For almost two years I have been rambling on about the demise of the big box retail industry.
I have postulated that our current economic situation, highlighted by high unemployment, tight credit and slower GDP growth, will be with us for years. It has been my hypothesis that a low growth economy will end the reign of Big Box retail due to the model’s over reliance on the opening of new stores and the attraction of new customers.
Blah, blah, blah is what most people heard. The evidence just wasn’t there.
“You’re a bitter old man with a loose grip on reality.” Is what my closest friends and most of my family members have been telling me.
But before shuffling off to watch The Simpson’s, I was quick to respond:
“Sure I’m bitter, but you’d be too if they kept changing the packaging for Publix ice cream … and sometimes I see things that aren’t really there, but does that mean I’m wrong?”
But now, I think my screwball ideas might just be coming to light. Wall Street sharks are circling in the economic moats that Big Box retailers have built to protect their kingdoms.
Wall Street bought the shares of Big Box stores and rode a wave of phenomenal growth and spectacular returns for 20 years. But after 6 quarters of declining same store sales, Wall Street is looking for a better return on the assets retailers hold, than the management of these Big Box firms have been able to provide.
For Wall Street…It’s payback time.
Ron Burkle and his boys take a run at Barnes and Noble, Blockbuster just folds, Gymboree takes a sweetheart deal from Bain Capital and JC Penney runs for cover into the arms of Goldman Sacks (?) to fend off Bill Ackman's hedge fund Pershing Square Capital Management (which, by the way, just got done chasing after Borders).
I don’t think these are isolated events.
I think this is a warning shot for Big Box executives to get the cash they are hoarding back into productive use, to fish or cut bait regarding under performing stores and to find a new retailing model that can keep the sharks satiated.
Can Big Box respond fast enough for Wall Street? My thoughts…? No way!
There just isn’t enough original thinking inside the vaulted HQ to get it right fast enough.
Wall Street created these behemoths and they will dismantle the firms they can, and merge the ones they can’t, until the last drop of whatever value is in the assets is squeezed out.
When it’s over, there will be empty shells of retail companies all over this great land.
Out of the carnage will rise the new retail models that can survive in a low growth economy, at least until the sharks regroup and get hungry enough.
It’s moments of lucidity like this that I live for.. that and Publix ice cream sundaes!
