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Bespoke's Hickey Says That 'Sucking Share' From Traditional Retail Is Online Retail - At 'Unheard Of Levels'

Bespoke's Hickey Says That 'Sucking Share' From Traditional Retail Is Online Retail - At 'Unheard Of Levels'
According to Bespoke Investment Group, the environment for traditional retailers may be much more troubled than Wall Street thinks.
Online retailers are "sucking share" from traditional retailers at an "incredible" rate, according ot a new report that has been prepared by the firm.
"It's like nothing we've really seen before," said the firm's co-founder Paul Hickey said recently. "A third of the growth in retail sales over the last 16 months has been in online sales. The group itself only accounts for ten percent of sales. So it's just taking in dollars at a much faster rate."
Hickey points out online sales showed their 22nd straight month of gains, in the government's latest monthly retail sales report that came out Friday. During the last housing peak, the longest win streak prior to this for online sales was the electronics and appliances sector, he says to put it in context. It clocked in at 13 months in a row.
"This is unheard of, the levels we've seen," added Hickey. "We're just seeing online retail take share from just about every sector. Only food and restaurants are one of the few sectors which doesn't see that."
Traditional retailers closed out the week in the red. IN its worst weekly performance in seven weeks, the SPDR S&P Retail ETF fell nearly three percent this week.
Disappointing April retail sales numbers triggered the bearish activity among traditional retail.
Plus, following its quarterly earnings report, struggling department store J.C. Penney sank to an all-time low. Same-store sales fell by 3.5 percent versus the 0.6 percent FactSet forecast even though earnings per share came in better than expected. The market cap shrunk this week for the department store, along with Macy’s and Nordstrom.
"People are changing their habits rather than going to the store. They're buying things online, and then they're using the time they save for experiences," said Hickey.
"The U.S. economy is over-stored. When you combine square footage of U.S. retail space to other countries, the U.S. just towers over everybody else. I think there could conceivably be more room for pain," he added.
Hickey isn't the only expert observing carnage in the retail area, although it's still too early to call this Armageddon for retail. And out spoken on this issue is former J.C. Penney CEO Allen Questrom, who also ran Federated Department Stores, Barney's and Neiman Marcus.
It's not just online sales and the number of malls hurting brick-and-mortar stores, said Questrom, who's often credited with turning around J.C. Penney in the early 2000s.
"We go through these cycles, and obviously this has been a challenging period. It's the Internet. It's understanding the millennial customer. It's the off-price stores," Questrom told CNBC on Friday. "When you have a difficult time like this, it's when people come up with the best ideas."

Christopher J. Mitchell

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