Retail Watchers

reymann wrote: ↑July 21st, 2024, 9:44 am

ClownLoach wrote: ↑July 20th, 2024, 1:58 pm

storewanderer wrote: ↑July 20th, 2024, 9:38 am

At this point after these closures that distro is going to be so under capacity that keeping it makes no sense. It was already way under capacity before these closures. It is a newer distro center and was built with hundreds of stores expansion in mind.

Maybe a smaller facility elsewhere in SoCal to handle incoming port freight makes sense as long as they stay in business.

I am wondering if a 300-400 store version of the chain can survive out of the OH/PA region.

The fact that 10% of the chain is closing but 50% of those closures are in CA shows there is a major issue with their store operation in CA.

When you look at their closures you actually see a lot of "clusters" of closures (especially in CA). Not "pruning the geography" type closures. I am wondering if they had really bad district and store management in some clusters of stores that just doomed the region. I don't want to be too hard on these people when I know the product and systems they are given to work with are complete trash.

It's a real estate problem. They seem to have a certain dollar amount they don't want to pay over. So they have systematically given up their highest quality locations over the last 5 years or so. To me it appears the lowest quality real estate is all they're going to retain. They will never be profitable with only garbage locations. Many of the closures this round are more desirable sites than what will remain, at least in SoCal. Their presence in SoCal is going to be so minimal I don't think it's worth bothering, they should just close them all. There is zero value to this chain.

I wonder if Mark Miller might be interested in buying the remaining California Big Lots stores to jump start the reboot of Pic N Save. Furniture is what killed a lot of the customer base for Big Lots in California.

Big Lots didn't get the right merchandise for many years. Furniture was a side show for them for decades prior and they used to handle it in separate storefronts, but in a lot of cases initially they actually expanded stores to include furniture, it was in the newer openings the past decade where they cut space of other items and blew a ton of space on furniture.

Those Pic N Save units don't seem to have the right merchandise either. Maybe if they add more locations they can find more liquidation groups to work with to obtain product. So far they simply don't have enough product.

Furniture historically seems to be a bad business. Chains that get involved with it often don't seem to stay in business long term.

reymann wrote: ↑July 21st, 2024, 9:44 am

ClownLoach wrote: ↑July 20th, 2024, 1:58 pm

storewanderer wrote: ↑July 20th, 2024, 9:38 am

At this point after these closures that distro is going to be so under capacity that keeping it makes no sense. It was already way under capacity before these closures. It is a newer distro center and was built with hundreds of stores expansion in mind.

Maybe a smaller facility elsewhere in SoCal to handle incoming port freight makes sense as long as they stay in business.

I am wondering if a 300-400 store version of the chain can survive out of the OH/PA region.

The fact that 10% of the chain is closing but 50% of those closures are in CA shows there is a major issue with their store operation in CA.

When you look at their closures you actually see a lot of "clusters" of closures (especially in CA). Not "pruning the geography" type closures. I am wondering if they had really bad district and store management in some clusters of stores that just doomed the region. I don't want to be too hard on these people when I know the product and systems they are given to work with are complete trash.

It's a real estate problem. They seem to have a certain dollar amount they don't want to pay over. So they have systematically given up their highest quality locations over the last 5 years or so. To me it appears the lowest quality real estate is all they're going to retain. They will never be profitable with only garbage locations. Many of the closures this round are more desirable sites than what will remain, at least in SoCal. Their presence in SoCal is going to be so minimal I don't think it's worth bothering, they should just close them all. There is zero value to this chain.

I wonder if Mark Miller might be interested in buying the remaining California Big Lots stores to jump start the reboot of Pic N Save. Furniture is what killed a lot of the customer base for Big Lots in California.

I don't know why this guy gets so much attention. He can't even stock or manage the two Pic N Save sites he operates now.

Maybe Ollie's will want to make the jump to the West Coast. But Big Lots isn't going to be helpful as they have already closed their better quality locations over the past few years. More better quality locations closing this wave. All that is going to be left at Big Lots will be undesirable buildings in the wrong shopping centers and communities.

These liquidation stores are at the mercy of AI at this point. As soon as the big retailers upgrade their ordering and forecasting systems with AI there will be even less product available for these chains. Much of what you see at TJX and Ross is already direct sourced, little is actually true overstock anymore. It's more obvious at TJX's HomeGoods subsidiary where you can see how they get entire color coordinated and themed collections of product.

I see no value in any of the assets of this chain. This sector has been a dumping ground for others mistakes for decades. Those mistakes are not happening with the same frequency as orders have been tightened up and inventory management across the retail industry has been forced to improve exponentially over the last decade or so to facilitate online ordering and in store pickups.

The coupling of improved inventory management systems and AI integrated forecasting/ordering systems will doom nearly all of these chains.

ClownLoach wrote: ↑July 22nd, 2024, 3:16 pm Maybe Ollie's will want to make the jump to the West Coast. But Big Lots isn't going to be helpful as they have already closed their better quality locations over the past few years. More better quality locations closing this wave. All that is going to be left at Big Lots will be undesirable buildings in the wrong shopping centers and communities.

With some of those closeout type stores, the locations and buildings really don't matter.

People are going there for the deals, and thus they will go get them wherever they are, and whatever the buildings are like (some of them are still using virtually unchanged stuff from stores like Ames, which is at minimum 25 years old now, but as long as it still works and is not falling apart, it does what they need it to do).

It all goes along with the idea that they can offer better deals as they cut costs anyplace possible (including not replacing things as long as they still function).

Ollie's doesn't seem to want to go into the west. They had a chance with 99 Only leases...

Big Lots is much more appealing to me than Ollie's is... gives an idea what I think of Ollie's.

storewanderer wrote: ↑July 22nd, 2024, 4:46 pm Ollie's doesn't seem to want to go into the west. They had a chance with 99 Only leases...

Big Lots is much more appealing to me than Ollie's is... gives an idea what I think of Ollie's.

Ollie's is how I remember Big Lots...

BillyGr wrote: ↑July 22nd, 2024, 4:07 pm

ClownLoach wrote: ↑July 22nd, 2024, 3:16 pm Maybe Ollie's will want to make the jump to the West Coast. But Big Lots isn't going to be helpful as they have already closed their better quality locations over the past few years. More better quality locations closing this wave. All that is going to be left at Big Lots will be undesirable buildings in the wrong shopping centers and communities.

With some of those closeout type stores, the locations and buildings really don't matter.

People are going there for the deals, and thus they will go get them wherever they are, and whatever the buildings are like (some of them are still using virtually unchanged stuff from stores like Ames, which is at minimum 25 years old now, but as long as it still works and is not falling apart, it does what they need it to do).

It all goes along with the idea that they can offer better deals as they cut costs anyplace possible (including not replacing things as long as they still function).

The locations definitely matter. Location is the #1 determinant of success or failure for a retailer.

Co-tenant composition is critical. Access, parking, local demographics, traffic. The fact is that Big Lots is not IKEA or Costco or Bass Pro, they are not going to pull from a long distance because they don't have a strong enough value proposition. A local example. The wealthy households in Temecula are losing their store, and they're not going to drive to Murrieta or Lake Elsinore (and that Murrieta location is desirable and thus likely next to be booted by their landlord probably for another Aldi). They are gone and not returning. Lake Elsinore is isolated, low income, and a neighborhood grade center far from the freeway in an aged building. I have zero doubt that Temecula was a far higher grossing, far more profitable site.

Looking across not just this wave of closures but the last few years, at least in the SoCal market I'm most familiar with the stores closed have been in More desirable areas with higher incomes, and typically with higher quality co-tenants.

Older buildings cost more to operate especially on triple net leases which are typical of discount stores. So repair costs pile up, energy use is higher, and profits are lower. Lower end areas have higher shrink and lower sales, lower average order value and so on. And when the site is delivering lower sales that further encourages landlords to boot them in favor of superior tenants that will bring more traffic to their centers, thus enabling higher rents for all and lower vacancy rates.

The better locations seem to be getting booted at lease end and immediately replaced by better tenants. Sometimes the landlord can't get the replacement banner for Burlington, TJX, Ross, Five Below and others up fast enough.

There is no way they can survive by continuing to downgrade their location quality.

Having said that, I also maintain my argument that this entire category is on life support because of the forces working against them. The supply of surplus goods shrinks every year as inventory management, computerized ordering and forecasting, and other technology works against the "leftovers" model. Next generation forecasting tools with AI are just going to further improve this down to the individual unit level in some cases. There simply won't be leftovers anymore, and the "made for Big Lots" goods they're selling instead are of little value being Walmart quality at Macy's prices.

ClownLoach wrote: ↑July 22nd, 2024, 5:50 pm

BillyGr wrote: ↑July 22nd, 2024, 4:07 pm

ClownLoach wrote: ↑July 22nd, 2024, 3:16 pm Maybe Ollie's will want to make the jump to the West Coast. But Big Lots isn't going to be helpful as they have already closed their better quality locations over the past few years. More better quality locations closing this wave. All that is going to be left at Big Lots will be undesirable buildings in the wrong shopping centers and communities.

With some of those closeout type stores, the locations and buildings really don't matter.

People are going there for the deals, and thus they will go get them wherever they are, and whatever the buildings are like (some of them are still using virtually unchanged stuff from stores like Ames, which is at minimum 25 years old now, but as long as it still works and is not falling apart, it does what they need it to do).

It all goes along with the idea that they can offer better deals as they cut costs anyplace possible (including not replacing things as long as they still function).

Having said that, I also maintain my argument that this entire category is on life support because of the forces working against them. The supply of surplus goods shrinks every year as inventory management, computerized ordering and forecasting, and other technology works against the "leftovers" model. Next generation forecasting tools with AI are just going to further improve this down to the individual unit level in some cases. There simply won't be leftovers anymore, and the "made for Big Lots" goods they're selling instead are of little value being Walmart quality at Macy's prices.

Just was in Massachusetts and visited Ocean State Job Lot. Fun treasure-hunt store in a way that Big Lots hasn't been for 10 years.

ClownLoach wrote: ↑July 22nd, 2024, 5:50 pm Having said that, I also maintain my argument that this entire category is on life support because of the forces working against them. The supply of surplus goods shrinks every year as inventory management, computerized ordering and forecasting, and other technology works against the "leftovers" model. Next generation forecasting tools with AI are just going to further improve this down to the individual unit level in some cases. There simply won't be leftovers anymore, and the "made for Big Lots" goods they're selling instead are of little value being Walmart quality at Macy's prices.

The other problem is that if surplus goods aren't selling in normal channels means that it would hard to make a profit on them at any price. KN-95 masks that were made after COVIDmania, Funko Pops that no one else wants, Pride merchandise that didn't sell back in June...

What they need to do with Big Lots is to try to make it to a small-format discount store that's similar to dollar stores except bigger, slightly nicer, higher quality, better staffed, and without the stigma that dollar stores carry. While that does align roughly with their current merchandise mix it would also have to rework their entire supply chain and probably needs a new name and branding, which their finances just doesn't allow.

pseudo3d wrote: ↑July 23rd, 2024, 8:53 pm

ClownLoach wrote: ↑July 22nd, 2024, 5:50 pm Having said that, I also maintain my argument that this entire category is on life support because of the forces working against them. The supply of surplus goods shrinks every year as inventory management, computerized ordering and forecasting, and other technology works against the "leftovers" model. Next generation forecasting tools with AI are just going to further improve this down to the individual unit level in some cases. There simply won't be leftovers anymore, and the "made for Big Lots" goods they're selling instead are of little value being Walmart quality at Macy's prices.

What they need to do with Big Lots is to try to make it to a small-format discount store that's similar to dollar stores except bigger, slightly nicer, higher quality, better staffed, and without the stigma that dollar stores carry. While that does align roughly with their current merchandise mix it would also have to rework their entire supply chain and probably needs a new name and branding, which their finances just doesn't allow.

The newer format stores, such as the Oceanside location that is getting the axe, are an attempt to do exactly what you want you recommend here. The problem is that the quality is lower than Walmart but priced well above Walmart, Target, and really not even much savings over a Ross or HomeGoods because of the poor quality representing bad value. They tried a larger higher quality building in a very nice modern Ralphs facility with skylights and open center ceiling, upgraded fixtures, a racetrack layout, spotlights and nicer signage. It didn't work because they're trying to move into Target and Walmart turf but they don't have better prices, product, quality, selection, store experience, service, capabilities, or location. There is no reason for the customer to shop at Big Lots when they have those other choices. So maybe they could try to go wherever there is no Walmart, no Target, no larger format Kroger, etc.? The only places like that are frankly too small for the overhead of a Big Lots and that's why they are Dollar General towns.

Nexstar did the work for us, here are the closing locations:
https://www.koin.com/news/oregon/2-oreg ... res-where/