The Worst Retail Cataclysm Ever: Sears Warns It Is On The Verge Of Collapse As Payless Prepares To File For Bankruptcy

Alarm Clock Abstract - Public DomainMore than 3,500 retail stores are going to close all across America over the next few months as the worst retail downturn in U.S. history gets even deeper.  Earlier this week, Sears shocked the world when it announced that there is “substantial doubt” that the company will be able to “continue as a going concern” much longer.  In other words, Sears has announced that it is on the verge of imminent collapse.  Meanwhile, Payless stunned the retail industry when it came out that they are preparing to file for bankruptcy.  The “retail apocalypse” that I have been warning about is greatly accelerating, and many believe that this is one of the early warning signs that the economic collapse that is already going on in other parts of the globe will soon reach U.S. shores.

I have repeatedly warned my readers that “Sears is going to zero“, and now Sears is officially saying that it might actually happen.  When you file official paperwork with the government that says there is “substantial doubt” that the company will survive, that means that the end is very near

The company that operates Sears, the department store chain that dominated retail for decades, warned Tuesday that it faces “substantial doubt” about its ability to stay in business unless it can borrow more and tap cash from more of its assets.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Sears Holdings said in a filing with the Securities and Exchange Commission. Sears Holdings operates both Sears and Kmart stores.

In the wake of that statement, the price of Sears stock dipped 13.69% to $7.85 a share.

Personally, I am going to miss Sears very much.  But of course the truth is that they simply cannot continue operating as they have been.

For the quarter that ended on January 28th, Sears lost an astounding 607 million dollars

The company said it lost $607 million, or $5.67 per diluted share, during the quarter that ended on Jan. 28. That compared with a loss of $580 million, or $5.44 per diluted share, a year earlier. It has posted a loss in all but two of the last 24 quarters, according to S&P Global Market Intelligence.

How in the world is it possible for a retailer to lose that amount of money in just three months?

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As I have said before, if they had employees flushing dollar bills down the toilet 24 hours a day they still shouldn’t have losses that big.

This week we also learned that Payless is heading for bankruptcy.  According to Bloomberg, the chain is planning to imminently close at least 400 stores…

Payless Inc., the struggling discount shoe chain, is preparing to file for bankruptcy as soon as next week, according to people familiar with the matter.

The company is initially planning to close 400 to 500 stores as it reorganizes operations, said the people, who asked not to be identified because the deliberations aren’t public. Payless had originally looked to shutter as many as 1,000 locations, and the number may still be in flux, according to one of the people.

Of course these are just two examples of a much broader phenomenon.

Never before in U.S. history have we seen such a dramatic wave of store closures.  According to Business Insider, over 3,500 retail locations “are expected to close in the next couple of months”…

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades.

More than 3,500 stores are expected to close in the next couple of months.

Once thriving shopping malls are rapidly being transformed into ghost towns.  As I wrote about just recently, “you might be tempted to think that ‘Space Available’ was the hottest new retail chain in the entire country.”

The demise of Sears is going to be an absolute nightmare for many mall owners.  Once “anchor stores” start closing, it is usually only a matter of time before smaller stores start bailing out

When an anchor store like Sears or Macy’s closes, it often triggers a downward spiral in performance for shopping malls.

Not only do the malls lose the income and shopper traffic from that store’s business, but the closure often triggers “co-tenancy clauses” that allow the other mall tenants to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the anchor space.

Years ago I wrote of a time when we would see boarded-up storefronts all across America, and now it is happening.

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Instead of asking which retailers are going to close, perhaps we should be asking which ones are going to survive this retail cataclysm.

In the past, you could always count on middle class U.S. consumers to save the day, but today the middle class is steadily shrinking and U.S. consumers are increasingly tapped out.

For instance, just look at what is happening to delinquency rates on auto loans

US auto loan and lease credit loss rates weakened in the second half of 2016, according to a new report from Fitch Ratings, which said they will continue to deteriorate.

“Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at Fitch.

The last time so many Americans got behind on subprime auto loans was during the last financial crisis.

We are seeing so many similarities to what happened just prior to the last recession, and yet most Americans still seem to think that the U.S. economy is going to be just fine in 2017.

Unfortunately, major red flags are popping up in the hard economic numbers and in the financial markets.

The last recession probably should have started back in late 2015, but thanks to manipulation by the Fed and an unprecedented debt binge by the Obama administration, official U.S. GDP growth has been able to stay barely above zero for the last year and a half.

But just because something is delayed does not mean that it is canceled.

All along, our long-term economic imbalances have continued to get even worse, and a date with destiny is rapidly approaching for the U.S. economy.

Courtesy of The Economic Collapse Blog

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  • jaded

    JcPenney is closing stores too. Take a look at how Macy’s and Nordstrom are doing…. dropping like flies and inventory is not good. What’s worse, look up “mom jeans” at Nordstrom’s site and you’ll understand how far they’ve fallen since dropping Ivanka’s line.

  • purplecandles

    This is just my experience. I stopped going to Sears when the mall became an attraction for low lifes. I stopped going to Sears when I noticed all their signs and PA announcements were only in Spanish. I stopped going to Sears when I felt uncomfortable and like a foreigner in my own town. I stopped going to Sears when I couldn’t use the parking garage because it was too risky. I stopped going to Sears when I got used to online shopping.

  • lloyd Lisco

    The Collapse is Well Underway, I went to Penneys to Buy Some Drawers, Only Myself and one Other Customer in the Tremendous Store. Yes I do Wear Drawers!

    • jaded

      they announced they are closing stores too.

  • VirgoVince

    HOW can ANY of this be happening, NOW?? WHY was NOTHING done to PREVENT IT??
    The answer to ALL the ILLS of the world is, 8 years of ugly brain damaged lefturd liberal/commie idiots!!
    They are NOT tolerant enough of US and WE are TOO tolerant of them!!
    EXECUTE ovomit AND clinton, NOW!!

  • Ann Tenna

    The “profit” from the god of the “rapture” and the “jimm and tammy bakker show”….strikes again….he is in dust and ashcloth clothes waving his fist at all the assholes…who dare not “listen” or “believe” to him…

  • Try living

    Same ole BS from Snyder. Sears is going under because they suck. The corporate management failed to do their jobs and change with the times. They have been failing for a long time. This is old news.
    There are thousands of successful business models out there. Why does Snyder fail to recognize them? Because his stock in trade is fear mongering.
    The Mall experience is also a failed business model. Bulldoze them and make a park or plant some trees.
    The void left open by the sucking sound of mismanagement at Sears will be replaced by new growth opportunities for other companies.
    Sears put out of business thousands of mom and pop general stores that were over priced. No one complained about that. Same with Walmart.
    Who cares about Payless? or Kmart? Have you been in one of their crappy stores lately? Me neither. Goodwill is a better deal for cheap shoes and clothing.
    Snyder has been ringing the death knell of everything for the last 10 years at least.
    The end is always near.
    Better to enjoy what you have now, than worry about it constantly.