Ok, look…
You might have missed the CMBX 6 BBB- boat. Or maybe you just didn’t like it as a “blunt” expression of the brick and mortar short. You liked individual name CDS better. And that’s fine. To each his own.
But I’m kinda starting to think that being bearish on physical retailers is a trade that’s going to work regardless of how it’s expressed. Sure, it sounds impressive when you get to use the word “tranche” while bragging to your friends at a lower Manhattan bar (the female hangerson will be impressed too because they won’t know what a “tranche” is but they’ll know it’s paying for their Aviations), but the way things are looking, just plain vanilla options might end up working just as well.
Look at these visuals out earlier this week from Deutsche Bank:
Check out the accompanying color on that second one:
Worse still, the threat from ecommerce is accelerating. For instance, in Figure 7 we show that in 2016, non-store retailing, as measured by NAICS 454 accounted for 16.9% of total retail sales excluding autos and gas. This was a 110 bps increase in penetration from 15.8% in 2015. Amazingly, that 110 bps increase in the percent of sales was the biggest acceleration in non-store retailing since we have data going back to 1993, and was as big as the prior two years combined. In other words, non-store retailing is big and getting bigger, at an accelerating pace. We believe that e-commerce accounts for about 70% of non-store retailing. On a year over year basis, non-store retailing grew 11.5%, a significantly faster growth rate versus the 7.0% increase in 2015 and in fact the largest increase since 2005, when the category was half as big as it is now.
“Amazingly,” indeed.
Are there any further questions here? I mean, there’s a lot more in the cited note but goddamn, do you really need to hear anything else when it comes to formulating a thesis about brick and mortar?
