Will store closings in 2021 beat last year’s record total?
COVID-19 accelerated the rationalization of retail’s over-stored environment and the pace of closures isn’t expected to slow.
“We’re not done yet,” Terry Lundgren, Macy’s former long-time CEO, told CNBC in mid-December. “We’re going to learn even more when we get through the holiday season. Retailers who have a weak balance sheet today aren’t going to get relief in January. It’s going to get tougher. When the volume of purchases drops dramatically after Christmas, the expenses remain.”
Retailers able to ride out the disruption until vaccinations arrive are expected to benefit.
“They’re actually going to have an opportunity to grow again. That’s the upside, the green shoots, from that perspective of store closures,” Mr. Lundgren added, predicting it’s “probably not too much more than six months from now.”
Before the pandemic, the expansion of online shopping had dragged down in-store traffic. Government-mandated restrictions, along with consumer caution, during the pandemic accelerated the online shift and decimated in-store selling for many retailers. A report from real estate firm CoStar Group found that 40 major retailers filed for bankruptcy and more than 11,000 store closures were announced in 2020 — both records.
Retailers behind in building online and omnichannel capabilities have been caught at a disadvantage during the pandemic. However, certain categories, such as apparel, luggage and jewelry, have particularly been a hard sell in the stay-at-home economy.
Coresight Research calculated U.S. retail sales of apparel and accessories tumbled 30 percent year over year from January through October, “which is likely to lead to substantial store closure announcements and/or bankruptcy filings among retailers selling apparel and similar product categories” in January. The firm added, “Moreover, many retailers likely hung on through the crucial holiday season in hopes that it would make up for a difficult year.”
Several articles listed retailers that struggled in 2020 as those most vulnerable to additional closures in 2021.
“It really comes down to how long COVID persists,” Chris Hudgins, at S&P Global Market Intelligence, told USA Today. “If we see this vaccine roll out and a lot of the cases come down and people go out and start shopping more, that will alleviate some strain on the retail sector.”
- Former Macy’s CEO expects retail closures to continue into 2021 as Covid persists – CNBC
- It May Be a Record, But It’s Not a Surprise; 1157 Stores Closed – Loss Prevention Media
- Weinswig’s Weekly: 2021 Outlook: Looking Forward to a Healthier Retail Environment as the Year Progresses – Coresight Research
- More store closings in 2021? These are the most vulnerable major retailers of 2021 as pandemic continues – USA Today
- Retail Bankruptcies Could Go From Bad To Worse In 2021 – Forbes
- It’s going to be a make-or-break holiday season for these retailers – CNBC
DISCUSSION QUESTIONS: Will the pressure for retail chains to close stores increase or lessen in 2021? What factors do you see particularly impacting store closing trends?