As many as 25,000 stores could fold up shop this year amid a coronavirus pandemic redrawing the U.S. retail map.
Between 55 percent and 60 percent of the 20,000 to 25,000 stores that could be affected are locating in shopping malls, whose “rationalization,” Coresight Research CEO Deborah Weinswig says, “has lagged physical store closures.”
“The coronavirus outbreak could accelerate a correction in mall space that already looks overdue,” she wrote in Coresight’s latest store-closing report, which revised the projected closure count upward from the previous pre-pandemic guesstimate of 15,000. The retail research firm determined that 9,821 stores closed their doors in 2019, while UBS sees 100,000 stores disappearing over the next half decade.
Discretionary retailers will be the hardest hit in this year’s closures, according to Coresight, largely due to months of coronavirus store shutdowns that nearly extinguished their cash flows. Department stores and clothing and shoe retailers are expected to dominate the total store-closure tally.
Some apparel specialty chains have indicated that sales at reopened stores are performing well. Abercrombie, for one, noted a recovery of 80 percent of sales in reopened stores, while Gap said it has captured 70 percent of last year’s sales. However, Coresight data suggests a gradual return to pre-COVID-19 levels in offline discretionary retail sales. Consumer confidence, not to mention demand and spending, are not expected to reach normal levels for some time. Refinitiv’s latest read on the state of the consumer, for example, shows that 35 percent of shoppers won’t visit a mall until a COVID-19 vaccine is available.
Apparel chains and department stores represent 14 of the top 20 occupants of U.S. mall space, according to the Coresight report, citing data from real estate analytics firm CoStar. This outsize occupancy rate could spell trouble for malls as department stores tend to act as anchor locations, drawing in specialty chains to set up shop. And co-tenancy clauses could allow some chains to break leases or pay lower rents should the anchor tenants bow out.
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Malls, particularly regional centers, have already seen foot traffic fall off as consumers shift their shopping from bricks to clicks. Now, the pandemic is further pressuring a sector already under considerable duress.
A Coresight poll from May 27 found that consumers who said their shopping patterns have changed expect their spending behavior will normalize in five to six months, which could force even more store rationalizations. And because many consumers have permanently acclimated to online shopping, retailers have yet another reason to bring their fleets under review. Coresight’s closures estimates don’t take into account a potential second wave of COVID-19 infections later this year.
As of June 5, Coresight has tabulated about 4,005 planned U.S. store closures, which factor in 936 Pier 1 Imports stores, GNC closing 304 stores over a multi-year period, the Tuesday Morning bankruptcy that will see 230 locations closed and the Victoria’s Secret fleet rationalization plan closing 223 U.S. doors. Of Coresight’s total tally, 11,161 represent closures in the home and office retail sector, followed by 986 in apparel, footwear and accessories, and 480 in the grocery category.
In the post-June 5 period, bankrupt J. C. Penney plans to close 242 stores and will begin liquidating 154 stores on Thursday. Other retailers are expected to announce store closures later this year, both in and out of bankruptcy proceedings, which Brooks Brothers and Ascena Retail Group are said to be mulling.