Because of yesterday’s monumental news the Richmond Fed President Jeffrey Lacker immediately resigned for leaking Fed information before it was released, I did not write on two huge developments in US retailing that point to the troubling economy.
Ralph Lauren — the iconic US retailer — is closing its flagship Manhattan store on 5th Avenue and Payless Shoes — the large discount shoe chain declared bankruptcy.
The two firms, which are on polar opposites of the retail space, shows how systemic the problems are in retail and by extension commercial real estate.
Both the aspirational shopper and the bargain hunter have pulled up stakes and pulled back their spending forcing Macy’s, JCPenney, Nordstrom’s, Sears/KMart and others to close many stores and look at changing their business models.
This is a key component to why the Gross Domestic Product is mired in a depressed level of sub-2%, since consumer spending accounts for roughly 70% of the important economic number.
Let’s also remember that many large retail operators are owned by private equity firms, which levered the business with plenty of debt to take their profits upfront, that is coming due is spurring the rash of bankruptcy filings.
To put a finer point on the retail woes. L Brands the maker of Victoria’s Secret just said Thursday morning its overall sales for March sales were down 10% year over year; and sales at Victoria’s Secret were down 13% for the same period.
So if sexy is not selling what does that portend for expensive sports clothes and cheap shoes?