10 Brands That Will Disappear in 2014

[JayBird]

Every June, 24/7 Wall St publishes a list of the top 10 brands that will disappear by the end of the following year.  They are not always correct, but some of them do disappear either through mergers or just closing up shop. The list arrived yesterday, and I thought I'd share. Some did surprise me, I wonder if they'll surprise you too.

http://247wallst.com/2013/05/23/ten-brands-that-will-disappear-in-2014/2/

1. J.C. Penney

J.C. Penney Co. Inc. (NYSE: JCP) has been in trouble for some time. Those who still believe in its future as an independent retailer point to the company’s ability to get a loan of $2.25 billion from Goldman Sachs and other investors, secured primarily by real estate and leases. That money, optimists claim, will last until CEO Myron Ullman can turn the company around. Ullman recently has returned to the company’s top job.

On the other hand, many believe the company cannot come back from the unprecedented sales losses it has suffered in recent years. The industry is very competitive, both at brick-and-mortar stores and online. Big-box retailers from Walmart to Target and successful department stores such as Macy’s are larger than J.C. Penney and are growing. At the e-commerce level, companies such as Amazon.com and eBay, are gobbling up market share. Amazon has done damage to retailers much healthier than J.C. Penney.

Even in a less competitive environment, a J.C. Penney comeback could not be sustained. For the year ended February 3, the company reported that comparable store sales dropped 25.2%, revenue fell 24.8 % to $12.985 billion and Internet sales were $1.02 billion, a plunge of 33% from the previous year. While the most recent quarter was considered an improvement with sales down 16.4%, in reality it was nothing more than a brief reprieve. There is absolutely no reason to believe that J.C. Penney’s prospects will improve.

2. Nook
Barnes & Noble Inc.’s (NYSE: BKS) e-reader was destined to struggle from the start. It was launched in October 2009, roughly two years after Amazon.com’s Kindle, which was, and has remained, the market leader. Both products were hit by competition from Apple’s iPad before the e-reader business even hit its stride. Adoption of tablets is forecast to grow 69.8% in 2013, while e-readers are expected to drop 27%.

The Nook was thrown a lifeline a year ago, when Microsoft invested $300 million in Barnes & Noble’s digital business, but to no avail. It has been downhill since. Sales at the company’s Nook segment, which includes both the e-reader and online books, declined by 26% between the third quarter of 2012 and the third quarter of 2013. The Nook’s disadvantage may have little to do with its hardware or software and more to do with size of its online audience. It competes against much larger e-commerce sites that have access to hundreds of millions of new readers. While Amazon has more than 130 million visitors a month according to Quantcast, Barnes & Noble has just over 6 million visitors.

3. Martha Stewart Living Magazine
Martha Stewart Living Omnimedia Inc. (NYSE: MSO) has three divisions: publishing, broadcasting and merchandising. In the five years up to the end of 2012, publishing revenue fell from $179.1 million to $122.5 million. Last year, the division lost $62 million. In the first quarter of this year, publishing revenue dropped from $30.8 million to $24.5 million. The unit lost $990,000 in that period. Because of its troubles, the company tried to sell off smaller magazines. Its Everyday Food stopped publication as a standalone title with the December 2012 issue. Whole Living was discontinued after the January/February 2013 issue.

The main problem at the company’s flagship magazine, Martha Stewart Living, is the precipitous drop in advertising pages. According to the Media Industry Newsletter, the magazine’s advertising pages fell from 1,306 in 2008 to 766 last year. Pages are up to 404 through the first half of the year, but even if the full year runs at this rate, it is not enough. The company does have a good opportunity to retrench.

Two of Omnimedia divisions are doing quite well and could sustain a restructured company. Merchandising had revenue of $11.5 million in the first quarter, and an operating income of $5.7 million. Even the small broadcasting operation made money. The company could move the magazine online, as many other newspapers and magazines have done, to avoid the huge costs of paper, printing, and adding new subscribers. Martha Stewart Living lost its ability to be a standalone magazine long ago.

4. LivingSocial
LivingSocial, a daily deals website, has trailed Groupon since it launched. But this is an industry in which trailing the leading company is a very bad sign. As the financial troubles of Groupon demonstrate, the online daily deal industry started to fall apart not long after it began. Groupon’s share price, which reached a high of more than $26 after its initial public offering, was trading as low as $2.60 last year. While the stock is up on improved sales, the company remains unprofitable.

The situation is even worse for LivingSocial. Leading advertising publication AdWeek recently reported that sources would not be surprised if the company “was sold to a larger company or liquidated piece by piece by spring 2014.” That is a long way from when Amazon.com confidently invested $175 million in LivingSocial in 2010. The deal soured as the huge e-commerce company wrote down the investment by $169 million in late 2012. More recently, an Amazon SEC filing indicated that LivingSocial lost $50 million in the first quarter of this year, compared to a profit of $156 million in the same period a year ago.

The biggest competitors to both LivingSocial and Groupon are eBay, American Express and Amazon’s own AmazonLocal service. Each has a huge customer base and significant amounts of data about its customers, which they can use to target deals. LivingSocial does not stand a chance.

5. Volvo
In the United States, Volvo was never a giant manufacturer with a large number of models or ultra high-end brands. As of April, its market share in America had dropped to 0.3%

The company’s models compete directly with mid-luxury offerings from every large auto company in the United States, including giants General Motors and Toyota. It also has more direct competition from low-end models made by BMW, Mercedes and Audi. With all that competition, consumer demand just is not there for Volvo cars. In the first four months of this year, Volvo sold 19,571 vehicles in the U.S., down 8% â€" in an overall market in which sales rose almost 7% to 4,974,000. A mid-market car company without a broad range of sedans, SUVs and light trucks would find it hard to make any progress in the United States. Volvo’s model line is too small to allow it any chance.

Volvo’s future is in question not just in the U.S. The company’s dealerships in China inflated sales numbers to receive cash incentives from the company that never went to customers, according to Brand Channel. In other words, some of Volvo’s dealers committed fraud. China has been the Swedish car maker’s home since Zhejiang Geely Holding bought it in 2010.

6. Olympus
Except for market leaders like Canon, Sony and Nikon, no one wants to be in the digital camera business anymore. Worldwide unit sales are down 18% in 2012 since their peak in 2010 and are accelerating this year. It is no surprise then that Olympus, which only has 7% market share, has failed to generate a profit from its imaging business in any of the past three years. The decline caught the company’s management off guard. Actual sales were less than two-thirds of forecasts.

For the next fiscal year, the outlook is grim. Olympus expects compact camera unit sales to fall from 5.1 million to 2.7 million units worldwide. But these declines are hardly a new trend. A major reason for declining sales has been the increased adoption of smartphones â€" which now offer lenses and chips that capture high-quality images â€" as an alternative to digital cameras. Based on increased interest in high-end cameras, the company plans to focus on increasing sales of SLR cameras, which accounted for just 35% of its imaging business. Meanwhile, sales of its largest camera segment, compact cameras, will be cut in half. Of concern to investors, the company has pledged to stop issuing dividends until the camera business is restored to profitability.

7. WNBA
The champion and protector of the Women’s National Basketball Association, David Stern, will retire in February 2014. He has been the all-powerful commissioner of the NBA for three decades. It is hard to imagine how the WNBA could have survived without his support, and that will soon be gone. The league was founded in 1996, and currently has 12 teams. Six teams have disappeared since the league’s beginning, and three have been relocated. Attendance has been awful. Average regular season attendance by team per game was only 7,457 in 2012, compared to about 18,000 for the NBA. The WNBA attendance number was below 6,000 in Atlanta, Chicago and Tulsa. Even in New York City, the New York Liberty could not break the 7,000 barrier. Attendance for half of the teams dropped by double digits between 2011 and 2012. Owners have little financial reason to support the league. The Chicago Sun Times reported in 2011 that “The majority of WNBA teams are believed to have lost money each year, with the NBA subsidizing some of the losses.” TV viewership is so low it only makes matters worse.

8. Leap Wireless
Leap Wireless International Inc. (NASDAQ: LEAP) was the one loser in the recent telecommunications M&A frenzy. AT&T nearly bought T-Mobile, which eventually combined with MetroPCS. Sprint Nextel is being pursued by both Japan broadband firm Softbank and Dish Network. Since the consolidations have created financially stronger companies, Leap is too small to survive. The best proof is in its subscriber counts and earnings. Wall Street lost confidence in Leap a long time ago. Its shares are down 90% over the past five years, while the Nasdaq is up by 40%. Leap’s management has probably known it needs a partner for some time. It was widely expected that Leap would merge with MetroPCS last year. The T-Mobile-MetroPCS deal ruined that.

In October 2012, Bloomberg BusinessWeek reported, “After reporting net losses for the last six years, analysts are forecasting Leap will remain unprofitable through 2015, according to data and estimates compiled by Bloomberg. It may post a profit of about $43 million in 2016, according to the average estimate.” The risk factors disclosed in Leap’s annual report read like a road map to Chapter 11. Management warns about the company’s ability to build out its 4G network, make debt payments, take on more debt if needed and increase its customer base. Probably the most damaging evidence regarding Leap’s dim future is its subscriber count, which dropped from 5.9 million at the end of 2011 to 5.3 million at the end of last year. By comparison, the new T-Mobile Metro PCS subscriber base is about 43 million, which in turn is smaller than Sprint, Verizon Wireless and AT&T.

9. Mitsubishi Motors
While it never had a massive presence in the United States, the niche Japanese automaker has had some success with models like the Lancer and the Eclipse. However, Mitsubishi Motors will soon exit the U.S. market, just as its Japanese rival, American Suzuki Motor Corp., did at the end of last year. Its sales are nose diving. In 2012, Mitsubishi sold fewer than 60,000 units in the United States, down from nearly 80,000 in 2011. That decline was the biggest of any auto brand and has continued this year. In the first four months of the year, sales have fallen by 6.5% to just 20,571 vehicles. The U.S. market share of Mitsubishi was only 0.3% in April. Mitsubishi does not have the advantages of some other companies with low market shares â€" it is not a luxury car company like Porsche and Land Rover, which sell high-end cars and command high prices. The average price for Mitsubishi’s seven models is under $25,000. One of the company’s weaknesses is this small model lineup. Mitsubishi is further hampered by the public’s perception of its products. In the new J.D. Power vehicle dependability survey, it ranked third from last out of 33 brands.

10. Road & Track
Founded in 1947, Road & Track is the oldest and most well-regarded automotive magazine in the country, according to Hearst, the publication’s owner since 2011. Road & Track and its better-selling stablemate, Car & Driver, have been among the top brands in the industry for years. However, Road & Track operates in a crowded market, which includes several other large publications and a substantial number of popular car websites. The four dominant magazines have all posted advertising sales drops in the past five years as Car & Driver, Motor Trend and Automobile have each lost hundreds of ad pages. Road & Track has had the worst of it. Ad pages fell from 1,092 in 2008 to 699 last year. Pages are down another 31% to 232 for the first six months of this year, according to MIN. No large national magazine can continue that kind of long-term slide.

Car & Driver has an audience of 10.7 million people, which according to Hearst makes it the world’s largest automobile magazine brand. Hearst does not need to support two magazine brands, each of which is in the midst of a sales slide. Since both magazines are based in Ann Arbor, Michigan, a consolidation of staffs would be a money-saving option. Road & Track subscribers could also be migrated to Car & Driver. Road & Track might continue to live online, but Hearst has no reason to keep two similar titles.

Volvo, Olympus, WNBA and Nook were the brands I was surprised about. Here is a look at last years list for comparison:

Gone
Still Iffy
Still Here

The Ten Brands That Will Disappear in 2013:

1. American Airlines - Did not disappear, instead exited bankruptcy and is in process of merger with US Airways

2. Talbots - Taken private last year, Sycamore Partners still has not said whether they will sell the brand by 4th quarter of 2013. Rumors have put Limited Brands (owner of Victoria's Secret, White Barn Candle Company, C.O Bigelow, Bath & Body Works, Henri Bendel) in early talks to buy

3. CurrentTV - Was sold and is now owned and operated by AlJazeera Media Network

4. Research In Motion - Still holding on, changing name to Blackberry which they banked their entire recovery on. It is still unknown if their new phone designs and operating system will save them.

5. Pacific Sunwear - Still in business as per there last quarterly earnings are seeking a buyout or partner

6. Suzuki - Exited bankruptcy in March of this year and operating as Suzuki Motor of America; in November of 2012 stopped manufacturing cars and light trucks for the USA

7. Salon.com - Still in business as a news blog, however this was based on if they need more money they will close which so far they have not needed

8. Oakland Raiders (Not leaving NFL, Leaving Oakland) - Though still rumored to move to Farmers Field when/if built in Los Angeles, they will play the 2013-3014 season in Oakland

9. MetroPCS - Though still using the MetroPCS name, the company was bought and is now operated by T-Mobile [This was listed as gone because the company no longer exists and T-Mobile will begin rebranding the regional carriers under a different name]

10. Avon - Still in business, since January of this year they have outperformed the S&P 500 Index

[tufsu1]

Volvo is bringing a new hatchback/wagon (V60) to the U.S. next year....and the local dealership will be moving down Philips Higjhway to a new-ish showroom near I-295/SR 9A

[JayBird]

Volvo is bringing a new hatchback/wagon (V60) to the U.S. next year....and the local dealership will be moving down Philips Higjhway to a new-ish showroom near I-295/SR 9A

This one surprised me because for fiscal year 2012, they broke even for the first time in a long time. Though, I am not sure the V60 will be the success they hope, their S line performs well in the US and they have a faithful following.

[Josh]

Maybe in the consumer camera market, but Olympus as a whole certainly isn't going anywhere. They are the largest manufacturer of endoscopes in the world.

[JeffreyS]

I really like my Nook.

[JayBird]

Maybe in the consumer camera market, but Olympus as a whole certainly isn't going anywhere. They are the largest manufacturer of endoscopes in the world.

It was one of my surprised picks too, I can only assume they mean brand recognition for the masses. That being said, I think their argument for why Olympus would back out of digital cameras is flimsy.

[JayBird]

I really like my Nook.

I have an iPad, iPad Mini (I am an apple addict), a Nook (my first e-reader), and a Kindle Fire (that I never use but my gf reads on it) and the Nook is actually my go to for reading. I enjoy it better than my iPad because it is lighter and less distractions on it. The only way I can see the Nook disappearing is if Barnes & Nobles shutters its doors. A possibility, but hopefully not in the near future.

[avonjax]

I really like my Nook.

I personally like Nook better. I worked at customer service at Best Buy and the most returned item we sold last year was the Kindle Fire. I don't know what happened but most of them were junk. The reason they are winning the e-reader race is name recognition. But I will admit Nook charges for almost everything. Almost nothing is free with the Nook.

[avonjax]

The one brand I hope survives their make-over is JC Penney. I have always found Penney to be the nice and better alternative to the WalMarts and K Marts for clothing. They are fairly affordable and better quality and a step down from Belk and Dillard's. Now their new look and merchandise actually makes them relevant for me. The clothing seems better and more fashionable, the Sephora shops are great looking, and the new look is fresh and clean and the pricing is great. But the real revelation for me is the home area. The look is terrific, the departments, Bodum, Michael Graves, Jonathan Adler Conran furniture, Martha Stewart among others makes Penney an actual destination for me. There is no doubt older customers may be turned off by the new look, but if they can market it correctly they can attract younger and more affluent customers. The furniture is rather pricey but seems to be great quality and much of it is great looking. I don't know how many of you have visited the stores lately and if you agree with me or not but I sure hope they thrive.
As far as Olympus and cameras, I think they may not survive. The major growth is  DSLR's and Olympus can't compete with Nikon and Canon. Their mirrorless compact SLR's didn't make a dent in the market and Sony owns that category. So time will tell.

[JayBird]

The one brand I hope survives their make-over is JC Penney. I have always found Penney to be the nice and better alternative to the WalMarts and K Marts for clothing. They are fairly affordable and better quality and a step down from Belk and Dillard's. Now their new look and merchandise actually makes them relevant for me. The clothing seems better and more fashionable, the Sephora shops are great looking, and the new look is fresh and clean and the pricing is great. But the real revelation for me is the home area. The look is terrific, the departments, Bodum, Michael Graves, Jonathan Adler Conran furniture, Martha Stewart among others makes Penney an actual destination for me. There is no doubt older customers may be turned off by the new look, but if they can market it correctly they can attract younger and more affluent customers. The furniture is rather pricey but seems to be great quality and much of it is great looking. I don't know how many of you have visited the stores lately and if you agree with me or not but I sure hope they thrive.

I agree, I have always liked JCPenneys stores. The downfall here was completely in mismanagement. Unfortunately they have a had a few rough leaders and each one drags them down a little lower. The reason they are in a precarious situation, the real estate they own is worth more than the value of the company on the stock market. So even though they have a faithful following, and actually more traffic in stores in the past 3 years than they have had in the previous decade, their longevity truly depends on how the company managed. Just goes to show that even successful plans and products do not compensate for inadequate management.

As far as Olympus and cameras, I think they may not survive. The major growth is  DSLR's and Olympus can't compete with Nikon and Canon. Their mirrorless compact SLR's didn't make a dent in the market and Sony owns that category. So time will tell.

Good point, I had not considered that.

[spuwho]

JC Penney - Done in by the hiring of an Apple executive who tried to take them "premium" by removing discounts. Oops.

Volvo - Geely is simply living off the capital investments made by Ford and the previous parent. When the current product lines require a refresh or replacement, that is where Volvo will either sink or swim. Ford essentially raped Volvo's product development and then sold off the name. Tata is in the same situation with Jaguar. Ditto Land Rover. GM already gave up on Saab. The Chinese are not showing the adeptness expected in auto development. Domestic market share of Chinese brands is falling, market share of American brands is rising.

Nook - Great for rooting and making your own tablet using open source or custom firmware.Using eBook profits to subsidize hardware has been great for tablet modders who could care less about an eBook.

WNBA - Trying to fit the mens model into a womens league does not work. Either shrink the arenas and player salaries so they fit in the TV contract, or keep subsidizing it out of the mens revenue.

Mitsubishi - The one real asset they have in the US is a flexible manufacturing plant in Normal, Illinois. They can make anything in their product line there. Also remember that Mitsubishi has a large commercial truck offering in the US, whereas Suzuki did not. For consideration is that there are still many Chrysler products that are based on the Lancer platform. (Dodge Caliber (discontinued), Jeep Compass, Chrysler 200) But Mitsubishi Motors was damaged heavily in 2 places. The financing scandal where their leasing/financing arm used fraud to pump up sales. And the mandate during the Daimler era to consolidate their product lines into less platforms. (This is why a Endeavour sits on a jacked up Eclipse/Galant platform). So they have been capital poor to invest in new platforms unless they take on a partner. They have only offered the City all-electric car as a new product lately and they only sold a few hundred. Now that Ford has divested their interest in Mazda, Mazda has the same problem coming up in 5-7 years. They are already looking for a platform partner as they don't have the capital to do one on their own.

Road & Track - Loss of good editorial leadership hurt them back in the 1990's. Their F1 reporting was the best. Also instrumental was the starting of Automobile Magazine by David E. Davis. Back when the "Big Three" ruled (Motor Trend, Car & Driver, Road & Track), his startup ending up draining R&T, even though today, C&D and Automobile are almost identical in content. Jean Jennings who runs Automobile now, worked for Davis at Car & Driver. The constant selling and reselling of magazine portfolios lately haven't helped R&T either. Formerly a CBS Publishing property, it went to Ziff Davis for awhile, then to Hachette and now with Hearst. When Davis recruited Angus MacKenzie from the British "Car" Magazine to run Motor Trend, their sales drove up even higher. R&T, no such luck. Used to be based in California (like Motor Trend) but after the Hachette purchase, moved them to Ann Arbor. Too many magazines saying the same things about the same cars chasing the same clients.

Other brands at risk?

AMD - Yes, the other computer CPU maker. They sold their fabs 3 years ago and have been divesting assets to stay alive. Even though they merged with ATI Graphics and are still competitive there, they are losing desktop and server market share like crazy. Their recent effort to get into phones and tablets by licensing the ARM model (basis of all Apple, Samsung tablets & phones) is a good path. Their strategy to port them to servers is fraught with alot of risk.

Linksys - the home networking brand that was bought out by monolith Cisco is now back on the market as Cisco decided they didn't have the chops outside of the corporate space.

Mazda - As I noted before, Ford divested all but 3% of their interest and while they have 5-7 years to sort things out, they are desperately looking for a partner for platforms.

Sprint - While the name may live on, the current bidding war between Softbank and Dish TV for Sprint and their buyout of Clearwire will mean only one thing, they will not look the same in 5 years. Same name, different company.

McDonalds - This will surprise people, but the hamburger "utility" is struggling at maintaining sales. Same store sales have been flat or get small bumps from new products, but their new product pipeline has been struggling. They have been working a new low-fat french fry for over 15 years, but can't get it out of clinics.  With market specialization (ie: Five Guys, etc), eating away at their core products, only their mcCafe Coffee has brought them any relief (and struck a dagger into Starbucks). International growth is keeping up, and they are on a massive store refresh project, but if domestic sales don't start turning around soon, you are going to see some closures.

Radio Shack -a company totally adrift. How long can a company last on new store openings only? Same store sales over a year have been flat for many years. This means when one opens it reaches a sales level and then doesn't change. Previous owner Tandy had a chance to go "big box" before Best Buy and didn't want the risk. They had a chance to be a leader in retail computers, didn't want to take a risk. Now they sell primarily risk free items....batteries, power adapters and stereo cables.

Sears Holdings - total train wreck in the works. Merged with loser KMart and they just keep getting worse. Had a chance to compete with WalMart with Sears GrandCentral, but internal strife has cut that back. Has just about spun off every non-core asset.