Special Report

Ten Brands That Will Disappear in 2014

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 recently reinstated CEO Myron Ullman can turn the company around.

On the other hand, many believe the company cannot come back from the unprecedented sales losses it has suffered in recent years. The retail 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 if the competition wasn’t so steep, a J.C. Penney comeback is not realistic. For the quarter ending November 2, comparable store sales dropped 4.8%, gross margins fell to 29.5% and the company reported a net loss of $489 million. Shares of JCP are down more than 50% on the year. This month, it was announced that the company would be removed from the S&P 500.

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. Tablet adoption forecast to grow 30% next year, while e-readers are expected to drop 27%.

The Nook was thrown a lifeline in April 2012 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 32.2% between the second fiscal quarter of 2013 and the second fiscal quarter of 2014. Digital sales declined by 21.1%. These declines may have cost Barnes & Noble CEO William Lynch his job. He resigned in July.

The Nook’s disadvantage may have little to do with its hardware or software and more to do with the size of Barnes & Noble’s 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 roughly 7.1 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 third quarter of this year, it saw publishing revenue drop from $27.6 million to $19.5 million, and a loss of $6.3 million. 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 min newsletter, these fell from 1,306 in 2008 to 766 last year. For 2013, pages are up 15% to 889 which is well short of what would have to happen to reverse years of losses

Although Omnimedia has a limited opportunity to retrench, it recently hired new CEO Dan Dienst to do just that. Unfortunately, one of Martha Stewart’s two other divisions — broadcasting — is disappearing. The division has seen revenue drop to under $300,000. The only healthy division is merchandising. And the future of this business will be hurt by the recent settlement between Martha Stewart and J.C. Penney.

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 it “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. Meanwhile, Groupon continues to eat into its customer base as it offers further discounts and drops fees.

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