Wave of Store Closures Batters Already Struggling U.S. Retail Industry

More coming
Toys "R" Us outlet closing down (Photo: Reuters)

The groaning and badly battered U.S. retail industry are bracing for a new wave of retail store closures that might see more than 2,000 outlets shutter their doors this year.

There's no light at the end of the tunnel for the retail industry as another wave of store closures is due to hit shopping centers and malls this year, according to a new research report by retail research firm Coresight Research.

Analysts wryly noted the U.S. remains "over-stored" (saddled with too many stores), especially when compared to other countries.

Retailers announced 2,187 new store closures on Jan. 1. This total is 23 percent larger than the number of announcements documented at the same time in 2018, said Coresight Research.

Among major retailers shuttering outlets are J.C. Penney, Gymboree, Charlotte Russe and Ascena Retail (parent company of specialty apparel retailer Ann, Inc.). The report also said "potentially many more (store closures are) on the way due to companies currently in the bankruptcy process and more on the horizon."

Coresight listed 5,524 store closure announcements in the U.S. in 2018. While seemingly large, this number was more than 30 percent lower than the record 8,139 closures announced in 2017.

Department store chains and specialty apparel retailers are the two retail categories expected to shrink this year and the next.

On the upside, Coresight said retailers have announced 1,411 store openings (offsetting 65 percent of store closures), largely from from dollar and discount chains. The pace of store closures is also slowing down.

David Simon, CEO of Simon Property Group (the largest mall operator in the U.S.), said the pace of store closures is slowing. Simon, however, expected more closures this year.

Driving store shut down in the real world is online shopping. This more convenient shopping option means that a lot of real estate for physical retail stores is no longer necessary. Retailers that do want to open new locations are opening in smaller spaces.

And, there are the fact store closings aren't always bad for business.

"You don't always look at store closures as a negative thing," said Brandon Famous, senior managing director of the retail advisory group at commercial real estate services firm CBRE. "That doesn't always dictate consumer sentiment.

"With any vacant department store, an owner has the opportunity to increase their rent, to reinvigorate or reinvent the space. In many cases, a landlord looks forward to the opportunity of getting that space back. In many cases, it will be a positive thing."

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