Survival of the Fittest

In today’s email:

• Survival of the Fittest: These 3 retailers are on the verge of bankruptcy

• Bigger is Better: Target upgrades their new store format

• Top Reads for your weekly enjoyment.

These Retailers May Not Survive Next Year

With the rise of e-commerce, many are quick to declare the death of brick and mortar. As we’ve seen, brick and mortar is alive and well, but retailers must continue to adapt to keep up with consumer demands and stay in business.

The list of dying retailers gets longer every year and this year is no different. With rising inflation and consumers pulling back on spending, more retailers will be closing up shop.

Here are three companies that are on the verge of bankruptcy:

Party City

The Rundown:

• Party City took a major hit during covid and still hasn’t recovered.

• After weaker than anticipated Halloween sales, the company announced it is decreasing its workforce by 19%.

• The bottom line is Party City doesn’t have the cash flow to service its debt!

Our take: Big box retailers have been dropping like flies over the years and Party City may be the next casualty. With rising inflation, it’s unlikely that consumers will be opening up their wallets for parties.

Bed Bath and Beyond

The Rundown:

• BB&B has been on a downward spiral since the pandemic.

• Sales declined from $12B in 2019 to $7.8B in 2022.

• The CFO recently committed suicide after accused of securities fraud.

• The company is closing 150 stores and laying off 20% of its staff.

Our take: This company is doomed. A new executive team took bold steps to turn the company around and failed. That executive team is now gone.

A core part of the BB&B business has been wedding registries, making up 30% of the business. That has also been in decline, as Amazon and Target have taken over market share.

You don’t have to take our word for it. Moody’s downgraded BB&B due to a “high likelihood of a default over the next twelve months”.

Rite Aid

The Rundown:

• Drugstores have all been in decline and have faced major problems with shoplifting.

• They are closing 145 stores. That’s never a good sign.

• EBITDA declined from $850M in 2015 to $400M in 2022.

Our take: Shopping at drugstores these days feels like walking into a prison commissary. Cameras everywhere. Products are often locked behind plastic. The stores are understaffed and no one seems happy to be there. Drugstores are all in need of a facelift and those that don’t update will fall by the wayside.

Target Stores Get a New Look

With all of the retail doom and gloom, Target is one store that consistently gets it right. From the physical retail, to online sales, they are the omni-channel champion.

While many retailers are shrinking their store footprint, Target is going bigger!

Target recently announced its larger format design.

Target clearly cares about their customers. The entire experience is designed with the end user in mind. The concept was designed in virtual reality, allowing the design team to virtually walk the space and optimize the store.

Target’s new format is 150,000 SF, more than 20k SF larger than the current average Target store. This new large format will be the focus as the retailer expands in the coming years.

Design Upgrade

The new design will have a greater focus on sustainability, as part of Target’s initiative to achieve net zero emissions by 2040.

Here’s what we know about the new Target design

• Larger windows and open layout to increase natural light

• More native plants and reclaimed wood, tailored to locations

• Natural refrigerants to reduce carbon emissions

• Rooftop solar in some locations

• EV charging stations in some locations

TL;DR

Canada Goose offers a “snow room” to try on products 

PopShelf, a Dollar General offshoot, looks to open 1,000 stores by 2025

Jack in the Box offers a sneak peak at their drive-through only format

Diddy, also known as Sean Combs, creates the largest black-owned cannabis company

That’s it for today!

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