This Christmas season was the worst ever for many retailers. And with too many stores and too few customers, expect to see A Rash of Retailer Closings in 2009.
The most dramatic pullback in consumer spending in decades could transform the retail landscape, as thousands of stores and whole malls close down. And analysts expect prolonged woes in the industry as the dramatic changes in shopping behavior could linger for another two or three years amid worries about the deteriorating economy and rising layoffs.
“You are going to see a substantial retrenchment in the retail industry,” said Rick Chesley, partner in the global bankruptcy and restructuring group at international law firm Paul Hastings. “The downturn has been catastrophic.”
The retail casualties, which were first among home furnishing stores and then many apparel stores over the past year or so, are expected to cut across all sectors as shoppers have slashed their spending on non-essentials, from TVs to jewelry.
About 160,000 stores will have closed this year and 200,000 more could close next year, said Burt P. Flickinger III, managing director of consulting firm Strategic Resource Group. That would be the industry’s biggest contraction in 35 years. Flickinger expects 2,000 to 3,000 malls to close in March and April.
AlixPartners, a turnaround consulting firm, predicts that 25.8 percent of 182 major retailers it tracks are facing major financial distress or will face a significant risk of filing for bankruptcy next year or in 2010 — the highest level in the 10 years that the firm has been compiling the figures. That compares with the 4 percent to 7 percent that it predicted would face financial woes in the previous two years.
Wave of Bankruptcies and Closures Coming
International Council of Shopping Centers comes up with a different set of numbers numbers as reported by Bloomberg in Holiday Sales Drop to Force Bankruptcies, Closings.
U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.
Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers. Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations.
“You’ll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains either multi- regionally or nationally go out,” Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said today in a Bloomberg Radio interview. “There are a number that are real causes for concern.”
Probably 50,000 stores could close without any effect on consumer choice, Gregory Segall, a managing partner at buyout firm Versa Capital Management Inc., said this month during a panel discussion held at Bloomberg LP’s New York offices. Only retailers with healthy balance sheets will survive the recession, according to Matthew Katz, a managing director at consulting firm AlixPartners LLP.
The ICSC predicts, using U.S. Bureau of Labor Statistics data, that 148,000 stores will shut down in 2008. That would be the largest number since 151,000 closings in 2001, during the last recession, according to ICSC Chief Economist Michael Niemira.
Retailers’ pricing models are being challenged by consumers, according to Richard Hastings, consumer strategist at Global Hunter Securities LLC of Newport Beach, California.
“The whole pricing system is becoming an old-fashioned bazaar,” Hastings said today in a telephone interview. “They’re going into the stores and they’re looking at the stuff and they’re saying ‘You know what? I know that that price is way too high,’ and they have figured out that the signage doesn’t mean that much.”
List of Retail Store Closings
Terri Potratz has a List of Retail Store Closings in US. Most will recognize the names on the list.
Evidence is now irrefutable that the Shopping Center Economic Model Is History.
Mike “Mish” Shedlock
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