{"id":103375,"date":"2017-03-13T10:54:07","date_gmt":"2017-03-13T14:54:07","guid":{"rendered":"http:\/\/countingpips.com\/?p=103375"},"modified":"2017-03-13T05:54:55","modified_gmt":"2017-03-13T09:54:55","slug":"profit-from-the-rise-of-ghost-malls","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/03\/profit-from-the-rise-of-ghost-malls\/","title":{"rendered":"Profit From the Rise of Ghost Malls"},"content":{"rendered":"<div id=\"inves-605511048\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">March 13, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/03\/0317_malls_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/03\/0317_malls_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/03\/0317_malls_feature-300x155.jpg 300w\" alt=\"Profit From the Rise of Ghost Malls\" width=\"580\" height=\"300\" \/><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-louis-basenese.jpg\" alt=\"Louis Basenese\" width=\"85\" height=\"100\" \/>Malls are scary places these days.<\/p>\n<p>Derelict malls have become attractive venues for drug addicts, homeless people and even the bodies of murdered people.<\/p>\n<p>Heck, why live on the cold streets of, say\u2026 Minneapolis, when there\u2019s an empty A\u00e9ropostale to call home?<\/p>\n<p>Meanwhile, malls lucky enough to still operate have problems of their own.<\/p>\n<p>On the day after Christmas, CNN reported massive brawls and food court fights at more than a dozen malls across the country. Yikes.<\/p><div id=\"inves-542032966\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>The age of malls is over, folks.<\/p>\n<p>Top retail analyst Jan Kniffen says about one-third of U.S. malls will close in the coming years.<\/p>\n<p>Bottom line, capitalism forces businesses to adapt or die.<\/p>\n<p>For companies like J.C. Penney and Sears, the chance to adapt has long passed.<\/p>\n<p>But what about some of America\u2019s other great retailers?<\/p>\n<p>I asked my senior analyst Martin Hutchinson to drill down on the retail sector.<\/p>\n<p>With a handful of once-great retailers destined for the courthouse steps, we have an opportunity to profit from their demise.<a name=\"video\"><\/a><\/p>\n<p>Hutch\u2019s full report is below.<\/p>\n<p>Smart investing,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <i>Wall Street Daily<\/i><\/p>\n<hr \/>\n<p><script src=\"https:\/\/fast.wistia.com\/assets\/external\/E-v1.js\" async><\/script><\/p>\n<div class=\"wistia_responsive_padding\" style=\"padding: 56.88% 0 0 0; position: relative;\">\n<div class=\"wistia_responsive_wrapper\" style=\"height: 100%; left: 0; position: absolute; top: 0; width: 100%;\">\n<div class=\"wistia_embed wistia_async_87rsei57cf videoFoam=true\" style=\"height: 100%; width: 100%;\"><\/div>\n<\/div>\n<\/div>\n<hr \/>\n<p><strong>Question:<\/strong> Martin, I\u2019m concerned about the border adjustment tax and how it will impact retailers. I\u2019m hearing some chatter on both sides, but by and large, it\u2019s negative. Is this going to be a net positive or negative for retailers?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I think the border adjustment tax doesn\u2019t have all that high a chance of being introduced. But if it is introduced, it will be a big negative for retailers, because most of them are big importers.<\/p>\n<p>You\u2019ve got companies like Wal-Mart, which are importing from China. Their costs will increase by 20% with the border adjustment tax, and inevitably, that\u2019s going to affect sales. And retailers are incredibly sales dependent. So that\u2019s one particular factor impacting retailers \u2014 but there are several others.<\/p>\n<p>The main one is e-commerce, which was 8.1% of total sales in 2016, up from 7.3% in 2015. Now that\u2019s still not a huge share of the market, but it\u2019s eating away at the brick-and-mortar retail market steadily. And obviously, it can only get bigger. That\u2019s a pretty big head wind, if someone else is taking market share from you every year.<\/p>\n<p>And then on the cost end, there are minimum wage rises. It doesn\u2019t matter if it\u2019s 5% or 10%. But some places are raising minimum wage to $15 like Seattle or New York City. I mean the whole state of New York is going to $12.50.<\/p>\n<p>That\u2019s a huge increase in cost for low-end retailers like the Wal-Marts and Targets of this world. It doesn\u2019t matter too much at Nordstrom, because they will pay more than that. But at the low end, it\u2019s a big cost increase.<\/p>\n<p><strong>Question:<\/strong> Hutch, can we talk a little bit about what seems to be the end of the mall culture in this country? I have to tell you, I try to avoid malls at all costs these days, but I had to go the other day. And it was kind of depressing.<\/p>\n<p>I\u2019m one of these folks that has moved all of my purchasing, as much as I can anyhow, onto online \u2014 particularly Amazon. It\u2019s almost depressing being in a mall these days. What can you tell us about that?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> That\u2019s quite right, and it\u2019s not just the world getting older. It\u2019s that the malls are getting older as well.<\/p>\n<p>We were building 140 a year in the mid-1990s. But there were no new malls built from 2007\u20132012. Nearly 3% of malls in 2014 are dying. Which is defined as more than 40% vacancies. And if they\u2019ve lost their anchor store, they\u2019re in real trouble. Two hundred of 1,300 were said to be going out of business in 2016.<\/p>\n<p>Rising interest rates, obviously, will choke off any new construction in that area. And frankly, old, unattractive malls are just not nice places to be. They will drive people toward online.<\/p>\n<p>And you got some other things that will do that as well. The cost cutting, for instance, pushes people to online. For example, Eddie Lampert, who is the hedge fund guy who owns Sears, stopped cleaning the stores for several years. Now that doesn\u2019t help traffic. As a Sears customer myself, I can assure you it was repulsing.<\/p>\n<p>You can generate cash through a leaseback, which Macy\u2019s is doing currently \u2014 and Sears has done it. But Sears is now selling outright because they\u2019re losing so much money.<\/p>\n<p>You can close and sell stores, which Sears and J.C. Penney are doing, but all that\u2019s reducing your business over time.<\/p>\n<p>So the outlook for general retailers just isn\u2019t very good.<\/p>\n<p><strong>Question:<\/strong> Hutch, listening to you, it doesn\u2019t sound like this is savable \u2014 especially for the bigger retailers. Is there a way our readers out there might be able to position themselves and profit from this?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Well, yes, that\u2019s what one is always looking for. The specialty retailers will do all right. For example, Ulta Beauty is expected to report good figures and is trading on 46 times earnings. That\u2019s probably excessive. We\u2019re in a bull market, but the specialists probably don\u2019t have too much of a problem.<\/p>\n<p>But the general stores that are not on the top end have real problems. In other words, <em>not<\/em> the Nordstroms and the Neiman Marcuses of the world.<\/p>\n<p>And so I think we can play this fairly easily.<\/p>\n<p>Puts on Macy\u2019s, for example. Its profits were down 13% in the fourth quarter. Sales are expected to be down 2% or 3% in the first quarter of 2017.<\/p>\n<p>Debt was just downgraded from BBB to BBB- \u2014 so one more downgrade and it\u2019s junk. It closed 66 stores in 2016, and it plans to close another 34 this year.<\/p>\n<p>Now you know that\u2019s not a happy picture, because if you\u2019re closing stores all the time, you\u2019re reducing your footprint and reducing your market share.<\/p>\n<p>The company is currently trading around $32. And the $25 January 2019 puts would cost you about $3 each. Now, if Macy\u2019s hits its October 2008 price of $7.42, you\u2019ll make six times your money on that trade. You\u2019ll make 238% profit even if it gets to double its 2008 price.<\/p>\n<p>So overall, I think those puts at $25, costing you about $3, are a very good deal and a good value play on Macy\u2019s \u2014 and to play the problems that retailers currently have.<\/p>\n<p><strong>Question:<\/strong> Not a particularly uplifting conversation today, Hutchinson, especially talking about the demise of an American institution in Macy\u2019s. But it just proves that there are profit opportunities on the downside too, if we\u2019re willing to look for them, right?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Very much so.<\/p>\n<p><strong>Question:<\/strong> Thanks a lot, Hutchinson. We\u2019ll talk to you again next week. This is <em>Wall Street Daily<\/em> signing off.<\/p>\n<p>Good investing,<\/p>\n<p>Martin Hutchinson<br \/>\nSenior Analyst, <i>Wall Street Daily<\/i><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/03\/13\/profit-rise-ghost-malls\/\" rel=\"nofollow\">Profit From the Rise of Ghost Malls<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Malls are scary places these days. Derelict malls have become attractive venues for drug addicts, homeless people and even the bodies of murdered people. Heck, why live on the cold streets of, say\u2026 Minneapolis, when there\u2019s an empty A\u00e9ropostale to call home? Meanwhile, malls lucky enough to still operate have problems of their [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-103375","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103375","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=103375"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103375\/revisions"}],"predecessor-version":[{"id":103381,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/103375\/revisions\/103381"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=103375"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=103375"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=103375"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}