There's so much turmoil in nearly every aspect of our lives, in our homes, in our communities, and around the world. This turmoil is no less so than in the financial markets, the effects of which, have trickled down to the individual, our communities, and the shops we patronize. How have investors delved into this world of confusion?
The retail brick & mortar industry has been under assault now for more than a decade or more. In my own little neck of the woods, retail location after retail location are simply empty. We see the long standing retail establishments that we knew from our childhood days close up shop. What are the big players doing to stay ahead of the game, and what are the small mom and pop stores doing to stay the course? There are of course the locals that continue to seem to make things work. I see these local establishments being here for the next 100 years outliving most of the now popularized publicly traded retail outlets that come and go as earnings dictate whether to stay or not. I'm not saying that earnings only dictate what the big shops will do, as the small folks also take care of the bottom line too. How have these locals stayed in this for the long haul? I mean really?
One of the locals shops in my area has been in the audio/video industry for over 60 years. They even moved to a better suited location several years ago into prime commercial retail with main street frontage. The audio/video industry has seen major changes and developments during their 60+ years, and yet here they are catering to the local population. What gives?
We also have a few outdoor sporting goods stores still run by locals. Just last year our town saw the closing of Sports Authority, which opened up the door for more sales to the local mom and pop stores. Of these two local shops still making things work, one has pretty much stayed in the same location in a dying area of downtown, and the other has expanded and has the look and size of a more established national player. I believe they are attempting to open a 2nd or 3rd location in neighboring cities. I'm sure they are leveraged and are entering that same realm of the larger national players. More debt, more sales growth, more customers, and just more of everything.
With this whole retail industry in flux, what makes these locals viable? I've boiled it down to generational adhesion. These local folks, for the most part, don't have the rental burdens of the rest of the industry. From generation to generation the properties have been kept closely held and in the family. This is a huge edge. They have been able to withstand the bigger shifts in the retail world. Just follow somebody who tried getting into retail in the last 20 years. Most of these folks are nowhere to be found.
So in this world of retail, we have a sifting out process of the viable vs. the not so viable, the debt free vs. the debt laden, and short term vs. long term survival. The world of debt financing coupled with a desire for investor returns has created opportunities for a tremendous business venture. Since mid 1960, real estate investment trusts have grown to over $1 trillion in market equity and over $2 trillion in assets.
With this hugely popular and successful investing vehicle, REITS have run the gamut of extreme market conditions. Today, they have been beat down and the major shifts in retail continue to put pressure on this industry. Retail REITS have seen better days. Here is one stock I'm following, and is somewhat of a smaller player in the industry. Since following them, an interesting stock purchase just happened on May 9th, 2017. One of the company insiders just dropped 4.76 million dollars in stock in this company. That's 500K shares. Take a look.
It will be interesting to watch this play out on this insider's big bet. I have no idea how well capitalized this individual is or what the basis is for his position. In this crazy industry of leveraged retail, and investing in retail REITS, it sure is a jungle out there. When these highly speculative and leveraged debt ridden entities are gone, you can count on the local mom and pop shop to be here for the next 100+ years.
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