I first heard the phrase "retail ice age" on FOX Business Network "Varney & Co." I don't know if anchor Stuart Varney coined it, but it's a pretty good assessment of the condition of bricks-and-mortar retail in America.
Sure, some down-in-the-dumps retail stocks will bounce if the market keeps on rallying.
But beware - these stocks aren't being bought because they're value stocks. They aren't even good bargains.
There's a reason some of them are moving up, and it's scary.
These Dinosaurs No Longer Rule the Earth
The only issue I have with calling retail's current situation an ice age is that it implies the sector's merely frozen. It's actually not.
What's happening to bricks-and-mortar retail is more like "an extinction event," like dinosaurs dying off.
That's what I call it.
These companies and their stocks aren't facing a cyclical correction, they're facing a secular shift of epic proportions.
The meteor that has exploded onto the scene didn't come from space, but from cyberspace.
Online shopping has changed everything.
Not only can online shopping be done from the convenience of your home or office, from any device, but your purchases can be shipped overnight, sometimes for free. Even when shoppers want to touch and feel something before they buy it in a store, they do their homework online and usually head to the one store where they make their final decision.
The elephant in the room is Amazon.com Inc. (Nasdaq: AMZN).
Amazon's sales went from $16 billion in 2010 to $80 billion in 2016. The online retailer's (or e-tailer's) meteoric rise has been staggering. Several Wall Street analysts estimate that half of U.S. households are Amazon Prime subscribers (even I just became one), though the company doesn't break out Prime members in any of its filings.
Of course, Amazon isn't the only e-commerce game in town. There are millions of web-based companies around the world selling everything under the sun. Almost every bricks-and-mortar retailer has an online presence, too.
While online sales are adding to retailers' top lines, their bottom lines are getting buried under the weight of bricks-and-mortar debris.
For years, bricks-and-mortar retailers misled investors - and themselves - by acting as if their problem was merchandising. In reality, it's a foot traffic problem.
Online shopping drastically reduced foot traffic in malls and shopping centers where retailers had spread themselves far and wide.
As far as retail square foot per capita, the United States has five times more retail square footage per eligible shopper than the UK, 10 times more than Germany, and 20 times more than Canada.
Retailers can't close stores fast enough, though they're trying. Sometimes they're able to reduce square footage and stay alive, but many have had to increasingly reorganize under bankruptcy protection, or liquidate themselves and go out of business.
In just the last three months, according to S&P G…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.