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Retail Is Going Down… You May As Well Make Some Money On It

2 February 2009 3 Comments

Retail is going down.  The U.S. consumer is on life support.  Remember, home equity and credit cards have fueled consumption for years.  With those sources completely tapped out and unemployment rising, consumption is plummeting.  Retailers and those linked to retailers are going to struggle big time.  Target the ones with high debt and watch them go under.

Macy’s (one of the retailers with a ton of debt) just announced cutting the dividend and laying off another 7,000 employees.  Macy’s could easily be bankrupt at some point in the near future, and I think it is almost certain that you will see more and more store closures… which takes me to my next point.

Also, look at some commercial real estate companies, especially the ones tied to retail, to find more companies that are sure to struggle in the near future.  Store closings like Linens n Things and Circuit City is really going to kill these commercial real estate holders.

I am currently short the following companies:

  • Macy’s (M)
  • Staples (SPLS)
  • Simon Property Group (SPG)
  • Vornado Realty Trust (VNO)

I’m also looking to grow these positions on any short term rallies such as government stimulus news or anything of the sort.  We have way too many stores for being a country that is flat broke.  Again, retail is going down.

Do you have any suggestions of retailers with high debt and deteriorating business?  Join the discussion.

3 Comments »

  • Studenomics said:

    I can’t believe it took me this long to find this blog! I am curious what you feel will happen to Macy’s by the end of the year?

  • Kevin said:

    I think Macy’s is going down….. there will likely be bankruptcy rumors at some point if not already. They reported better than expected earnings this morning but that doesn’t mean they are any good.

    Business will continue to deteriorate and they are at risk of getting their credit rating dropped.

    I’m hoping to close my position under $5 / share. We will see.

  • Chrystal said:

    I don’t know if retail will end forever. I think what will happen is the change in the way retail is going. more people are buying online. if Macy’s were smart they would focus to online retailing. Consumers are shopping more and more at home/work. And for every store that closes a new company will take it’s place. Or so i believe.