Michael Lasser, analyst at UBS Securities, which provided the analysis of America’s brick-and-mortar landscape, said Monday that many of those 80,000 lost stores will come from malls. “If the number of malls per household regressed to 1980 levels, it would imply a 9 to 10 percent decline in malls,” he added.
In 2026, the U.S. could be home to just 797,000 stores, down from a base of 878,000 last year. “This assumes that online penetration grows to 27 percent in [calendar year 2026], from 18 percent in 2020,” Lasser wrote in the report, “How Many More Retail Stores Will Close? A Deep Dive in Slides.”
It’s not all bad news, however.
Lasser and the UBS retail analytical team said their conclusion presumes that “retailers evolve and adapt their store formats to be the centerpiece of interacting with consumers, including fulfilling online orders.” According to UBS, 20 percent of stores could fulfill digital orders by 2026, up from 10 percent last year. “Overall, under this framework, every 100 [basis point] increase in online penetration results in the equivalent sales of 8,000 stores shifting to e-commerce,” Lasser said.
Online competitors scaled their fulfillment capabilities in the past year, with Amazon growing its fulfillment space by 100 million square feet in the U.S. for a total of 295 million square feet while Wayfair’s capacity increased by 20 percent to 19 million square feet. Combined, these two e-commerce firms added the fulfillment capacity equivalent of 21,000 retail stores last year.
The big loser, however, will be the apparel sector.
The UBS team believes that apparel stores will lose 21,000 doors, followed by consumer electronics with 8,000 and home furnishings at 7,000. By contrast, auto parts stores are projected to add 160 locations. Grocery and home improvement also should fare far better than apparel retailers, with both projected to see modest store closures, at 1,200 and 1,600, respectively.
Retail got a boost last year from stimulus checks and consumers who redirected their spending from services to essential goods, though UBS dismissed those trends as “temporary.”
“As the consumer backdrop normalizes, we think the challenges faced by undifferentiated retailers will become more apparent,” Lasser said.
Despite the store-closing outlook, brick and mortar continues to play a key role in retail, which has seen store-based fulfillment surge during the pandemic. “As a result, we are now incorporating the assumption that retailers will increasingly fulfill a portion of online sales through their stores,” Lasser said, noting the rapid adoption of curbside pickup, buy-online, pickup in-store, as well as ship from store.
If the volume of stores handling fulfillment for online-originating orders reaches 30 percent, versus the 20 percent in UBS’ base outlook, a staggering 150,000 physical locations could fold up shop.
Meanwhile, sales per store in the hard-hit department-store sector have plummeted to their lowest point in more than a decade, according to UBS. Store productivity is now well below peak levels from the second quarter of 2005 when sales per store were $18.6 million versus $10 million today.
Regional, highly leveraged chains will accelerate closures and possibly go out of business. And department stores are likely to continue to lose customers to off-price chains, UBS said.