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Home / Business / Dealers struggled during boom times. What happens if there is a recession?

Dealers struggled during boom times. What happens if there is a recession?



High-profile bankruptcies and store closures have eroded some of the nation's biggest dealers – and it's in good economic times.

Now, amid fears that the United States is heading for recession, analysts say another calculation may be pending as a declining global economy, volatile stock market and new tariffs are likely to take its toll on US consumers over the coming months.

There is little middle ground left in retail: Businesses are either doing fast business or struggling to keep up, analysts say – a trend that is likely to be even more pronounced if the economy rises.

"If there is yet another recession – and I think it will soon – everyone will be turned down," said Mark Cohen, director of retail studies at Columbia Business School and the former CEO of Sears Canada. “The strong get on their feet. The weak do not recover. »

Analysts say the gap between the sector's winners and losers is expected to widen in the coming months, as illustrated by the recent revenue season. Walmart, Target and Lowe all had better-than-expected profits over the past week, increasing their stock prices and reassuring investors that US consumers are still opening their wallets. Targe's shares rose 20.4 percent Wednesday to close at a high of $ 103 after it posted a 17 percent gain and raised expectations for the rest of the year.

Not so lucky: department stores and clothing retailers. Macy's and J. C. Penney had disappointing revenue last week, causing stock prices to fall by double digits and drag down the entire retail sector. J.C. Penney has lost $ 196 million so far this year and expects sales to dive nearly 10 percent in 2019. The company's stock – which trades at around 60 cents per share – risks being delisted from the New York Stock Exchange. Macy's shares have fallen 21 percent since last week.

Barney's New York luxury chain, meanwhile, sought bankruptcy protection this month, after years of struggling to compete with online stores. Also, the parent companies of Ann Taylor, Victoria's Secret and J. Crew have struggled in recent months. Urban Outfitters reported a 35 percent decline in quarterly profits this week, which managers attributed to reducing store traffic and soft demand for women's clothing.

So far this year, retailers have announced the closure of more than 7,500 stores, according to data from Coresight Research. In comparison, 5,500 stores were shuttered throughout 2018. A number of national chains, including Payless ShoeSource, Gymboree and Things Remembered, have also applied for bankruptcy protection with reference to declining sales and debt collection.

"It's a really mixed bag of results we're seeing," said Neil Saunders, CEO of GlobalData Retail. “The dealers who do well see good returns, while the weaker ones remain. The real concern is: What happens if the economy slows down? Polarization is going to be even more of a problem. "

The coming months will be crucial for retailers as they support the Trump administration's new $ 300 billion Chinese tariff – including toys, TVs and clothing – that will go into effect in mid-September. President Trump said last week that he would push back some of those tariffs until December 15 "so they won't be relevant to the Christmas shopping season," but retailers say the constant uncertainty is already changing how they prepare for the busy holiday season. [19659013] Home Depot this week lowered sales expectations for the rest of the year, citing "potential consequences for the US consumer as a result of recently announced tariffs."

Sector winners – which include Target, Walmart, Lowe & # 39; s and Dollar General – has spent the last decade investing in its stores and websites to keep up with consumers' changing priorities Walmart and Target have thrill millions building new private-label brands and adding in-store pickup and delivery services in recent years as they compete with Amazon for a larger share of the market. (Jeff Bezos, Amazon founder and CEO, owns The Washington Post.) Analysts say investments are likely to pay off in a downturn as Americans trade at lower prices for retailers to save money.

Targe's chief executive Brian Cornell said Wednesday that the company had benefited from the demise of certain competitors in the current "volatile environment."

"As we sit here today, it is quite clear that there are retailers in The United States that continues to build, build momentum, ”Cornell said in a conversation with reporters this week. “There are other dealers who have cut stores and cut expenses. They help our position. "


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