Kmart still exists, but most of the stores have closed. Here is a photo of the last Kmart store in my local area, now closed, but with the lights still on. Millions of dollars in unsold inventory has to be shipped out to other stores.
Thursday, February 14, 2019
New York City community leaders worried about the likely impact of a major Amazon office center there are breathing a sigh of relief after Amazon announced it has canceled its plans.
Last week there were reports that Amazon was trying to negotiate further concessions on top of the $3 billion in subsidies that state and city officials had already agreed to. Today, though, Amazon released an alarmingly bitter statement blaming the cancellation on opposition from city officials. In its statement, Amazon falsely claimed its project had the support of 70 percent of city residents. In fact, the plan faced an immediate backlash from the public after the scale of the promised subsidies was revealed, with further concerns when it was learned that the new facility would probably not create any net job growth. The prospects for the project were dimmed further when Amazon made additional demands in closed-door meetings with officials.
Amazon’s change of heart was surely more influenced by a disappointing December across the retail sector than by local opposition. With future revenue in doubt, Amazon is scaling back its plans. The surest indication of this is that Amazon says it has no plans to replace the proposed New York City facility with similar one elsewhere. Even without the New York City facility, Amazon probably will never see the kind of growth that would justify its rapid office expansion, and it could go into a decline at any point without warning. That becomes much more likely if there is an recession in the United States, a prospect that seems closer today after the government released data that shows a decline at retail in December.
The timing of Amazon’s decline is hard to predict, but a decline at some point is inevitable, and New York City will be spared the impact of that decline, now that an Amazon office complex will not be going forward there.
Friday, February 8, 2019
The Hasbro earnings report confirms the effect of the overhang of inventory from the Toys ‘R’ Us liquidation during the holiday shopping season. Sarah Whitten covering the story at CNBC:
I feel confident that the toy inventory overhang is still in stores and warehouses now after muted toy sales across the retail sector in 2018. It may take the 2019 holiday shopping season to get toy inventories back to a steady-state level.
Thursday, February 7, 2019
Sears will exit bankruptcy, but in a state at least as precarious a year ago.
A bankruptcy court today approved the sale of Sears to its CEO’s hedge fund in the hope that this arrangement would temporarily save the jobs of the retailer’s employees. The new Sears and Kmart will have 425 stores, though observers expect store closures to continue at a rate of roughly 4 per month. The same as a year ago, the company faces a cash crunch and a load of liabilities that it cannot reasonably expect to ever pay. It is a company operating at a loss. The losses between now and the end of 2019 are likely to be in the neighborhood of $1 billion, a sum that would use up cash on hand and available credit. Even though it is exiting bankruptcy, it still looks like Sears and Kmart are probably heading for liquidation within a year when cash runs out.
The new Sears and Kmart will face new challenges that result from the current bankruptcy. Employees now know for sure that their pensions will not be funded. They have little incentive to stay with a doomed company if they can find an equivalent job anywhere else. As always, it is the most skilled employees who will leave most easily. Suppliers that were not paid when Sears went into bankruptcy will be in no position to extend credit to a company that remains desperately short of cash, so Sears and Kmart stores will have even less to sell in 2019 than they had in 2018. Shoppers will have little reason to return to the stores knowing that the company is on its last legs and the merchandise they are looking for in the store is not likely to be found. The world continues to turn away from department stores in general. It is a retail category that has been in decline since the late 1980s even as retail in general has boomed. Sears and Kmart have done worse than the category they are in, and now they need to do better than average just to survive.
Just to make it through 2019, Sears needs big changes. The company knows its stores are too large, and it will continue to shrink some stores in place and move others to smaller locations. At the same time, it desperately needs new investors to keep operating and pay for the costs of these changes. That will be hard to arrange; investors usually like to bet on a growing company rather than one that must shrink to survive.
Sears needs a business plan that will allow it to make a profit. It needs to reclaim its identity and present a reason for shoppers to go into the stores. As a first step, Sears and Kmart need to cut back on their clothing offerings. Sears could even abandon clothing entirely. Sears was never a fashion name, and for Kmart, that is a history from so long ago that most shoppers have forgotten.
To accomplish any of this, Sears and Kmart need new management. A management team that could not manage a single change to the business plan in five months of bankruptcy can hardly be expected to turn the two retail chains’ business models upside down in the ten months that remain before cash runs out.
Let’s assume for the sake of discussion that both retail chains go into bankruptcy again in 8 to 13 months, as analysts expect. The current bankruptcy can be seen as a restructuring of liabilities mainly for the purposes of the second bankruptcy. The biggest losers this time around are employees, suppliers, lenders, landlords, and stockholders. A year from now, it may be the same story again.
Friday, January 18, 2019
In a support document dated January 2, 2019, Microsoft has announced end of life for the last few products that use the Windows Mobile operating system. Most Windows Mobile devices are already considered obsolete. Support for Windows Mobile ends in June for two more device models and in December for the rest.
Nominally, the announcement says that the last two operating system versions will be updated for a few more months, depending on the version. In practice, it is fair to expect that the operating system will not be updated for new security risks unless the potential attack vector is particularly broad and the fix is particularly simple. This announcement marks the definitive end of life for Windows Phone, so any software developer who was thinking of updating an application will be giving up that idea now. Users will continue to use the phones at their own risk for a few more years.
Windows Mobile was a key part of the design philosophy for Windows 10, the current version of the Microsoft Windows operating system. The operating system could continue to be used on desktop computers for ten more years or longer, but eventually, that platform too will be abandoned.