A report from Coresight suggests that filing for Chapter 11 may no longer be an option for struggling retailers. A record amount of stores are going dark this year. Are many of the industry’s troubles still ahead? Let’s see what they have to say…
An estimated 25,000 retail stores across the United States are expected to go dark this year. That stunning figure is poised to put additional pressure on already struggling landlords.
Already 15 major retailers have filed for bankruptcy protection, as the coronavirus crisis forced all but essential stores to close for nearly three months.
Coresight is forecasting closings in the 20,000 to 25,000 range, far outpacing the firm’s original 2020 projection of 15,000 stores shutting down forever.
Coresight ascribed the shift to what it called an “e-commerce disruption” as well as the “trend of discretionary spend incrementally moving from products to services as shoppers demonstrated a preference to spend on experiences rather than discretionary product purchases.”
Already Coresight has logged 4,005 planned store closings as of Friday. More than half of those, 2,059, can be accounted for by only six retailers:
· Pier 1 Imports liquidated and closed 936 stores.
· GNC will get rid of 304 wellness stores.
· Tuesday Morning is closing all 230 stores.
· Victoria’s Secret parent L Brands is purging 223 stores.
· Papyrus, the greeting cards retailer, is shutting down all 178 stores.
· J.C. Penney is unloading 169 stores through its Chapter 11 bankruptcy.
Coresight expects it will be challenging for retailers troubled before the COVID-19 outbreak to find a funding source, leaving no other resort but to file a Chapter 7 bankruptcy to liquidate as opposed to filing for Chapter 11 protection.
Apparel retail and department stores are likely to dominate the closings, with 55% to 60% of them in shopping centers and malls.
The nation’s largest owners of retail space have been rethinking how to use abandoned space. Many have adjusted the tenant mix with experiential retail options ranging from more eating establishments to medical to climbing walls and other fitness-related activities, with some uses seen as less desirable during the social distancing of the pandemic.
While the customer sales response at many retail stores has been unexpectedly favorable in these early days, there’s no telling what lies ahead with the coronavirus, the economy and on the job front, the biggest purchasing motivator.
Coresight, for its part, recognizes there’s still plenty of industry strife ahead.