January 21, 2014 – ECONOMY – Two of the largest retailers in America are steamrolling toward bankruptcy. Sears and J.C. Penney are both losing hundreds of millions of dollars each quarter, and both of them appear to be caught in the grip of a death spiral from which it will be impossible to escape. Once upon a time, Sears was actually the largest retailer in the United States, and even today Sears and J.C. Penney are “anchor stores” in malls all over the country. When I was growing up, my mother would take me to the mall when it was time to go clothes shopping, and there were usually just two options: Sears or J.C. Penney. When I got older, I actually worked for Sears for a little while. At the time, nobody would have ever imagined that Sears or J.C. Penney could go out of business someday. But that is precisely what is happening. They are both shutting down unprofitable stores and laying off employees in a desperate attempt to avoid bankruptcy, but everyone knows that they are just delaying the inevitable. These two great retail giants are dying, and they certainly won’t be the last to fall. This is just the beginning. Sales have declined at Sears for 27 quarters in a row, and the legendary retailer has been closing hundreds of stores and selling off property in a frantic attempt to turn things around. Unfortunately for Sears, it is not working. In fact, Sears has announced that it expects to lose “between $250 million to $360 million” for the quarter that will end on February 1st. Things have gotten so bad that Sears is even making commercials that openly acknowledge how badly it is struggling.
For example, consider the following bit of dialogue from a recent Sears television commercial featuring two young women. “Wait, the movie theater is on the other side,” the passenger says. “But Sears always has parking!” the driver responds. Sears always has parking??? Of course the unspoken admission is that Sears always has parking because nobody shops there anymore. This week J.C. Penney announced that it is eliminating 2,000 jobs and closing 33 stores. It’s been a brutal year for J.C. Penney, its stock falling over 60% in the past 12 months. The company has been losing hundreds of millions of dollars per quarter, and is in the midst of another turnaround effort after ousting former Apple executive Ron Johnson last year. Overall, shares of J.C. Penney have fallen by an astounding 84 percent since February 2012. And keep in mind that this decline has happened during one of the greatest stock market rallies of all-time. For now, J.C. Penney will continue to try to desperately raise more cash from investors that are foolish enough to give it to them, but all that is really accomplishing is just delaying the inevitable. If you would like to see some photos that graphically illustrate why J.C. Penney is falling apart, you can find some right here. And of course Sears and J.C. Penney are not the only large retailers that have fallen on hard times. This week the CEO of Best Buy admitted that sales declined at his chain during the holiday season. Best Buy shares skid on Thursday after the retailer said total revenue and sales at its established U.S stores fell in the all-important holiday season due to intense discounting by rivals, supply constraints for key products and weak traffic in December. –Zero Hedge