In the retail market there are a wide variety of shops and some you will like and have shopped at. Most will be under pressure because of the virus. The virus stoppage means the retail stores have inventory or stuff in the store that likely no one wants to pay full price. The retail stores follow the seasons and need to sell their inventory for the next season. When the stores open there will be great sales for stuff that is for 2021, not necessarily for 2020. It is very hard to be a retailer right now.
Prior to the virus, the retail market was changing and some of the biggest names were in trouble, now it is more so. One of the big names is the Neiman Marcus Group founded in Dallas in 1907. The store became a national chain and in 2013 there was a leveraged buyout by Ares Management and Canada Pension Plan Investment Board. The chain owes $4.8 billion from a $6 billion buyout.
According to an article by Mike Spector and Jessica Dinapoli of Reuters, Neiman Marcus skipped millions of dollars in debt payment in mid April. Other department stores such as Macy’s and Nordstorm were borrowing money to stay afloat while JC Penny is considering bankruptcy filings to rework its unsustainable finances and save money on looming debt payments.
Standard & Poor which rates debt noted Neiman Marcus’s capital structure is unsustainable and move the rating into junk category.
Linking to dividend paying stocks, when you look at the big chains, you might think they are back by great real estate assets, but has the market changed forever or will it go back to normal. What can the mall stores be used for, it is a higher paying rent? Those are great questions which we will find out, if you want to invest in retail stores ensure they own the space not lease it for low rates. Do your homework or you will lose money. The investors first rule is try not to lose money.
There are more questions than answers, till the next time – to raising questions.