Displaying items by tag: retail

PLEASE HELP SMALL BUSINESS OWNERS BY FILLING OUT THE SURVEY

COVID Loan Tracker was started by small business owners Duncan and Rita MacDonald-Korth to help their fellow small business owners understand when and where PPP and EIDL advance money starts flowing. The site works by crowdsourcing knowledge on applications and loan disbursements. Our goal is to help the small business community and empower journalists with the data they need to keep the government accountable.

Retail is one of the largest sectors of the US economy. Tens of millions of workers earn their living in the sector and millions of small business owners employ them. However, this group—at once the most visible and vulnerable victims of the lockdown—are being left out in the cold by the PPP initiative. It has already been well established that “large” small businesses have fared much better in the Paycheck Protection Program, but retail small business owners may have even more to lose.

The common practice in commercial leasing to small businesses in the US is that landlords require tenants to put up personal guarantees in order to execute a lease. That means that if a business is unable to afford the rent, their own personal assets are the on hook to pay the landlord. Small business owners usually have no choice but to accept the terms—if they do not, they cannot lease the space. Since almost all landlords require this, small business owners are left with a stark choice: commit to a personal guarantee, or don’t open a business.

While it is clear at this point that smaller small business owners have not been helped by this program, that is doubly true for retail owners, for whom payroll is usually a minority expense compared to rent, utilities, and inventory. Accordingly, the small shop owners of America—hardware stores, clothing boutiques, nail salons, dry cleaners, cobblers, bar owners etc are at grave risk of losing not just their business, but their own assets, such as savings, houses, future income. They stand to lose everything.

(New York)

The outlook for retail is bleak. Investors already know this, but separating those who might actually go bust from those who will muddle through is key. The US’ big stimulus package had little directly for retailers, but there is enough to throw them a lifeline. According to analysts 630,000 US retailers have had to shut their doors since Coronavrus erupted. Larger companies have responded by furloughing staff, delaying obligations, and tapping revolving credit lines. The retailers most at risk seem to be the mall-based chains that focus on clothing—who were already struggling against ecommerce. Think J.Crew, Neiman Marcus, other department stores etc.

FINSUM: Our team has considerable experience in retail, and in our view the coronavirus will be looked back on as the coffin nail in brick and mortar retail (especially for clothing). This lockdown is going to accelerate the shift to ecommerce, and brick and mortar shopping habits may be permanently reduced.

(New York)

Coronavirus has made a reasonable impact on the market. Things fell a bit but are back where they started. However, instead of focusing on the big esoteric risk of the virus, it might be more productive to think about the specific sectors where the virus is gong to have an impact no matter what. Take for instance luxury retail, which is reportedly getting walloped by the virus. Why you might ask? Chinese tourists have vanished from the fancy shops of New York, Paris, and Milan, which means top luxury brands aren’t selling as many glitzy handbags.

FINSUM: There are going to be many of these niche areas that will be hurt by the virus, but don’t immediately come to mind when you consider its impact.

(New York)

Nike is one of the retail stocks that has had a very good year, and it may be about to get even better. Goldman Sachs has just jumped on the Nike bandwagon, saying that the stock is going to keep on rising. GS upgraded Nike to a Buy from Neutral and joined 25 other analysts who say the stock is a Buy. According the GS, their change in view is due to “Evidence of building pricing power, signs of operating leverage, accelerating shift to differentiated retail, sharply scaling app ecosystem, and a constructive global athletic growth backdrop”.

FINSUM: Brands are in a better position than retailers, and Nike is on the very good side of that better group.

(New York)

Retail is a hard sector to invest in right now. Generally speaking it seems better to buy into broad retailers like Walmart or Target than into clothing specialists like Gap, and discount retailers seem better than traditional, but the whole industry is a battlefield. With that in mind, here is a good stock to look at: Tanger Outlets (SKT). The REIT owns 39 discount malls across the US and has a cheap valuation that seems to have suffered simply from being in the sector. The company is not financially distressed and sports a 96% occupancy rate at its malls. It is trading at about half the valuation of some other popular REITs and sports a hefty 9%+ yield. Because it is in the outlet mall space, it faces considerably less turmoil than traditional malls.

FINSUM: You probably saw a Tanger last time you were on the interstate. The fundamentals of this stock make it look like a good investment.