Friday, March 14, 2014

Charting US Retail: Not Mean-reverting

I've been harping for some time on Twitter that traditional US retail is no longer a mean-reverting industry. I've selected 36 charts of well-known and not-so-well-known retailers that are at XX% off their pre-crisis or post-crisis high to illustrate my point. Some a pure retailers, some are both wholesalers and retailers (ie CROX).

Surely some retailers are doing better but also there is a good number that have liquidated in the last few years (ie Borders, Circuit City, Mervyn's, Loehmann's, Syms, Filene's, etc.) as well as unsuccessful offshoots (ie Structure, Ruehl)

My thinking is that the lack of mean-reversion is driven in part by online shopping (not only direct substitutes but also reducing physical shopping trips), in part by demographics and in part by stagnant real discretionary incomes for the bottom YY% of the population.

Also beware of any thesis heavily based on the putative "value" of a company's retail real estate or overly optimistic vacancy and rent increase projections.

Update 3/24/14: this is what traffic has looked like. The rest of the charts are from the original post.