You might not realize it, but there’s a kind of ongoing debate about the best way to play the brick and mortar retail apocalypse.
This is one of those running narratives that you should be aware of and stay up on irrespective of whether you plan to trade it. In that regard, it’s kind of like the increasingly amusing back-and-forth about the relative merits of trying to short auto ABS amid growing concerns about subprime car loans.
On Friday afternoon we brought you “‘Brick And Martyr: When Retail Workers Become Bartenders,” a post which you should read and which undoubtedly would have gotten more attention had it not been for the fact that the second it was published, this crossed the wires: “Trump to unveil ‘massive’ tax cuts.”
In the “brick and martyr” post we showed you the following chart:
So that’s from BofAML internal data and clearly it doesn’t presage anything good for department stores, which are on the front-lines of the brick and mortar death spiral. We also noted the following rather amusing color from the bank:
Given the disruption in the retail sector, we think we are headed for a structural change in the retail industry and it’s likely to disrupt the retail workforce. In this context it’s worth considering where displaced retail worker may end up. In particular, majority of retail workers that find jobs in the leisure and hospitality sector find jobs in the food services and drinking places industry.This isn’t all too surprising given that skills that are useful in the retail sector overlap with skills needed in other service industries.
As we also pointed out, that might not be all bad for consumer spending because after all, bartenders make a s***load more money than retail workers.
Getting back to the trade, the go-to has been the now famous CMBX 6 BBB- short but as Citi suggested earlier this month, that might be all played out. For their part, the bank recommended buying protection on individual retailers.
