Monday, February 13, 2017

Apparel Retreat Continues

It has been a bad season for U.S. retail, and the fallout has continued into February. West Seal and Eastern Mountain Sports can be added to the official list of retail chain bankruptcy liquidations. Smaller chains are also part of the trend. Luke’s Locker, which at its peak had at least 10 fitness clothing stores in Texas, plans to emerge from bankruptcy with just three stores. Marbles, a Chicago-based game retailer, will close all of its 37 stores in bankruptcy.

There are worries in general about private equity owned apparel chains because of their debt load. In that category, Gymboree may be in the worst shape. The company is hoping for a $1 billion debt restructuring, and as part of that plan, its CEO is preparing to step down. Discount footwear chain Payless has a smaller debt load but also has smaller margins and may close 20 percent of its 4,500 stores if it can reach a deal on its debt. In the private equity apparel category, J. Crew, Rue 21, True Religion, and Claire’s are mentioned as retailers whose debt load is probably too high to pay off over time. The largest debt crisis in retail could be Toys “R” Us and Babies “R” Us. These chains have already extended most debt payments due this year and next, but have only months remaining to restructure the rest. A lackluster fourth quarter and a security breach at loyalty program Rewards “R” Us during that period won’t help.

Retailers that are doing well in financial terms may still be closing stores. The latest large store-closing announcement came from BCBG, with plans to close 120 stores, mostly in malls. As clothing becomes more durable, it’s expected that consumers will continue to scale back their clothing purchases.

Sunday, February 12, 2017

A Strange Winter in the Arctic

The Arctic Ocean has been a strange place this winter, with the trend of record low ice continuing from 2016. Arctic ice extent has never been below 14 million km2 in February or March in the satellite record as analyzed by NSIDC aside from the first few days of February 2006 and 2016, but extent in the first 11 days of February 2017 has inched up to 13.9 only to fall back again. Other measures — area, thickness, and volume — also show record lows for this time of year. The broad area of thick ice north of Canada hasn’t materialized this winter, and instead, 90 percent of the thick ice is poised to flow out into the Atlantic over the next several months. Satellite and airplane photographs show ice that is softer and more broken up than you would expect in any season outside of August and September. A Russian convoy crossed the Arctic Ocean around the end of December with with supplies, the first wintertime cargo trip across the Arctic ice in the post-Soviet era. No one is saying the trip was easy, but with thin and fragile ice it wasn’t accompanied by the sense of peril that followed icebreakers around in prior decades. The broken ice is flowing freely through Nares Strait, the narrow strait at the northwest corner of Greenland, which normally would clog up from November through April. Open water has been spotted not just on the north coast of Alaska but even on the north coast of Greenland. There have been episodes of warm air crossing the Arctic Ocean to feed unseasonable warmth into eastern Canada and western Russia. Last week North Pole temperatures crept up to the freezing mark and possibly over, the result of a warm atmospheric river that originated in the Caribbean Sea. At points the normal winter cold has escaped from not only the Arctic Ocean but also Siberia, so that the Northern Hemisphere’s cold spots were found in places as unlikely as southwest Asia and the U.S. Rocky Mountains.

Mild winter conditions in the Arctic Ocean in the last few years have not mattered to the sea ice because normal winter weather always returned eventually, giving ice inside the Arctic Circle enough cold air to regenerate. The rule of thumb was that if fall weather gave way to winter before the last week of January, you would be assured of thick ice by April. This year for the first time that rule has been broken. Winter cold is already three months late, there is no sign of a cold snap on the way, and Siberia, which has come to the Arctic’s rescue in winters past, is not currently cold enough to cool off an ocean. We are now assured that the melting season will start with ice that is thinner than normal.

We don’t know exactly what this means for the coming summer in the Arctic Ocean because we’ve never seen this situation before. If we start the melting season with 10 percent less ice than ever before, does that mean the whole Arctic Ocean could melt out before the summer is over? It sounds unlikely, but we can only guess.

Friday, January 27, 2017

Apparel Bankruptcies

The Limited closed abruptly three weeks ago and filed for bankruptcy liquidation last week. The plan is for the brand and web site to be sold at auction to new owners who will operate a web store, but there are reasons to be skeptical of that plan. The Limited would be a hard brand to relaunch at this point.

Wet Seal, bought in bankruptcy two years ago by private investors, is now preparing to close all stores and go into liquidation. About 171 locations, most in malls, will close by March 21, but many are likely to close in the next few days.

American Apparel, in bankruptcy for a second time, has let half of its staff go and will close for good in February.

Eastern Mountain Sports is said to still be seeking funding to purchase spring inventory. At this point, the clock is ticking, and it may have to close in February or March.

Bank Failure: Seaway Bank & Trust

Illinois state bank regulators closed Seaway Bank & Trust, a Chicago-based bank with 10 branches. It was known as Chicago’s largest black-owned bank. In 2011 it had bought out the failed Milwaukee-based Legacy Bank. A year-long community-based campaign to raise capital fell short, and tonight the FDIC sold most of the bank’s assets to Texas State Bank. The bank had $300 million in deposits, making it one of the largest banks to fail in the last couple of years.

Sunday, January 22, 2017

Women’s March as a Threshold Moment

A threshold moment, a change just large enough that everything after is seen in a different light than everything before, can seem almost ordinary at the time. Often these turning points aren’t recognized and identified until the end of the year when people looking back can pick out the moment where everything changed. Sometimes, though, the moment is so dramatic that you recognize right there that something big has happened. The Women’s March yesterday was such an occasion. I was not free to follow the events as they occurred, preoccupied as I was with friends’ problems with computers, cars, and clutter along with my own concerns, so the events of the day struck me almost all at once in the middle of the evening. I have little sense of the order in which they occurred but I don’t believe I will forget the order in which they came to me in the form of secondhand stories and headlines. Even if I had not known the substance of the event, I could not avoid being blown away by the scale. Thousands of people I have met personally were there. There were too many news stories to count — I must have seen hundreds of headlines without going to look for them.

I saw the aerial photos. So many people showed up in Washington that a physical march was impossible. The crowd completely filled the intended marching route and an alternate route and spilled out onto the side streets. I could not help but compare these photos to those of the event of the day before. On Friday for the Trump inaugural address, photos showed more bare carpet than people in attendance. The audience Friday was so sparse that it could not possibly have included all of the members of Congress who had promised to be there. Surely they or their staffers were watching the events on television in their offices but the importance of the event did not justify the risk and inconvenience of stepping outside. The threats contained and implied in Trump’s speech did not deter the Women’s March, however, and if the Trump event was ten times smaller than a major free concert on the Mall, the Women’s March was ten times larger. And that was just in Washington. Friends on Twitter offered similar photos from St. Louis, Chicago, Seattle. The event extended to Mexico City, Berlin, Sydney, Cape Town, Antarctica. This one event was surely bigger than everything the Trump White House will do spanning his time in office.

But it was not the number of people that made the Women’s March a threshold moment. No matter how many people you can draw together, if the messages and sentiments are conflicting and impractical, it is all for nothing. I saw and heard a few minutes of the event. There were speeches by Gloria Steinem, Alicia Keys, Scarlett Johansson, and many more who I did not happen to see. The message more than held together, it galvanized. Everything they said was following in the tradition of Martin Luther King and his timeless call for human dignity. The signs people were carrying echoed the same sentiments. It was a bold stand to take less than a week after officials of the incoming administration made it clear that calls for human dignity and decency will be met with contempt and retaliation.

Madonna seemed to get the most headlines for the profanity in her address, but perhaps the attention was fitting, since she may have summed up the feeling of the day as well as anyone. Elizabeth Warren, though politically correct as always, was clearly pissed off at the Washington and Wall Street insiders who pushed her to the sidelines in 2016. And why wouldn’t she be? If the corrupt Democratic Party establishment had allowed Warren to run, she would be president today. We would be talking about steps to solve the country’s problems, not how to best survive the kind of aggressive dismantling that, historically, great countries rarely recover from. This was not the attack-dog Warren we endured in 2016, but the old Warren we remember from 2015 and before, practical and principled. The Women’s March was the day we learned that Warren is free to speak again.

For me, the moment I knew things had changed was when Michael Moore ripped up the “Trump Takes Power” newspaper headline. Moore’s message was simple and direct, that the majority of Americans working together could minimize and shorten the damage and violence of the Trump era. It was not such a profound message but it was enough to reframe the situation. Yes, there are reasons to fear the injury, death, and economic loss that will result from the policies Trump has already announced, not to mention other policies to follow, and the situation is all the more troubling for women who have been targets of Republican repression for a lifetime. But we are not here merely to survive one of the most brutal periods in the history of our country. There is a lot we can do despite, or perhaps even because of, the active animosity of our government toward us. In the end, no matter what anyone does, the corporate system and big-money politics will collapse of their own weight, but there is reason to hope that we can make that upcoming transition go more smoothly and happen sooner. In the end, there is nothing Trump and his cronies can do to save the system he represents. That would be the case even if they were competent leaders. Knowing that they are a pack of liars, hypocrites, and buffoons, and recognizing that Trump himself is a feeble old man who does little more than watch television all day, perhaps “Trump Takes Power” really is a headline to laugh at.

This view changes the situation from one of hoping to survive an unfair challenge to the prospect of overcoming the challenge and being part of the triumph to follow. The expectation of just surviving is a low-energy state and it was easy to see the lethargy affecting the country on Friday, a very dark day not just in terms of the weather. This morning I see people with more energy, thinking of things to do and going and doing them. Perhaps only 25 million people were directly involved in the Women’s March yesterday, but the changes it represents will by now have reached twice as many. These numbers and this clarity of purpose are not a bad place to start from when a country urgently needs a change.