Be Well: Why Major Retailers Are Shuttering Doors

<div class="block">Marty Cantor, CPA and economic development consultant, joined Cheddar News to discuss the landscape of the retail industry. With cornerstone department stores like Bed, Bath and Beyond and Party City filing for bankruptcy, Cantor said &quot;people are just running out of money.&quot; He said discretionary spending is halting as the cost of other goods and services increases, ultimately impacting the bottom line of major retail giants.</div>

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Welcome back to the Well, it is time now for your money with Marty. And if you think about it, picture some of your favorite stores, some of them are disappearing. According to S and P Global, more than 230 companies have filed for bankruptcy so far this year. And we're talking about some really high profile retailers and beyond your party city, Tuesday mornings, David Bridal right now, analysts expect the default rate for companies with low credit quality to peak early next year. So this increase is most visible in these big companies, Marty. So what's going on? Well, the economy is undergoing some serious changes. It usually happens after, after a crisis. And what's happening right now is that people are just running out of money, all the money that they were flushed with because of the stimulus programs and uh you know, in the American rescue plan and things of that nature, they're all gone. And so now with the increase in food prices, the increase in energy costs, health care, all the essentials of life. So the discretionary spending which could be on a on party favors. So, you know, or, or bridal dresses, things like that. Even though if you're a bride, it's not, that's not discretionary. But the fact is those type of expenses are, are starting to be hurt, those, those luxuries, those extras because people are running out of money. Wages haven't kept up with inflation and inflation is a bigger part of our economy now than ever before. And so these companies which catered to, you know, to these discretionary spending can't make it. Also, consumers, habits are changing and what they're spending their money on. You know, it was interesting to me, one of the data points that came out just a few weeks ago, more companies filed for bankruptcy in a 48 hour period than any time since at least 2008 eight. And you think about that time, that was a great recession. Well, the two different kinds of recession, remember the, uh, in 2008, that was a housing recession and that was built because of subprime loans. People got these home, these loans for 2%. And then when the mortgage rates went up five or six, they couldn't flip the homes and they couldn't afford the mortgage and, and the banks were failing because they were holding all these mortgages. And that's when the federal government had to put in closer billion dollars to bail people out different times. Just an example. Uh, today, uh the national debt is 31 trillion and the gross domestic product is 25 is 25 trillion. Whereas back in 2009, the gross domestic product exceeded the national debt by two trillion. So we have a complete reversal of what the economy looks like. 2009, believe it or not, inflation was minus 20090.4%. Yeah, today is 5%. So we have a totally different economy. Today, this economy is built on government spending, government debt, too many dollars chasing too few goods. Uh, totally different. Uh, totally different. Uh, uh, time right now, this one is a financial in uh recession or inflation if you will because it's impacted by what the Federal Reserve is doing by increasing those interest rates, you know, 500 basis points in a year, which is a lot. That's a lot. Yeah. All right. Let's take a look at some of those numbers here. So there were uh just about 16,200 bankruptcy filings among all types of companies in the US. And, and, uh, we take a look like by quarter 12,200 from a year earlier. So, I mean, you're looking at these numbers and you're really starting to see them, you know, take off. Well, understand bankruptcy is unfortunately part of the business cycle. You know, if a company who starts business today, uh uh it's unlikely that it will be around in uh two years. So new businesses have a mortality rate of about 80%. Uh So uh you have your normal, your normal bankruptcies. But let's be clear, a lot of these banks which uh businesses rather, which would have gone to their bank and say, give me a working capital loan can't get it now because banks don't have number one, the money to spend because the Federal Reserve is taking $95 billion a month out of the banking system, liquidity uh and dollars. So there's less money for the banks to lend. They're spending more money on deposits to, to bring in money to lend out for the higher mortgages. They don't have it. Also, the banks are taking a hard look at the company's balance sheets. If your debt to equity ratio or your assets to debt are unfavorable, they won't lend you the money because banks need to get that money back and that leads to bankruptcies also. So, ok, we take a look at like just let's take Party City for an example. This is non essential consumer items. Big company been around for a long time. What about the mom and pops that don't, you know, that don't have that kind of, you know, name recognition and you know, so many people coming in. Yeah and, and look and, and in Party City, I mean, you can go to so many different places to get your healing inflated balloons. Uh It doesn't have to be a party city. You you know, you can go to the dollar stores you can go to any place. And so, so the specialty stores that, that will charge for service uh in their prices are losing out because people right now are very price conscious. That's why Walmart uh is doing better than target of the other places. Because Walmart is bringing in, you can you can buy giant packages of food stuffs at Walmart for lower per unit prices than you can at target at the other places. So Walmart is doing better than, than the other retail stores. So because inflation is so high, people are looking for a deal, price matters and people are looking for the best price for their dollar. And if you can give your best price, you're going to get the customers. What we're finding right now is businesses that are going bankrupt. Can't compete with the price demands or the price structure. You know, there's, there's something in, in economics, you know, called elasticity. That's the impact that price has on demand. And when it comes to necessities, you, you're gonna pay whatever you need for medical and necessities. But if the prices go up for your discretionary goods, you're not gonna buy it. All right. Thank you so much, Marty Shannon, back to you. Alright, thanks Elizabeth and Marty. It's a summer favorite and you can grow it right in your backyard. Meteorologist, Alex Calamia shows us how you can get watermelons blooming right this week in your garden and this week's garden nothing says summer like watermelon. And now that I've had my first taste, I'm going to get my hands dirty and show you how you can grow your own. So it starts off with a seed packet. We're going to do sugar, baby watermelons because that's a compact variety. It actually starts fruiting about a month or so after the seeds get sprouted. This is two weeks old now. So a month from now you'll start noticing fruits and they're also compact. So they're going to grow really well in a container. That's important because watermelon typically don't do well in containers. These are such tiny plants and look at the roots are already crawling out. Can you believe that they're only about two weeks old or so? So I had to really pay close attention to really using high quality soil in this container, using as large of a container as I could find and amending it with organic compounds like blood meal. When you're wanting to plant something like this early in the season, you need to search for something that has a high nitrogen. So this is 1200. That first number is nitrogen. It's just pure growth and then you'll switch to a high second number, phosphorus as we get later in the season because that encourages flowers and healthy fruit growth. Watermelon are heavy feeders by July. You're going to notice your first fruits, but they won't ripen until August. You can't miss watering here. But it's worth the wait, because the fun of growing your own is that you have the opportunity to try unusual varieties. This is called Mountain Sweet yellow. The inside's gonna be bright yellow and they're already coming up so quickly. Oh, that's so cool. And up next on be, well, we're back at the beach for fitness and four and it's all about quality over quantity. The quick workout that ramps up your heart rate in half the time you're watching. Be well, helping you live life better.