Added to this worry is the fact that bigger leveraged buyouts have been largely absent from the busy merger and acquisition scene this cycle. Regulatory constraints on banks and private-equity firms in "harvesting" mode have curtailed LBO activity.
Finally, the usual escape hatch of challenged retailers — reaping some value from extensive real estate holdings — is complicated by the waning appeal of mall and strip-center space. While Macy's sits on vast value in the form of its Midtown Manhattan flagship and is busy carving out spaces for smaller retailers and other tenants in anchor stores, the typical retailer is hard-pressed to find eager takers for its leases or boxes.
There is, too, the cautionary example of Sears Holdings, the combination of Kmart and the old Sears controlled for a decade by hedge-fund manager Edward S. Lampert. While Lampert has kept the holding company afloat through multiple asset sales, real estate deals and spinoffs, it's still unclear if enough value can be squeezed out to overcome the persistent sales declines at its core chains.
Gap remains an intriguing company in this whole discussion. The company has frequently faltered in driving comp-store sales, often with Old Navy serving as the only one of its three concepts reliably growing. The founding Fisher family continues to hold a large stake. The online business and workout-wear brand Athleta continue to have growth obscured by sluggish mall-store performance. And the company was reported to have considered going private in 2007.
Gap said it would not comment on rumors or speculation.
At some point, if industry trends should stabilize, these cheap-looking stocks could be viewed as offering two ways to win, either through a return to earnings growth or a premium-paying acquisition.
In the fog of today's retail environment, though, investors are now stubbornly focused on what more might be lost.