.  And we have just learned that The Limited is immediately closing all stores nationwide.  If the U.S. economy is doing just fine, then why are we experiencing such a retail apocalypse?  All over America, vast shopping malls that were once buzzing with eager consumers now resemble mausoleums.  We have never seen anything quite like this in our entire history, and nobody is quite sure what is going to happen next.

Not too long ago I walked into a Macy’s, and it was eerily quiet.  I stumbled around the men’s department looking for something to buy, but I was deeply disappointed in what was being offered.  After some time had passed, an employee finally noticed me and came over to help, but they didn’t have anything that I was looking for.

And it is a sad thing, because over the past several years when I have gone into Macy’s looking to spend money, most of the time I have come out of there without spending a penny.  Macy’s has made some very bad decisions recently, and I am hoping that they can still turn things around.  But for the moment, they are closing stores and cutting jobs.  The following comes from the New York Times

Struggling with sagging sales over another crucial holiday shopping season, Macy’s announced on Wednesday that it was eliminating more than 10,000 jobs as part of a continuing plan to cut costs and close 100 stores.

Macy’s, the country’s largest department store chain, said sales at its stores had fallen 2.1 percent in November and December compared with the same period in 2015. Terry J. Lundgren, the company’s chairman and chief executive, said in a statement that while the trend was “consistent with the lower end of our guidance, we had anticipated sales would be stronger.”

Another legendary retailer that really does not have any hope left is Sears.  Every year they just keep closing even more stores, and because they are losing so much money they don’t have anything to invest in the stores that remain.  As a result, the state of many Sears locations is downright embarrassing at this point

But the retailer, famous for selling everything from shoes to vacuum cleaners to whole houses, is facing its biggest crisis ever. It’s closing hundreds of stores. Others are in shambles, with leaking ceilings and broken escalators. In some, employees hang bedsheets to shield shoppers from sections that stand empty.

Since the early portion of 2013, sales are down an astounding 37 percent for the company.  Sears is currently more than 1.6 billion dollars in debt, and they are losing more than a billion dollars a year.

They keep closing stores in a desperate attempt to stop the bleeding, but it hasn’t worked.

In 2010, Sears had 3,555 stores.

Last year, Sears had 1,503 stores, and now a whole bunch more are being shut down.

But everyone can see where this is going.  As I have stated repeatedly, Sears is going to zero, and many of the experts completely agree with me

“They are going out of business,” said Van Conway, an expert in bankruptcy and debt restructuring and CEO of Van Conway & Partners. “This snowball is 90% of the way to the bottom of the hill.”

Of course Sears is still surviving for the moment, and that is more than can be said for The Limited.

Back in the old days, it seemed like every mall had one of their stores.  I remember passing it on my way to Orange Julius and Herman’s World of Sporting Goods.

But now they are shutting down every single location and will be online only

American malls just got emptier.

The Limited, a once-popular women’s clothing brand that offers casual attire and workwear, no longer has any storefronts.

On Saturday, a message on the store’s website read, “We’re sad to say that all The Limited stores nationwide have officially closed their doors. But this isn’t goodbye.” The website will still be up and running and will continue to ship nationwide, the company said.

In addition to Macy’s, Sears and The Limited, other huge names in the retail industry have also fallen on hard times and have had to shut stores over the past 12 months.  The following comes from the Washington Post

The retail environment has proved challenging for a variety of stores: Sports Authority went out of business in 2016, shuttering more than 460 locations in U.S. malls and strip malls. PacSun, Aeropostale and American Apparel each have filed for bankruptcy protection in the past year and are aiming to reorganize and revive their businesses.

So why is this happening?

Without a doubt, our shopping habits have changed.  And in the online world, many of these retailers are being absolutely crushed by competition from Amazon and other tech companies that developed online infrastructure before they did.  I know that my wife and I actually prefer to shop online for many things when possible, and I anticipate that the share of retailing done online will only continue to grow in this country.

But let us also not underestimate the impact that the stagnating economy is having on ordinary consumers.  Thanks to the last eight years, approximately two-thirds of all Americans are living paycheck to paycheck.  More than a third of all Americans have a debt that is at least 180 days past due, and the rate of homeownership has been hovering near the lowest level that we have seen in about 50 years.  As you read this article, more than 95 million Americans are not in the labor force, and that number has grown by 18 percent under Barack Obama.  Homelessness in New York City and other major cities is at a record high, and as a nation we have accumulated the largest mountain of debt in the history of the world.

Let us hope that things can be turned around, but if current trends continue the retail apocalypse is just going to go from bad to worse, and we will continue to see lots of headlines about more stores closing down.

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