The Retail Apocalypse is Coming
… and it’s not taking any prisoners. This week, retail giants Hudson’s Bay and Forever 21 made moves that have the finance and real estate world abuzz about the future of brick-and-mortar retail stores.
Forever 21, the fast-fashion destination for trendy outfits you almost always regret a couple months down the road, is rumoured to be filing for bankruptcy, a legal move which could help the company stay alive for a while longer while shedding retail locations and restructuring aspects of the business. Forever 21 is one of the largest tenants in malls across North America, which has shopping mall owners like Cadillac Fairview, Simon, and the Westfield Group concerned about how they might find new tenants in the age of Amazon.
In Canada, Hudson’s Bay is in talks to sell Lord & Taylor, another department store acquired back in 2012, which has 38 locations in the US. The buyer is upstart Le Tote, which charges customers a flat monthly fee to rent women’s clothing – an innovative business model made possible by the rise of the internet and delivery. Meanwhile, Hudson’s Bay is busy keeping things afloat while the company negotiates possible privatization. As CEO Helena Foulkes noted, the sale of Lord & Taylor will allow the company to focus on the HBC and Saks brands.
Will shopping malls die? Here at Btchcoin, we suspect they’re just evolving. While mainstay mall anchors like Sears, Payless, and Toys R Us have gone bankrupt, other ‘millennial-favourite’ brands like Warby Parker and Casper have moved into brick-and-mortar spaces.
The International Council of Shopping Malls sees hope in Gen Z-ers. The Council recently published a study stating that 75% of Gen Z consumers think shopping in a physical store provides a better experience than online. While we’re somewhat skeptical about completely buying into a study written by Big Mall themselves (seems a bit sneaky, no?), it makes sense. We’ve all dealt with poor online returns and ill-fitting online impulse purchases – and also, who doesn’t love the food court?
Say Oil-Revoir… Kinder Morgan Exits Canadian Market
Pembina Pipeline Corp. has signed a deal to buy Kinder Morgan Canada Ltd. and the U.S. portion of the Cochin pipeline system, in an agreement valued at about $4.35 billion CAD. The Cochin pipeline system crosses three provinces and seven states, and is one of two pipelines that imports fossil fuels from the U.S.
The sale marks another blow to the Canadian energy industry, as several foreign mega-companies, like ConocoPhillips, Shell and Marathon, and Devon Energy have fully or partially pulled out of Canada over the past three years. Cumulatively, the exits amount to more than 30 billion dollars leaving the economy, which has further compounded Alberta’s economic woes. The province is forecast to have the slowest economic growth in Canada this year, and unemployment is hovering around 6% – higher than the rest of the country.
A major factor for the recent departures is the strong backlash companies are facing from environmental and Indigenous advocacy groups, which have delayed and even halted new projects. In addition, we have a slow-moving regulatory process. Remember the messy controversial Trans Mountain Pipeline?
There is a bit of a sliver lining though – the exits mean Canadian companies now own a larger portion of our own resources. Now it’s just a question of whether those companies can turn a profit, and build jobs with those assets. Albertan oil sands are a major source of revenue for the province and the country, so expect the decline in foreign investment to be a hot topic in the upcoming election. Hint: maybe a good question to ask Minister Morneau about for our federal election project???
Let’s Talk About Opioids
…because you’re going to be hearing a lot more about them in the coming months.
It’s no secret that opioids, a highly addictive and heavily overprescribed prescription painkiller, have wreaked havoc on North American public health systems and caused thousands of tragic overdoses.
According to the Government of Canada, the opioid crisis claimed the lives of 11,500 Canadians between January 2016 and December 2018 – roughly one death every two hours. The University of Victoria’s Institute for Substance Use Research estimates the crisis has led to a sharp decrease in economic productivity and led to a loss of more than $3 billion dollars for both health and law enforcement systems.
Now, state and provincial governments are coming after pharmaceutical companies for damages to cover the cost of the overdoses and addictions.
This week in Oklahoma, Johnson & Johnson was ordered to financially compensate a government body in relation to their hand in the opioid crisis – the first verdict of its kind.
This is a hopeful sign for the large number of Canadian lawsuits that are waiting to come to trial. Among them, BC and Ontario have teamed up to launch a massive class-action suit against 40 different drug companies that have manufactured and sold opioids.
Despite the positive development, Oklahoma’s win does not necessarily translate into a guarantee for Canadian class actions, or the demise of opioid manufacturers – but it is hopeful.
Lawyer Tony Merchant, who is leading a similar class-action in Saskatchewan, notes “American precedent doesn’t count in Canada, but it’s going in the right direction and judges here are going to look at that.”
On another not-so-positive note, the Oklahoma verdict ordered Johnson & Johnson to pay the state only $572 million USD – a sum significantly less than that demanded by the state’s Attorney General, which conversely sent Johnson & Johnson’s stock soaring.