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April 9, 2017

Retail Sector on Pace to a Record-Number of Store Closings in 2017

Experts say it may take five years to bring the over-stored U.S. in line with true demand.

U.S. retailers, impacted by the growing popularity of online shopping, are taking serious action by shuttering stores at a record pace. According to Credit Suisse, so far this year retailers have announced plans to close almost 2900 stores – that’s two and a half times as many closings as had been announced by the same point in time one year ago: 1153. If the trend continues, 2017 will be a record-setting year for the sector; but not in a good way.

From 2000 through 2007, U.S. retailers closed about 2500 stores each year. That number doubled to about 5000 during the depths of the Great Recession (2008 – 2010) and peaked at 6200 in 2008. Industry experts say we could see as many as 8000 or more store closings this year.

Some retailers are opting to reorganize under bankruptcy protection, shuttering poorly performing stores in order to improve financial results. High-profile casualties include Payless ShoeSource, which recently filed for Chapter 11 bankruptcy and announced plans to close 400 (9%) of its stores worldwide. Electronics retailer RadioShack, in its second bankruptcy filing in two years, announced it will close another 187 (9%) of its stores. Outdoor goods retailer Gander Mountain, who operates in 11 states, has announced it will close 32 of its 162 stores.

Other retailers will shut down operations altogether. In January, Ohio-based women's clothing company, The Limited, filed for Chapter 11 protection after shuttering roughly 250 stores across 42 states. The Indianapolis-based electronics chain HHGregg Inc. announced it will close all of its 220 stores in 19 states. Gordmans Stores Inc., based in Omaha and operating 106 department stores in 22 midwestern states, will likewise close all its doors.

Many companies are electing to pare down their physical-store footprint in the absence of any bankruptcy proceedings, including Sears Holdings Corp., Macy’s Inc. and J.C. Penney. Others, such as American fashion house Kenneth Cole and the women’s apparel chain Bebe Stores Inc., are reportedly hoping to remake themselves into e-commerce-focused enterprises.

Data generated by the commercial real estate information provider CoStar Group suggests that because of overbuilding and Ecommerce gains, the U.S. remains over-stored and that another ten percent of retail space still must go. While upscale malls continue to perform well, C and D-class shopping centers (30% of the U.S. total) will bear the brunt of store closures in the years ahead.

This retail-store news summary is presented by Butcher Block Co. BBC is an online-only retailer specializing in kitchen furnishings and accessories, including wood countertops, kitchen islands, carts and tables. BBC closely monitors retail trends impacting markets and consumers.

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