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Amazon has made a big push into clothing in the last two years, expanding its offerings of high-volume items like bras, socks,  and men’s dress shirts where shoppers don’t care about brand names.
Amazon has made a big push into clothing in the last two years, expanding its offerings of high-volume items like bras, socks,  and men’s dress shirts where shoppers don’t care about brand names.

US Retail Bankruptcies Up

22% of retailers surveyed are expected to post losses, the highest percentage since the second quarter of 2009

US Retail Bankruptcies Up

It's starting to look a lot like the Great Recession redux for retailers. More than twice as many stores have closed this year than at the same point last year. Bankruptcies are far outpacing last year's rate. Retailers slashed jobs at the sharpest pace in seven years this spring. And retailers collectively could report the biggest drop in first-quarter profits since 2009.
This time, the culprit's not the economy but shoppers whose habits have changed profoundly and permanently, as they shop online more and look for deals. The results this week from department stores like Macy's, Kohl's and J.C. Penney are expected to illustrate the latest damage by the spending shift and the dominance of Amazon, AP reported.
"The first-quarter reports will show how difficult the mountain retailers will have to climb," said Ken Perkins, president of research firm Retail Metrics LLC. "Things are far better from an economic perspective than before when the sky was falling." But he says people are increasingly spending on experiences and shopping on phones and tablets, "and stores are facing pressure from off-price stores and Amazon.com."
Perkins estimates that the 114 retailers he tracks will see an average drop of more than 5% in first-quarter earnings, marking the second straight quarter of declines and third in the last six quarters. But he thinks there's even a chance they could surpass a 7.1% drop in the fourth quarter of 2013 that would make it the worst quarter since 2009. Moreover, 22% are expected to post losses, the highest percentage since the second quarter of 2009. And he forecasts that nearly half of the retailers will see total sales revenue fall, nearing the level of the last downturn.
Massive Closures
The bad news for retail has been relentless of late: The Limited closed all its remaining 250 stores. Payless ShoeSource is shuttering nearly 400 stores as part of its bankruptcy reorganization. Other chains that have shuttered all their stores or retrenched include Abercrombie & Fitch, BCBG and Wet Seal. Mall anchors like Macy's and J.C. Penney are closing locations. And Sears Holdings Corp. has said there's "substantial doubt" about its future, though it has insisted that its actions to turn around its business should help reduce that risk.
Perkins believes the rash of store closings and job cuts will be a minor burden on the economy. The vast majority of retail workers are paid less than the hourly average earnings per hour of $25, so the impact is far less than losing higher-paying manufacturing jobs, he says. But Frank Badillo, director of research at MacroSavvy, believes the effect will be wider.
"The economic effects tend to reinforce the widening income equality and redistribution that favor 'haves' over 'have nots', professional class over the working class and urban over rural," Badillo said.
The National Retail Federation, the nation's largest retail trade group, is sticking with its annual sales growth forecast of 3.7 to 4.2% over 2016. But that includes a hefty expected bump of 8% to 12% from online and other non-store business.
The clothing sector may be at a tipping point when it comes to online shopping for that category. Cooper Smith, an analyst at research firm L2, estimates that about 18 to 22% of clothing sales will be online this year. That's a critical juncture. His research and that from firms like Boomerang Commerce shows that when online penetration in a merchandising category hits 20%, that's when Amazon steps up its game to seek more of that market. Analysts say one example is what happened when consumer electronics hit that threshold around 2005, and the liquidation of chains like Circuit City followed.
Amazon has made a big push into clothing in the last two years, expanding its offerings of high-volume items like bras, socks, and men's dress shirts where shoppers don't care about brand names.

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