How to Play the Retail “Ice Age”
The images I’m about to share with you today are upsetting.
To be honest, I find them downright disturbing. But if you’re planning to invest even a single dollar this year, you’ve got to see them…
…and invest accordingly – or risk losing it all, like most others will.
These Pictures Weren’t Taken in the Third World…
Take a good look at this picture.
It’s not Syria… not a riot damaged area of Venezuela… not any of a dozen backwater locations around the world.
It’s the Rolling Acres Mall in Akron, Ohio.
This one is from the Hawthorne Plaza Mall in Hawthorne, California.
Whenever I talk about this, people short circuit. They know it’s happening on some level but malls have been such a big part of the American shopping landscape for so long they just cannot process what’s happening.
America’s malls are dying and the big box retailers who once served as “anchor” tenants guaranteed to bring valuable foot traffic through the doors are going with ’em. Or, rather, because of them.
There were more than 35 million visits to malls in 2010 according to Cushman and Wakefield. By 2013 that figure had dropped by 50% to 17 million. The latest projections could drop below 10 million this year.
According to retail analyst Jan Kniffen, one third of all U.S. malls will fail or be converted to non-retail space within the next decade. Two years ago, that figure stood at 10%.
I think that’s conservative and that as many as 50% of all US shopping malls will fail within the next 10 years.
Many investors want to believe Wall Street’s hype.
“Sales will be back,” goes the rally cry. “Retailers will figure out how to combat the inevitable decline by re-engaging consumers one wallet at a time.”
No, they won’t.
Rest Easy, Retail
Sales per square foot have dropped by more than 25% over the past 10 years, according to a report published by Green Street Advisors last December. Now it’s probably closer to 30%.
Sears Holding Corp. (NasdaqGS:SHLD) would have to close more than 50% of its locations to get back to comparable sales per square foot figures posted 10 years ago. JC Penny Company Inc. (NYSE:JCP) would have to close 320 locations to do the same thing, according to Forbes.
Nearly 50% of the total value of all U.S. shopping malls is concentrated in just 100 properties according to Professor Scott Rothbort of Seton Hall University’s Stillman School of Business. The other 900 are doomed.
It doesn’t matter whether you’re talking about the big retailers themselves or the tiny specialty shops that depend on them for ancillary business. They’re all going “the way of the dodo” in the next few years.
Any investor along for the ride will get crushed.
Many already are, in fact.
Nordstrom Inc. (NYSE:JWN) is down 31% since December 2016. Sears is down 35% in just under two weeks, and 80.35% since I recommended Total Wealth readers short it back in January of 2015. I called it “one of the most dangerous stocks on Wall Street,” and in January 2014 put it on my list of stocks to avoid at all costs.
The “Retail Ice Age” I talk about so frequently during my television appearances is very, very real.
This will be an extinction level event for most investors.
But, not for you.
That’s where the Unstoppable Trend, “Technology” comes in.
“Clicks” and Mortar
Online shopping has devastated the physical retail shopping experience.
Just yesterday, for example, I visited a local mall as part of my research for this story. Nearly every shopper had a smartphone in hand.
More than a few I watched bought online and left empty handed, having fallen prey to the practice of “showrooming” – meaning using a given storefront as little more than a place to examine a product that’s then purchased on line, and often from an entirely different merchant.
Retailers are trying to fight back but it’s an expensive, uphill battle. Digital shelf displays are growing in popularity because they can be linked to smart phone applications many consumers already use. But the cost of equipping a single location can run well into the six figures. It’s a multi-million-dollar, profit-squashing undertaking.
The goal, of course, is to blur the online/offline experience and capture more sales but I think the consumer driven initiative is going to backfire. Physical retailers simply can’t keep up.
For example, big retailers average 5,000 price changes a month, according to Kevin Robison, a Department of Defense spokesman for the Defense Commissary Agency, which runs 180 military commissaries. An electronic shelf price tag can handle 3,000 price changes an hour.
If you’ve ever walked through a store and thought prices were changing as you go from one aisle to the next, you’re not imagining things. In fact, there are already experiments underway that will display different prices to different shoppers based on your Internet search history, your phone and your habits.
It’s not inconceivable that you’ll be walking along with your spouse or a friend and see two different prices on the same shelf item.
As obnoxious and personally invasive as that thought is, it’s also your entry.
The best way to play the situation is to align your money with the technology that makes it possible. Retail itself is nothing more than a secondary consideration.
Right now the top players are companies like Amazon.com Inc. (NasdaqGS:AMZN), Facebook Inc. (NasdaqGS:FB), Apple Inc. (NasdaqGS:AAPL), Alibaba Group Holdings Ltd. (NYSE:BABA) and Alphabet Inc. (NasdaqGS:GOOGL) for three reasons:
- These companies are built around constantly changing consumer behavior and have a business model that’s specifically around adapting content to it.
- These companies are global players which means your money isn’t limited to specific geographic locations and retail players that may not survive. And;
- These companies are so well capitalized that it’s them “versus everybody else” which means your money is positioned at the top of the proverbial food chain rather than the bottom where everybody else thinks the game is being played.
There’s just one teensy problem – every one of those stocks is very expensive.
Amazon, for example, is trading at $995 a share while Alphabet just hit $988. To paraphrase my dad when I broached the subject with him as part of our family planning, you can “buy 100 shares… or a house.”
Fortunately, I’ve got a workaround. It’s one I think you’re going to like and, hopefully, find very profitable, too.
The key to the retirement of your dreams:
Enter the T. Rowe Price Blue Chip Growth Fund (TRBCX) – one of a special class of investments that lets you profit from Amazon for as little as $72/share.
Amazon is TRBCX’s largest holding, with an 8.97% stake that’s almost twice the size of its next largest holding, Facebook.
As if that weren’t enough, TRCBX has another stake in Alibaba, which is China’s largest e-commerce company. Alibaba has managed to grow revenues at more than 54% year-over-year, and is poised to be an enormous growth stock down the road.
And the best part? The fund doesn’t need Alibaba or any other holding to go off on a tear in order to reward investors extremely well. After all, Alibaba hasn’t returned triple-digit profits since its IPO more than two years ago, but TRBCX was able to beat Alibaba’s individual performance by 215%.
Thanks to its ability to tap powerful growth stocks and even post returns exceeding them, TRBCX has beaten the Dow by 45% over the last five years – during one of the most celebrated bull markets of history.
Best of all, the forces pushing Amazon and Alibaba stock to new record prices – specifically, the booming global e-commerce revolution – are just getting started. eMarketer forecasts the global market for e-commerce to reach $4 trillion by 2020, providing huge tailwinds for the two most important e-commerce players.
TRBCX is just one of ten opportunities like this – among a special class of investment programs that operate as 100% legal tax havens, generate aggressive monthly income for investors, and allow you to tap into the best stocks in the market with a single move. Some of them only require $100 to get started. [Enroll here.]
Best regards for great investing,