Dying shopping malls are wreaking havoc on suburban America

Foto: Nicholas Eckhart Rolling Acres Mall in Akron, Ohio

Rolling Acres Mall in Akron, Ohio opened in 1975 to great fanfare as the premier shopping destination for the surrounding community. But customer traffic started to slow more than a decade ago, several department stores abandoned their leases, and the mall started failing. It lost its last store tenant in 2013.  The mall was still standing vacant last year, and it remained a safety concern. The mayor of Akron instructed residents in July to “stay clear” of the area. The city finally began the process of demolishing the rotting shopping center in late October. Like Rolling Acres, shopping malls across the country are dying, and in some cases leaving jobless communities and rotting buildings that are hotbeds for crime in their wake. Dozens of malls have closed in the last 10 years, and many more are at risk of shutting down as retailers like Macy’s, JCPenney, and Sears – also known as anchor stores – shutter hundreds of stores to staunch the bleeding from falling sales.

The commercial real estate firm CoStar estimates that nearly a quarter of malls in the US, or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor store.

 Many storefronts in the struggling Regency Square mall in Richmond, Virginia have gone dark.sourceBusiness Insider/Hayley Peterson

When anchor stores close, it can be hard to find businesses to replace them because they occupy the giant, multi-story buildings at mall entrances, which are are often at least 100,000 square feet. If no replacement tenant is found, the loss can trigger a decades-long downward spiral for the shopping mall and surrounding communities. “The communities wither away, and they never come back,” says Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm headquartered in New York City.

When anchor stores are boarded up, traffic tends to decline to the retailers located in the middle sections of malls. That has been happening at shopping malls nationwide, and now many retailers are going out of business and closing all their stores as a result.

Just within the last couple months, several mall-based stores including American Apparel, Abercrombie & Fitch, The Limited, Bebe, BCBG, and Wet Seal have all announced mass closures. The process of a shopping mall shutting down entirely happens slowly – often over the course of a decade or more. As stores are boarded up one by one, shopper traffic slows and crime in the area tends to spike, Davidowitz says. “Malls are big, big contributors to city and state taxes, jobs, and everything,” Davidowitz says. “Once they close, they are a blight on the community for a very long time.” There were as many as 890 crime incidents at one Memphis-area mall between January 1, 2012 and July 15, 2015, according to an investigation last summer by local NBC affiliate WMC Action News. Zent said he believes that crime is the biggest reason why shopping mall traffic has declined in the last decade, though many analysts attribute those declines to changing shopper preferences and the rise of online shopping. Sure enough, studies show Americans are increasingly choosing to spend money on technology and experiences like vacations over apparel. When they shop for clothing, a growing number of them are going to discount stores like TJ Maxx or ordering from Amazon

Canada announces retaliatory tariffs on steel and aluminum

Canadian PM on tariffs: We hope common sense will triumph

Canada will retaliate against new U.S. tariffs by imposing its own trade barriers on U.S. steel, aluminum and other products, Canadian Foreign Minister Chrystia Freeland said Thursday. Freeland said Canada plans to slap dollar-for-dollar tariffs on the U.S. The Nafta partner’s proposed import taxes would also cover whiskey, orange juice and other food products alongside the steel and aluminum tariffs. The retaliatory measures will cover CA$16.6 billion in imports, Freeland said. The products being targeted will be subject to tariffs between 10 percent and 25 percent. Canadian Prime Minister Justin Trudeau said that the tariffs, announced Thursday by Commerce Secretary Wilbur Ross, are an affront to the security partnership between the U.S. and Canada. Ross said the tariffs will take effect at midnight Thursday, when previously set exemptions for Canada, Mexico and the European Union are set to expire. The tariffs are “totally unacceptable,” Trudeau said, though he noted that Canada will continue to negotiate with the U.S. Trudeau warned that the import taxes — of 25 percent on steel imports and 10 percent on aluminum imports — will harm both countries’ economies.

Pending home sales fall more than expected as costs for buyers rise

A real estate agent, right, shows a home to a prospective buyer in Miami, Florida.
Getty Images A real estate agent, right, shows a home to a prospective buyer in Miami, Florida.
Potential homebuyers out shopping in April may have been spooked by a sharp rise in mortgage interest rates. Pending home sales, which measure signed contracts to buy existing homes, fell a wider-than-expected 1.3 percent compared to March, according to the National Association of Realtors. It was the third lowest level of the past year.

Pending sales were 2.1 percent lower compared to April of 2017 the fourth straight month showing an annual decline. The Realtors point, again, to the continuing supply crisis in housing today. “Feedback from Realtors, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher,” said Lawrence Yun, chief economist for the NAR in a release. “The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.”

Weakening affordability is going hand-in-hand with short supply, especially on the lower end of the market. As home prices continue to rise, potential buyers have less and less wiggle room in their wallets.

Mortgage rates jumped sharply in April, with the average rate on the popular 30-year fixed hitting its highest level in seven years. Buyers out shopping were having to recalculate their budgets for homes. Buyers are also seeing higher prices for gas, which, while not a major factor for everyone, may weigh on consumer confidence. Buying a home is usually the largest investment most people ever make, and confidence is therefore key. “The combination of paying extra at the pump, while also needing to save more for a down payment because of higher rates and home prices, may weigh on the psyche of those looking to buy,” said Yun. Regionally, pending home sales in the Northeast were unchanged for the month and 2.1 percent lower than one year ago. In the Midwest, sales decreased 3.2 percent monthly, and were 5.1 percent lower than April 2017.

‘Caution is going to be the word here,’ says former super bull Jeremy Siegel

‘Caution is the word here,’ Wharton’s Jeremy Siegel says
‘Caution is going to be the word here,’ Wharton’s Jeremy Siegel says

Wharton School finance professor Jeremy Siegel appears to be wandering from the bull camp. Siegel, who helped lead 2017’s rally cry, told CNBC’s “Trading Nation” that he isn’t blaming Italy’s political turmoil, the latest headline to rock the markets, for a borderline bearish forecast. Rather, he cited risks from rising rates to trade tensions. “The major threat of the market is higher interest rates going forward. Too many people read the FOMC minutes as being too dovish,” he said Wednesday.

Siegel expects the Federal Reserve to hike rates a total of four times this year, a number Wall Street may be dangerously underestimating. As rates rise, stocks historically look less appealing to investors.

He’s also viewing trade tensions with China as a “wild card” for the market. “[President Donald Trump] feels he has to tread very, very carefully on this. It doesn’t mean for sure he won’t go full blast forward,” Siegel said. “Caution is going to be the word here.” His thoughts came as stocks staged a comeback a day after Italy tensions rattled the market. Siegel has been warning since December that 2018 wouldn’t be as robust as 2017, and stocks would be flat to up 10 percent by year-end. “This is a great year for earnings, no one argues with that. But the tax cut is front-loaded which means that the write-offs on capital equipment are going to accrue to 2018 and not nearly as much in 2019,” Siegel said.

Mexico hits back at U.S. tariffs with measures on farm, steel products

MEXICO CITY (Reuters) – Mexico responded to U.S. steel and aluminum tariffs by imposing wide-ranging “equivalent” measures on farm and industrial products, the economy ministry said on Thursday, ratcheting up tensions during talks to renegotiate NAFTA. The United States on Thursday morning said it was moving ahead with tariffs on aluminum and steel imports from Canada, Mexico and the European Union, ending a two-month exception and threatening to ignite a trade war. The Mexican measures, which target pork legs, apples, grapes and cheeses as well as steel, could hit farm states that are a bastion of support for U.S. President Donald Trump, ahead of American midterm elections in November. The Mexican measures will be in place until the U.S. government eliminates its tariffs, the ministry said.

“Mexico profoundly regrets and condemns the decision by the United States to impose these tariffs on imports of steel and aluminum from Mexico,” the ministry said.

“Mexico reiterates its openness to constructive dialogue with the United States, its support for the international commerce system and its rejection of unilateral protectionist measures,” it said. Mexico buys more steel and aluminum from the United States than it sells. It is the top buyer of U.S. aluminum and the second buyer of U.S. steel, the economy ministry said. The countermeasures will hit U.S. hot and cold rolled steel, plated steel and tubes, the ministry said. The United States, Canada and Mexico have been renegotiating the North American Free Trade Agreement, which governs trade between the three countries.

Savings Rate Tumbles Back Near Record Lows As Americans Spend More Than They Make For 28th Month In A Row

While US personal incomes grew, as expected, at 0.3% MoM, Americans resumed spending fare more than they make (increasing 0.6% MoM in April). For the 28th month in a row, YoY growth in spending has outpaced incomes, sending the savings rate back down to just 2.8, the lowest since the debt-funded holiday spending spree of December 2017, and just shy of record lows. Spending YoY is the highest since April 2017: Adjusted for inflation, real consumption rose 0.4%, double the median projection of 0.2%. The Commerce Department said spending for gasoline and other energy goods, as well as household utilities, were leading contributors to the monthly increase in real outlays. Real durable goods spending, rose 0.3% after a 1.9% increase in the prior month; nondurable goods advanced 0.4% for a second month. Outlays on services, adjusted for inflation, rose 0.4% after a 0.3% gain in prior month.

Sears Is Closing More Stores as Sales Shrink For 26th Quarter in a Row

Struggling retailer’s revenue has declined as it closed hundreds of stores

The last remaining Sears store in Chicago on May 13. Sears Holdings said Thursday that it plans to close another 72 stores.
The last remaining Sears store in Chicago on May 13. Sears Holdings said Thursday that it plans to close another 72 stores. Photo: Patrick Gorski/Zuma Press
 

Sears Holdings Corp. SHLD -9.66% said Thursday that it plans to close another 72 stores it has deemed unprofitable, as the company continues to struggle with falling sales. Sears has been closing hundreds of stores in recent years, selling brands and spinning off divisions to stay afloat as losses have mounted and as it struggles to keep its customers away from Walmart Inc., Amazon.com Inc. AMZN 0.58% and other outlets. The company said a list of the 72 stores would be posted later Thursday.

The new round of store closures comes as the retailer reported sales fell in the latest quarter, extending a streak of declines that stretches back more than six years at the once dominant retailer. The last time Sears’s sales increased from the previous year was in the third quarter of 2011, when the company had $9.4 billion in revenue, according to data from Thomson Reuters . In the latest quarter, total merchandise sales fell 34% to $2.2 billion. Total revenue, which includes money generated from appliance and product-repair services, fell 31% to $2.89 billion. Same-store sales at Sears locations fell 13.4%, while they declined 9.5% at Kmart locations. The company operated 894 total locations as of May 5, down from 1,275 as of around the same time the year prior. Sears reported a first-quarter net loss of $424 million, or $3.93 a share, compared with a profit of $245 million, or $2.29 a share, a year earlier. The prior-year quarter’s results got a $741 million lift from asset sales. In the latest period, Sears recorded a $165 million benefit. Mr. Lampert, who is also Sears’s biggest investor and among its biggest lenders, said in an April letter to the Sears board that his ESL Investments Inc., which owns a controlling stake in the retailer, is willing to submit offers for Kenmore, the Sears Home Improvement and Parts Direct businesses as well as some real estate, including $1.2 billion in debt secured by the properties

The company’s shares, which more than a decade ago traded above $100, now languish at around $3. Sears shares fell 3.4% premarket trading Thursday. Mr. Lampert’s interest in purchasing Kenmore and the other businesses extends a string of transactions in which he is often on both sides. In addition to serving as Sears’s chairman and CEO, he is also chairman of, and a major investor in, Seritage, which ranks among Sears’s biggest landlords.

China reportedly lining up countries against US in pending trade war

China's President Xi Jinping (R) meets German Chancellor Angela Merkel at the Great Hall of the People in Beijing, China, May 24, 2018.
Jason Lee | Reuters China’s President Xi Jinping (R) meets German Chancellor Angela Merkel at the Great Hall of the People in Beijing, China, May 24, 2018
China is reportedly looking to line up other countries against the U.S. in a pending trade war after the White House took an unexpected move forward on tariffs a day earlier, the Wall Street Journal said Wednesday, citing Chinese officials.

On Tuesday, the White House announced it would have a final list of $50 billion in imports that would be subject to 25 percent tariffs by June 15, and two weeks later would announce investment restrictions on Chinese acquisitions of U.S. technology. In response, China is reportedly looking to line up countries against the U.S., the Journal reported. The countries in question are mostly in Europe and Asia, where companies could benefit from China’s plans to give foreign companies more open access to its markets. Tuesday’s announcement came just days after the two countries announced a tentative solution. U.S. Treasury Secretary Steven Mnuchin had said any trade war would be put on ice while negotiators worked out the details. As part of that deal, China would reduce its trade advantage by buying more U.S. goods such as agricultural and energy commodities.  U.S. Commerce Secretary Wilbur Ross is set to arrive in Beijing Saturday but the surprise move from Washington could be an impediment to those talks, and is “casting doubt” over whether they can advance to the next level, the Journal reported.

U.S. GDP Growth Revised Down to 2.2% Rate in First Quarter

WASHINGTON—U.S. economic growth during early 2018 was slightly softer than initially thought, though a measure of corporate profits partly rebounded in the first quarter after a weak end to 2017. Gross domestic product—the dollar value of all goods and services produced in the U.S., adjusted for inflation—rose at a 2.2% seasonally adjusted annual rate in the first quarter, the Commerce Department said Wednesday. That was down from last month’s initial estimate of 2.3% growth; economists surveyed by The Wall Street Journal had expected an unrevised 2.3% reading. Growth in business investment was revised higher for the first quarter, but offset by downward revisions in other major components including inventories. Compared with a year earlier, total output expanded 2.8% in the first quarter—the strongest annual growth reading in nearly three years. Economists think growth has picked up in the spring, and expect solid growth for 2018 as a whole. Forecasting firm Macroeconomic Advisers last week projected GDP would expand at a 2.9% annual pace in the second quarter, and the Federal Reserve Bank of Atlanta’s GDPNow model predicted 4.0% growth. Wednesday’s report included the government’s first official estimates for U.S. corporate profits in the early months of 2018, in the wake of significant tax-code changes enacted in December. After-tax corporate profits, without inventory valuation and capital consumption adjustments, rose a seasonally adjusted 7.8% in the first quarter after declining 9.6% in the fourth quarter. Compared with a year earlier, profits were little changed in the first quarter, up 0.1% on the year. “Although the economic environment is largely positive for demand, there are some supply-side headwinds to overcome,” Chief Financial Officer Rajesh Kalathur told analysts earlier this month. “Material and freight costs have exceeded our forecast for the year, due largely to inflation in U.S. steel prices and a tight market for logistics providers.” Wednesday’s report showed personal-consumption expenditures climbed at a 1.0% annual pace in the first three months of the year, down slightly from an initially estimated 1.1%. It was the weakest quarter for consumer spending in nearly five years. The housing sector was a headwind for overall growth in the first quarter, with residential fixed investment declining at a revised annual rate of 2.0%. Government spending rose at a 1.1% annual pace last quarter, led by growth in federal-government expenditures on the military and domestic programs. Net exports contributed 0.08 percentage point to the overall GDP growth rate in the first quarter. Change in private inventories contributed 0.13 percentage point. Both categories tend to be volatile from quarter to quarter, and were revised down from last month’s early estimates.

Robot chef cooks 300 burgers a day

– The one-armed burger-flipping robot sensation that got laid off because it couldn’t handle the work is back on the job. Flippy, the somewhat creepy-looking but fascinating piece of one-armed technology at Caliburger in Pasadena, California, has its job back flipping burgers at the grill station. Flippy debuted in March to a media sensation, with many wondering if it was the cook of the future.

It turns about 300 burgers a day, seven days a week.  Flippy came into the job when short-order cooks were leaving the kitchen due to the high hea.t but the owners say it isn’t actually replacing humans and on one at Caliburger has lost their job. Flippy still requires human interaction to work properly but its creators say it can learn from its surroundings and acquire new skills over time..