Bloomberg News reports that vacancies are rising fast. It notes that the average vacancy rate at neighborhood and community malls rose to 8.2%, up from 7.3% in 2007 and the highest level since 1995. And at regional and super-regional malls, vacancies increased to 6.3%, up from 5.6 % in 2007.

Sam Chandan, chief economist of research firm, Reis Inc., told Bloomberg that the amount of retail space being abandoned, "consistent with store closures, is at its highest level in almost 28 years." What's going on? Retailers --such as Linens 'n Things, Sharper Image, Lillian Vernon, Bombay and Levitz Furniture -- have filed for bankruptcy.

Why so many bankruptcies? It could be that with housing prices down 15% and 3 million mortgages in foreclosure people can't borrow the money they formerly used to purchase the goods that these malls sell. With consumer demand dropping and vacancies on the rise, it's surprising that rents are increasing at all.

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

San Francisco-based Gap Inc. (NYSE: GPS) has seen its fair share of hits or misses. The original Gap Stores was an overwhelming success in the 1980s and 1990s, but ran into the proverbial wall as the century was ending. The Gap missed the fashion changes and has re-tooled and re-engineered itself more than Joan Rivers! The concept has never been quite the same or attained its cache in the minds of discerning consumers. Other concepts within the Gap system have fared better, such as the Banana Republic, and Old Navy still remains popular in the deep discount segment.

Zara offers a fresh approach to fashion with a range of price points appealing to all levels of consumers. Zara is based in Spain and is part of the huge distribution company Inditex, which trades on the Spanish exchange. Zara is just beginning to make some serious inroads into the United States. With only 154 stores in the U.S., Zara has the room to five-fold its base within the next decade. The Zara concept has over 1,400 stores spread out over 50 countries, with plans to double that base. The U.S. is fertile ground for Zara as the international cache appeals to American consumers.

Zara is a vertically integrated concept. From designing men's, women's and children's fashions to manufacturing to distribution, Zara controls the entire process. The stores are all company-owned, to complete the vertical integration. Zara has captured the cache that the Gap Stores once had. Zara's appeal ranges from casual wear to business attire, while maintaining reasonable price points.

Some people waiting for their economic stimulus checks may be in for a shock.

According to USA Today, about $2 billion in payments from 1.8 million checks are being confiscated from people who owe child support, student loans and back taxes. Taxpayers get letters from the government explaining why their bank accounts are not being stimulated and so far few have complained, according to a Treasury Department official quoted by the newspaper.

I am all for making sure that children get the financial support they deserve. People also should not be able to dodge student loan payments or tax bills. The government, though, cannot impose a one-size-fits-all solution. For instance, what if someone is laid off and is already behind in their bills? The economic stimulus is supposed to help people in need, right?

Though the economic stimulus checks have helped boost retail sales, investors should keep their expectations in check. Many of the people I know are using their stimulus checks to pay bills, not buy big-screen televisions. A good portion of my stimulus is going right back to Uncle Sam for taxes I need to pay for being self-employed. That's another rant for another time.

Gosh, from the recent retail report, you'd think the economy is back on track. But, of course, you'd be wrong.

Retail sales in the U.S. rose twice as much as forecast in May. Twice as much. Sales climbed 1%, and as Bloomberg says, it was the most since November, and it followed a 0.4% gain in April. Excluding gasoline, purchases increased 0.8% last month. For the quarter, though, spending may grow at an annual rate of 0.8%, the weakest since the first quarter of 1995.

So what happened in May? Americans used their tax rebates checks of course. All those who criticized the government's stimulus plan, saying the money would not be spent on discretionary purchases were wrong. Consumers spent the money at electronics and department stores, at least the portion that was left after filling up the gas tank at $4 a gallon. Don't forget the Federal Reserve's successive rate cuts. Those could have had something with the increase in retail sales too.

The Wall Street Journal reports that BJ's Wholesale Club (NYSE: BJ) reported a 26% rise in net income. Its earnings of 29 cents a share beat analysts' expectations by a penny. And as consumers go on their crash recession diet, BJ's is likely to continue to exceed expectations. I would not be surprised if its stock keeps rising.

That's because results are growing faster than had been expected. The Journal reports that BJ's revenue climbed 12% to $2.31 billion. Earlier this month, BJ's said net sales increased 12% to $2.26 billion, as same-store sales rose 9.6%, with gasoline sales contributing 3.9 percentage points to the rise. And BJ's raised its EPS guidance by six cents to $2.04 to $2.14 a share. The mean estimate was $2.06 a share.

BJ's joins two beneficiaries of consumers' recession diet -- Wal-Mart Stores (NYSE: WMT) and TJX Co's (NYSE: TJX) -- caused by the rising price of gasoline coupled with flat income and collapsed housing values. After all, if you can't borrow against your house and your credit cards are maxed out, where are you going to turn to keep your family functioning?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

It's been brewing ever so slowly, but AnnTaylor Stores Corp. (NYSE: ANN) has finally been able to show the results of its efforts. Shares of AnnTaylor soared about 13% today after the women's apparel chain raised its first-quarter earnings forecast.

The company said that better-than-expected results at its LOFT stores as well as lower inventories and better expense management overall contributed to the results. Yes, surprising investors is always good, but it's also always good to remain a little cautious with such news. The company itself warned about the rest of the year, leaving its full-year forecast unchanged.

Of course, the question is what's ahead for AnnTaylor. One answer already came today from the company when it said it would shelve a new store concept targeting baby boomers. But following the success of LOFT, the retailer is aggressively launching an outlet version of the brand. Is it smart? It certainly seems that in the current economic climate increasing lower-priced offerings would allow AnnTaylor to keep cash-strapped customers while offering them budget clothes in a familiar brand.

The Wall Street Journal is reporting about the novel theory that this recession may have fewer job cuts than those in the past. The paper says that "in past recessions, job losses have eventually gotten much more severe, marked by nationwide cuts reaching 300,000 or more per month. This time -- and these are dangerous words -- maybe it is different."

The argument here is based on the fact that job growth has been slow recently meaning there is not "a lot of fat" to cut.

It is a specious argument which may make some people feel better for a few weeks. With car sales off 14% last month and home prices down by as much as 25% in some markets, this recession is beginning to look like a deep one. Huge layoffs have already begun at financial services companies. Retailers may be the next to dump employees, especially if sales are weak in April and May.

The next large round of layoffs is likely to happen in the airline industry. High fuel prices are causing tremendous losses. If several airlines merge, there will be cuts. If fuel prices stay high, there will be cuts.

As the recession deepens, it will consume industry after industry. Like dominoes dropping, the layoffs are sure to come.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

Wal-Mart (NYSE: WMT) has surprised some investors these past six months or so by putting up more than decent earnings results. After yesterday's huge rally, Wal-Mart has nudged up over $50 per share. At this level, the company's market cap has also just crossed over the $200 billion mark. But is the stock a buy here at $50 and a $200 billion cap and what are its near term prospects?

It has been hinted strongly that in this consumer-led slowdown that millions of Americans are "shopping down" on daily staples at Wal-Mart instead of going to pricier competitors. If this is a temporary phenomenon, Wal-Mart should see a good April 30th quarterly result with momentum building to the July 31st quarter.

Long term, however, Wal-Mart is more of a market performer than an out-performer. Consensus estimates for the fiscal year ending January 31, 2009 calls for revenue of $405 billion and EPS of $3.40 and for fiscal year 2010, revenues of $435 billion and EPS of $3.75. Barely 10% growth of earnings and less than 10% growth of revenues. With the stock trading at a 13 PE multiple of fiscal year 2009, many would say the shares are more than fairly valued. In a difficult market as we have experienced, Wal-Mart became a safe place to hide money. The shares are up 14% this year which is outstanding performance vis a vis the rest of the market.

Wal-Mart may trade up to the $53-55 level before the year is finished, but as I mentioned it is not the best long term story in the big box retail segment. If the economy improves in the second half of the year, consumers may begin to "shop up" again, which would leave Wal-Mart with its traditional shopping base. That base is not enough to propel strong same store sales which is the life blood of big box retailers.

Georges Yared write about great growth stocks today in Game On Investing

Best Buy Inc. (NYSE: BBY), the consumer electronics retailer whose shares have slumped more than 12% this year, confirmed Wall Street's growing fears about consumer spending and cut its earnings outlook.

The Richfield, MN company expects fiscal 2008 earnings of $3.05 to $3.10, down from previous guidance of $3.10 to $3.20. Analysts expected profit of $3.17. Comparable stores sales are expected to rise 2.5 to 3%, below the company's previous forecast of a 4% increase. Fourth quarter same-store sales are expect to "decline modestly" in the fiscal fourth quarter, reflecting broader economy.

"Our December revenue results were in line with our expectations. Soft domestic customer traffic in January, coupled with our near-term outlook, now indicate that our fourth-quarter revenue will fall short of our planned targets," Brad Anderson, vice chairman and chief executive officer of Best Buy, said in a press release.

The company plans to open 130 to 160 new stores during its 2009 fiscal year, increasing its total retail square footage by about 10% to 51 million square feet. In addition, it plans "to bring more than 12,000 new retail management, sales and services positions to communities in its markets." Last year, rival Circuit City Stores Inc. (NYSE: CC) came under fire for firing 3,400 workers who were "paid well above the market-based salary range for their role."

Look for both Best Buy and Circuit City to discount like demons to lure consumers back into their stores. Maybe I'll pick up the plasma screen I've been eying.

Freelance writer Jonathan Berr edits the blog Ketchup and Eggs.

Apple Inc. (NASDAQ: AAPL) shares are trading higher this morning after the Commerce Department reported this morning that retail sales rose 0.3% in January. The announcement surprised analysts, who were expecting a 0.3% decrease in sales. This could be good news for AAPL, as analysts are questioning whether the company can keep up its strong sales record after a disappointing revenue forecast last month. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AAPL.

After hitting a one-year low of $83.00 last February, the stock hit a one-year high of $202.96 in December. AAPL opened this morning at $126.74. So far today the stock has hit a low of $125.63 and a high of $127.85. As of 10:35, AAPL is trading at $126.90, up $2.04 (2.0%). The chart for AAPL looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) hold rating.

In an odd turn of events, consumers actually increased their spending in January by 0.3%. What's strange about this is that sales during the December holiday shopping period actually declined 0.4% as "retailers suffered through their worst Christmas shopping season in five years."

Perhaps after feeling they had been conscientious spenders during the holiday season, shoppers have decided it was time to make up for it. True, there are concerns about the economy, but it seems consumers are either less worried about it or don't feel the effects yet. While the January jobs data has shown a slowdown, it was the first drop in four years and may not be felt overall yet.

So sure, some of the increase in the retail numbers was to be expected as consumers paid higher prices at the pump, but there was also strong demand for new cars as auto sales increased by 0.6% in January. And while sales excluding automobiles and gasoline were unchanged, clothing stores saw an increase of 1.4%, suggesting consumers are holding up.

Last week, Wal-Mart Stores Inc. (NYSE: WMT) reported a January same-store sales increase of 0.5% and competitor Target Corp. (NYSE: TGT) reported a January same-store sales dip of 1.1% from the same period in 2007.

It's been a while since Target saw a same-store sales decrease while larger competitor Wal-Mart reported an increase, and the reasons reported by both chains are a tad different. While Wal-Mart missed expectations of a 2% same-store sales increase in January, Target missed expectations of a 0.6% decline as well.

While Wal-Mart stated that fewer than expected customers cashed in gift cards in January, Target stated that lower sales of jewelry and lawn and garden items were the main reasons for its January downfall. Jewelry -- that makes sense, as the holiday season ended in December. But, lawn and garden sales in January? How low was the forecast there, Target?

It is hard for Wal-Mart (NYSE: WMT) to leave Japan, even though its sales there look awful. There are only so many large markets, and to keep its international growth moving, it needs to be in almost all of them.

The world's largest retailer did have a tough time in the big Asian market last year. The operation there said "it now expected to post a group net loss of 20.9 billion yen ($196 million) for calendar 2007, instead of its previous forecast for a loss of 10.4 billion yen, " according to Reuters. Same-store sales for the year dropped just over 1%.

The bad thing about Japan is that sales are flat. The good thing is that the government there allows Wal-Mart to operate without significant regulation. The politics of Japan are stable.

Wal-Mart has had success in China and hopes to move into India, but those countries have many more restrictions for doing business. At this point, Wal-Mart cannot even enter India under its own name. In China, Wal-Mart workers are members of unions and the communist party has a wing in the retailer.

Perhaps a market with modest potential and a large population is better than those with big business risks.

Douglas A. McIntyre is an editor at 247wallst.com.

I guess this shouldn't come as a surprise, but official holiday spending figures are now in, and to no one's surprise consumers pulled back on spending in December. According to the Commerce Department as reported by The Wall Street Journal (subscription required), retail sales fell by 0.4 percent during December.

On top of a weak month in December, the report also issued a downward revision on its previous November figures, and now show that November only saw a growth of 1 percent, a tad lower than the previous 1.2 percent that it had reported earlier.

The writing had been on the wall long before today however. Late last month retail giant Target (NYSE: TGT) set the mood for the holiday season when it announced that it was expecting to have flat December sales. The company had previously estimated that it would see an increase of around 3.5 percent, so a flat December would have been pretty hard to swallow.

December is a critical month for retailers - the holiday season is the busiest shopping time, and a large chunk of bottom-line profits is booked in the final month of the calendar year. In 2006, December sales accounted for about 15% of all sales for the retailing sector. But December 2007, as many were predicting, may be one of the worst Decembers this decade.

Tomorrow, same-store sales for this critical month will hit the Street and the International Council of Shopping Centers (ICSC) is expecting an overall gain of 1% among stores open at least a year. This is below the ICSC's earlier estimate of 1.5% and compares to a year-ago jump of 3.3%. If this estimate is on the nose, it will be the sector's worst December since 2002.

There are many reasons that the holiday-shopping season was a slow one: rising food and fuel costs, the credit market breakdown, continued housing woes. And because of all these reasons, many retailers were forced to offer sale prices and additional incentives to lure cautious customers into the stores. These discounts obviously pressured the bottom line.