Keep your eyes peeled during future trips to the mall. The landscape during that trip is about to change drastically according to Wall Street watchdogs.
And we’re not talking about small Ma and Pa operations that can’t compete with the big boys in today’s cut-throat business environment. We’re talking about many iconic U.S. companies that you’ve known for decades. They may very well not exist at the end of 2008! Not all will go out of business. Some may simply be auctioned off in pieces. Others may be bought. Others will simply vanish.
And don’t forget … these aren’t unsubstantiated predictions pulled from a blogger’s crystal ball. These forecasts come to us from 24/7 Wall St. … a Delaware corporation set up to run a financial news and opinion operation with content delivered over the Internet to readers thoughout North America, Asia, the Middle East, and Africa. They arrive at their conclusions after a great deal of research, review of historical bios, and educated projections of coming events.
I fear we’ve passed the shock threshold as a result of seeing so many powerful icons in so many industries fall by the wayside. We can’t afford to do that. Review some of the following major names and brands to appreciate the changes we can expect in the near future and then read ahead for more details on each. Hopefully the demise of these once unstoppable organizations will entice you to examine your own business, possible need for change, and current strategies designed for future success.
K-Mart, Sears, Eckerd Pharmacy, Circuit City, Ford Motor Co., Sprint, Cingular, Yahoo, CompUSA, Quest, Bombay Co., Gateway, Old Navy, Motorola, XM Satellite Radio, Citigroup and others.
We’ve been predicting this one for quite some time now. K-Mart is one of the two big brands at Sears Holdings. They’ve certainly tumbled from their once-lofty position as the nation’s #2 retailer. Based on same store sales for last year, they are the least successful of the Sears/K-Mart retail team. Spending to promote both retail operations may cost more that the holding company can afford. It certainly makes sense to kill off the K-Mart name and re-label all of the stores as Sears.
Here’s the other half of that once-powerful retail team. Sears was once the #1 U.S. retailer but has recently reported a string of bad earnings. Recent reports indicate that Sears leadership may spin-off the company’s real estate and break the firm into several operating units, each of which would have more operating autonomy. The CEO has been pushed out in favor of a “temp.” That sounds like the prelude to an auction.
With over 1,500 stores across the country, Eckerd Pharmacy served as the principal drug chain in several states until the nearly 110-year-old chain was acquired by Rite-Aid Pharmacy in June. Rite-Aid has since converted all Eckerd stores to Rite-Aid stores.
Dodge is part of the Chrysler company which was recently bought out by private equity firm Cerberus. Chrysler management has already said that the company has too many brands and too many dealers. Dodge vehicles will probably be re-branded as Chrysler and Dodge will disappear. Other announced car exits include the Dodge Caravan, Chrysler Pacifica, Chrysler Crossfire sports car, Dodge Magnum and the PT Cruiser convertible.
Ford Motor Co.
There was a time when no one would have believed this one. However, Ford has a market cap of $13 billion against annual sales of $173 billion. If sales continue to fall, cuts won’t make up the difference forever. The Ford family, which has de facto control of the company, will have to look at selling the car operations to a large Asian or European auto company, allowing for a consolidation of production, marketing and R&D. Bottom line — billions of dollars in annual savings.
Here’s another one we’ve been predicting for some time now. Circuit City has been synonymous with electronics retail, but companies like Best Buy and Wal-Mart have brought too much marketing muscle and wholesale buying power to the industry. Outside investors are struggling to “improve shareholder value.” That means the chain will probably be sold.
Sprint should never have merged with NexTel, but it is a little too late for that to be fixed now. It traded above $23 about a year ago and recently fell to close to $8. While AT&T and Verizon post enviable wireless numbers, Sprint struggles to keep current subscribers. Sprint is cutting bodies, but Wall St. has no confidence that fewer people and these modest savings will turn around the company.
When AT&T acquired BellSouth in December of 2006, it also heralded the end to Cingular. Cingular also came under AT&T with this acquisition, and its brand was eventually weeded out from AT&T during the acquisition transition that ended in June.
Yahoo! was not going to make it as a standalone, especially after Q4 earnings. There has been speculation that the company might be sold to Microsoft. If that happens, note that Microsoft is not generous about letting other brands have the limelight. Microsoft could take out 3,000 or 4,000 people and add as much as $100 million in operating income per quarter. Yahoo!’s brand will last while the e-mail and instant message operations are integrated, but soon enough it will all be MSN.
Old Navy is one of the Gap’s three brands and is currently pulling down overall sales at the big clothing company. With a little over one thousand outlets, Old Navy will struggle to maintain the costs of separate buying, marketing, and management costs. It may not be worth it. Watch closely because it may not be long before Old Navy locations may just become Gap stores.
Motorola is still likely to sell its large handset unit to someone. That division is simply losing too much money, and it’s dragging the company under. As Motorola’s stock price drops, so does the value of its handset operation. Look for that Motorola phone to be called an LG handset sometime next year.
XM Satellite Radio
Seems as though XM Satellite Radio just arrived on the scene, and now they’ll disappear either in a merger with Sirius because without a merger, XM may not make it. The company has over $1.2 billion in long-term debt. Look for the XM brand to disappear a few months after the merger is complete.
With a recession and more financial company write-offs coming, Citi will have to get smaller by selling one or two of its valuable businesses. Its consumer units could be worth more on their own. This entire industry is volatile at the moment. Things are getting worse rather than better and you can expect anything to happen at any moment.
After the holidays, it’s bye-bye Bombay. This furniture and home accessories retailer has been around since 1978 but officially filed for bankruptcy in September of 2007. They have been sold to Gordon Brothers/Hilco.
Remember when Gateway was considered a peer of both Dell and Compaq? In 1993, Gateway was in the Fortune 500 but was recently bought by Taiwan PC firm Acer. It doesn’t make sense to maintain both brands as the costs are simply too high. Starting soon you will be buying an Acer PC online or at your electronics retailer.
The second richest man in the world, Carlos Slim of Mexico, turned a multi-billion dollar investment into zero dollars in just eight years. The 20-year-old consumer electronics retailer had closed its doors due to financial difficulties amid tough competition from retailers like Best Buy.
Remember the break-up of the old AT&T? Quest is the last of the Baby Bells still standing from historic move. Although it’s the dominant phone company in 14 states, its shares are falling fast, it has no wireless operations, and simply doesn’t have the balance sheet to upgrade all of its infrastructure to fiber like Verizon is doing.
Vonage almost invented VoIP. It certainly made it popular. They lost their “first mover” advantage when cable companies began to market the service to existing customers. Look for one of the large cable companies to take over the Vonage customer list and let the brand disappear in the very near future.
This 97-year-old furniture chain, once one of the largest in the U.S., recently began closing its 76 stores after filing for bankruptcy for the third (and final) time in 10 years.
While their famous competitors have disappeared as a result of mergers, E*Trade has survived in a discount brokerage business thus far. Although they claim they don’t want to sell out, the firm’s $12 billion in home equity loan exposure may very well make staying independent impossible.
It once seemed as though Countrywide had an operation on almost every street corner. While they were known to give almost anyone a home loan, they weren’t so generous when foreclosure time came around. Bank of America is buying Countrywide. Due to Countrywide’s excessive negative baggage and very poor image, Bank of America will be wise to quickly put its name on all of the Countrywide branches.
Known as one of the first Internet banks, NetBank has closed its doors after just 10 years of existence. After a couple of years of deficiency problems, NetBank restructured which eventually led to its demise this year.
So how was your week? Feeling sorry for the above companies but confident that you can avoid the same fate? Do you boast longevity, great sales history, competitive strategy or a great track record? So did most of those mentioned above. You might think about bench-marking, strategizing, training, continuous improvement and necessary change, and even that guarantees nothing in today chaotic business environment.