U.S. retailers are fighting battles on multiple fronts, experts say, and in the years ahead we should expect store closings to continue.
Many retailers are seeing online sales grow at a greater rate than at physical stores while they are simultaneously hit by significant overhead costs at brick-and-mortar locations, according to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City-based retail consulting and investment banking firm.
“Of the 10 largest online retailers, eight are companies with a brick-and-mortar heritage, substantial investments and huge overhead," Davidowitz says. "They have a thriving online business in which they continue to invest, but are not doing so well overall because of the brick and mortar shortfall. One can only conclude that there will continue to be an ongoing urgent need to reduce brick-and-mortar with massive store and mall closures."
The bottom line is that retailers, and teen apparel sellers in particular, cannot afford to rest idly. The Deal collected data reporting that the number of large-liability retail Chapter 11 filings (at least $250 million in liabilities) nearly doubled in 2016.
Retailers’ coping strategies so far have included closing stores; focusing on smaller-format stores; and using physical stores to drive online sales through allowing customers to examine the merchandise in real life, pick-up online orders and make returns.
Among the major headwinds brick-and-mortar chains are now facing is a relatively deflationary environment for retail goods, consumers spending less money on apparel and the growth of apparel sales online, notes Neil Stern, senior partner at Chicago-based retail consulting firm McMillan Doolittle.
“Of course I am predicting more closures, more consolidations of stores, rationalization of store sizes,” Stern says. “At some point, through rationalization of supply, the retailers who survive should be healthier. I am reasonably bearish on apparel retail sector and department stores in 2017.”
Here is a look at the chains expected to be closing multiple stores this year. (The list excludes Sears Holdings stores, as at this point it seems taken for granted that it’s only a matter of time before it implodes.)