Store closings are hardly an infrequent topic in this space. As a barometer for both the performance of individual brands and the market at large, they are an important part of the equation for any retail analyst. Store closings are part of healthy portfolio management for any brand, and, on a larger scale, bankruptcies and reorganizations are a reflection of the market at work.
The economy is hardly going like gangbusters, but the overall trend of modest (if somewhat less than dynamic) growth seems to be continuing unabated. In that context, the number of large-scale closings that have been announced recently stands out.
Consider the big names that have announced big store closing plans in the last few months:
• Sears has stated recently that they will be closing 80 stores this year (this coming from a store that has already closed 500 stores since 2005);
• Office Depot announced that they will be closing at least 400 stores across the country in the wake of their merger with Office Max;
• American Eagle has released plans for 150 closings over the next three years, with 70 of those on tap for 2014;
• Coldwater Creek is in the process of liquidating its 350-store national portfolio;
• Aeropostale is closing at least150 stores;
• Abercrombie & Fitch is doing away with its Gilly Hicks brand; and
• Express just announced plans to ax about 50 stores over the next three years.
One of the few pieces of good news regarding store closures came from Radio Shack, which was planning to close 1,100 U.S. stores, but could not come to an agreement with its creditors and is now expected to close just a fraction of that number—at least for now.
The really surprising thing here isn’t that any one of these closings is taking place—it’s that they all seem to all be happening at almost the same time. Most of these announcements have all come within a few weeks.
Typically, you don’t see this happening mid-year; usually it’s at the beginning of the year shortly after the holiday shopping season has rendered its annual verdict on seasonal winners and loser. I suspect that this might be an indication that these are larger corporate decisions, rather than just standard closures based on poor holiday sales or other short-term metrics.
As for what is prompting these closures, that’s a more difficult question—with more than one answer. Office Depot and Office Max are obviously dealing with post-merger redundancies and duplications in certain markets, while other brands are trying to trim some fat after poor financial performance. Some closures are the result of chronic, long-term struggles, and others are the result of repositioning or strategic attempts to consolidate or move in another direction entirely. But while the proximate reasons vary, there is a common thread running through all of these closures: an inability to adapt to and compete in a rapidly evolving and highly competitive retail landscape.
Is it just a coincidence that this is all happening at once? Or is it part of a trend? I don’t necessarily think this is a warning sign, but it is definitely significant enough that it bears watching. If for no other reason than because this volume of closures has the potential to have a huge impact not only on the retail side, but on shopping center development.
To me, the really interesting question is what happens next. What will fill this retail and retail real estate vacuum? Will it be new and emerging brands? Perhaps some popular and promising online concepts moving into brick and mortar? I’ll go into some of the brands and concepts that I think will be filling some of these gaps (and what that might mean for the industry) in my next column. In the meantime, I’d love to hear from you about what you’re seeing out there. What concepts are struggling? What stores are closing? And which candidates do you see that are poised to move into the literal and figurative spaces left behind by these closings? Leave a comment below to continue to conversation or send me an email with your perspective at Jeff@JeffGreenPartners.com.
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