Archive for February, 2009

More Closings for Sears

by David Bodamer February 27th, 2009

Sears Holding Corp. Chairman Eddie Lampert sent a 15-page letter to shareholders that, according to the Chicago Tribune, is a bit unorthodox.

The hedge fund manager with the Goldman Sachs pedigree expounds for 8,500 words (about the length of a New Yorker article) on topics as far-flung as the government’s missteps trying to contain the financial meltdown, short-selling rules, civil liberties, the writings of free-market Austrian economist Friedrich Hayek and the notion, repeated in past letters, that the credit rating agencies are unfairly rating Sears’ debt junk.

“As for enlightening investors with specifics about his merchandising strategy and fiscal 2009 outlook, we guess he ran out of room,” Carol Levenson, co-founder of Chicago-based Gimme Credit, said in a report.

Lampert, the majority shareholder and chairman of Sears, has no investor relations department and rarely speaks publicly, making his yearly letter a rare opportunity for investors to get a glimpse into his thinking.

Among the quirkier sections of Lampert’s 15-page letter is a call for job candidates with turnaround experience.

Besides the quirk, however, there is some useful information–including the tidbit that Sears will close an additional 24 stores this year. Last October, it had announced it was going to close 12 stores in 2009. Later, it announced plans to close eight more stores this year. So, by our count, that means it plans to shut 44 stores in 2009.

Bankruptcies and Liquidations:

Potential Bankruptcies & Liquidation Impact: 884 confirmed closures out of about 2,231 stores

Announced Closings

Total Closings: up to 874 U.S. stores

Potential Impact of All Announcements to Date: 1,758 closures out of up to 3,105 potentially affected U.S. stores

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Is Saks Headed for Bankruptcy?

by David Bodamer February 26th, 2009

The downturn in the luxury segment has been incredibly nasty. So much for the idea that luxury stores were going to hold up better than middle-market retailers. Instead, luxury retailers have been posting negative double-digit same-store sales comps for months.

The upshot of all this is that now it appears Saks may be facing bankruptcy.

“There have been a lot of rumors circulating about the company,” Stephen I. Sadove, chief executive of Saks, said during a blunt conference call with investors, “including bankruptcy.”

Mr. Sadove did not explicitly rule out the possibility. But he argued that “bankruptcy would destroy shareholder value” — a point pretty much beyond dispute — and that Saks had devised a plan for the weak economy that should see it through. The plan entails cutting costs and introducing exclusive but more affordable merchandise, Mr. Sadove said.

But the company hedged its bets. Kevin Wills, Saks’s chief financial officer, told investors that if Saks “needed to do something, we have very valuable real estate that provides us flexibility.”

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Target Taking Greater Aim at Wal-Mart

by David Bodamer February 25th, 2009

Target Corp. is adjusting its approach in a way that may make the retailer more like successful rival Wal-Mart Stores Inc.

Target plans to place greater emphasis on food, health-care products, personal items and other necessities, while offering fewer discretionary items to avoid big markdowns that have hobbled its earnings.

Target executives layed out plans for the new strategy during a conference call with analysts after posting a 41% drop in fourth-quarter net income on weak sales and a withered credit-card operation.

“We plan to further enhance our assortment of dry, dairy and frozen [food products], and add perishable items in new and remodeled general-merchandise stores,” President and Chief Executive Gregg Steinhafel said.

Link.

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Zale Posts Loss; Will Close 115 Stores

by David Bodamer February 25th, 2009

Zale joins the growing list of retailers undergoing cut backs. The chain says it will shut 115 stores “when the leases mature.” At least that’s better than the firm trying to get out of long-term leases. They intend to meet existing obligations and just pass on renewals.

The net loss was $23.6 million, or 74 cents per share, in the fiscal second quarter, ended Jan. 31, compared with a net earnings of $60.8 million, or $1.34 per share, a year earlier.

Adjusted for special items, profit came to 16 cents a share in the latest period, compared with 48 cents a share expected by analysts on average, according to Reuters Estimates.

Sales dropped 17.9 percent to $679.4 million, while same-store sales fell 18.1 percent as consumers cut back on discretionary purchases in the recession.

Gross margin shrank to 44 percent of revenue from 49.3 percent a year earlier, hurt by aggressive discounting.

Zale withdrew its full-year outlook in November, and at that time, its CEO said the 2008 holiday season could be “one of the most challenging in decades.”

Bankruptcies and Liquidations:

Potential Bankruptcies & Liquidation Impact: 884 confirmed closures out of about 2,231 stores

Announced Closings

Total Closings: up to 830 U.S. stores

Potential Impact of All Announcements to Date: 1,714 closures out of up to 3,061 potentially affected U.S. stores

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GGP Posts Gains But Drops Earnings Call and Estimates

by David Bodamer February 24th, 2009

Embattled regional mall REIT General Growth Properties reported its fourth quarter and year-end earnings late last night (the release hit the wires at about 11:00 PM). The company had delayed the report two weeks and got it in just under the wire. The numbers were solid. It posted FFO gains thanks to some one-time items. However, the results don’t change the company’s debt situation and the release reiterated the idea that the company may have to seek bankruptcy protection if it can’t find a permanent solution. Furthermore, the company is not doing a call with investors and analysts to discuss these results nor is it providing guidance for 2009.

The Chicago company said that funds from operations — a key measure of performance for real estate investment trusts — rose 17 percent, to $222.2 million from $190.4 million in the fourth quarter a year earlier.

Excluding one-time items, core funds from operations fell 14.8 percent, to $231 million, or 72 cents per share. Analysts polled by Thomson Reuters had projected core funds from operations of 85 cents per share.

General Growth said it was continuing discussions with its lenders and that it was “considering all strategic alternatives.” Yesterday’s earnings release came after a two-week delay, and company executives said they would not hold a conference call this quarter. General Growth also said it would not provide earnings forecasts for upcoming quarters.

Past links and stories:

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DDR Sells Shares to German Developer

by David Bodamer February 24th, 2009

Developers Diversified, which some observers are concerned may face issues with refinancing, has raised some capital by selling 30 million shares to German developer ECE Projektmanagement for about $112.5 million The firm has $1.7 billion in debt maturing in the next two years.

The transaction will increase Alexander Otto and certain relatives’ stake in Developers Diversified to a total of 36 million shares, or more than 20 percent of its common shares outstanding, making the Ottos the company’s largest individual shareholder.

In addition, the deal calls for an affiliate of the Ottos to give Developers Diversified a $60 million secured mortgage loan at a fixed interest rate for five years, the company said.

The Ottos will buy the Developers Diversified shares in two tranches — at $3.50 a share for the first 15 million shares and $4 a share for the second, the company said. The deal represents a premium of about 33 percent and 52 percent, respectively, to the closing market price of Developers Diversified shares on Friday.

As part of the deal, the Ottos also will receive five-year warrants to buy up to 10 million shares at $6 each — a premium of 128 percent to Friday’s share price.

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Wal-Mart Opening 252 Stores in Mexico in 2009

by David Bodamer February 24th, 2009

Wal-Mart de Mexico SA said Thursday it will invest 11.8 billion pesos ($805 million) and open 252 new stores in 2009 despite the slowing Mexican economy.

The investment represents a 4 percent increase compared to last year and will create 14,500 new direct jobs, said Walmex Chief Executive Officer Eduardo Solorzano.

Solorzano said the growth plan for Walmex, the Mexican unit of Arkansas-based Wal-Mart Stores Inc., is possible thanks to the company’s commercial aggressiveness and strict spending.

“We’ve always been aggressive in the commercial part and more conservative on the financial one and this is how we will continue to manage the company,” he said.

Mexico has been battered by the recession in the United States, which buys 80 percent of the goods it sells abroad. Mexico’s growth slowed to 1.5 percent in 2008 from 3.3 percent the year before, as consumer credit tightened and money sent home by migrants fell.

Link.

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Aeropostale Dropping Jimmy’Z; Z. Gallerie Closing 25 Stores

by David Bodamer February 24th, 2009

It’s a bad day for retailers with the letter Z. Aeropostale is throwing in the towel on its Jimmy’Z concept and shutting all 11 stores it operates under that banner. Meanwhile, Z Gallerie is closing about a third of its stores, 25 in all, leaving the retailer with 52 locations.

Bankruptcies and Liquidations:

Potential Bankruptcies & Liquidation Impact: 884 confirmed closures out of about 2,231 stores

Announced Closings

Total Closings: up to 715 U.S. stores

Potential Impact of All Announcements to Date: 1,599 closures out of up to 2,946 potentially affected U.S. stores

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Ritz Camera Files for Bankruptcy

by David Bodamer February 23rd, 2009

Another retailer files for Chapter 11. This time its Ritz Camera, which operates about 1,000 locations in 45 states.

Ritz Camera Centers Inc, which said it is the largest U.S. specialty camera and imaging chain, on Monday filed for Chapter 11 bankruptcy protection, hurt by the recession and consumers’ shift to digital photography.

The Beltsville, Maryland-based company filed for protection from creditors with the U.S. bankruptcy court in Wilmington, Delaware. Ritz said it has between $100 million and $500 million of both assets and liabilities.

Ritz operates under such names as Ritz Camera, Wolf Camera, Kits Cameras, Inkley’s and The Camera Shops, and also operates the 130-store Boater’s World Marine Centers chain. It said it had nearly $1 billion of revenue in the year ended Nov. 30, 2008.

In an affidavit, Chief Restructuring Officer Marc Weinsweig said the company’s lenders ordered the company in January to boost reserves, thereby reducing available credit.

Link.

Bankruptcies and Liquidations:

Potential Bankruptcies & Liquidation Impact: about 2,231 stores

Announced Closings

Total Closings: up to 679 U.S. stores

Potential Impact of All Announcements to Date: up to 2,910 U.S. stores

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Tesco Says U.S. Launch Took Wrong Approach

by David Bodamer February 23rd, 2009

We’re about two years into the Tesco experiment in the U.S. The company is now saying that it took the wrong approach in trying to break in. We reported pretty early on that some had doubts on Tesco’s model. This was confirmed about a year ago. So now what happens in this little experiment?

Britain’s biggest retailer Tesco PLC got its approach wrong to launching in the United States and it may make big changes to the stores, the head of the operation said on Sunday.

Tim Mason, the head of Tesco’s U.S. business, was quoted in the Sunday Times as saying its early market research was mistaken.

“We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price,” he said. “That may have been a mistake.”

Link.

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