Stocks continued to get pummeled and pundits continue to claim there’s nothing to worry about. They say the economy is fundamentally strong. But is it? Really?
Peter Schiff doesn’t think so.
Well, today is Black Friday.
Since 2005, the day after Thanksgiving has marked the busiest shopping day of the year. I know a lot of people who treat today like a holiday. They even have Black Friday traditions. I actually have some friends who meet at 3 a.m. on Black Friday for breakfast and then hit the sales.
There were more signs of a retail apocalypse in the first quarter of this year.
Defaults by retail companies rated by Moody’s hit an all-time high in Q1. There were a total of nine defaults among Moody’s-rated retail corporates. According to Wolf Street, total corporate defaults in Q1 were up 22% from last year, and the nine retailer defaults accounted for nearly 1/3 of them.
As Wolf Street put it, these are not mom-and-pop stores. These are retailers large enough to be rated by Moody’s – “corporations that make up the core of the Brick-and-Mortar Meltdown.”
Could we be on the verge of a retail apocalypse?
February marked the third straight month of declining retail sales. Analysts had not expected another drop, but they got one nonetheless. Sales fell 0.1% in February. Analysts had expected an uptick of 0.3%.
This is not good news for a retail sector that is already teetering on the brink.
When we reported on the Toys R Us bankruptcy, we argued that it wasn’t just about shifting shopping patterns away from brick and mortar to online companies. A recent article on TechCo complaining that millennials are broke backs up our assertion.
Toys R Us filed for bankruptcy earlier this week, a wicked head-shot to a retail sector that’s been reeling for months.
The TRU filing ranks as the second-largest US retail bankruptcy ever, according to S&P Global Market Intelligence.
Toys R Us had $6.6 billion in assets at the time of filing. Only Kmart was bigger. It had $16.3 billion in assets when it went bankrupt in 2002. Crushing debt pulled the giant toy seller under. According to a Bloomberg report, the company has piled up more than $5 billion in debt. Toys R Us reportedly pays more than $400 million a year on debt service alone.
The company says it plans to continue operating and secured a$3.1 billion operating loan to stabilize operations.
Investors knew retailers were struggling, but it wasn’t until this week’s financial reports that they were able to gauge how much sales had deteriorated due to slowing foot traffic.”
And they have deteriorated significantly. Dillard’s, Macy’s, Kohl’s, Nordstrom and JC Penny all reported dismal first quarter results. On his most recent podcast, Peter Schiff called it the “retailpocalypse.”
The retail sector is in worse shape today than it was in 2008 during and immediately following the financial crisis.”