What’s with all the retail store closings?
The Container Store is preparing to file for bankruptcy, Bloomberg reported last week. It’ll join the list of 49 retailers that have filed this year so far — almost double the number last year, according to Coresight.
Meanwhile, upwards of 7,000 brick-and-mortar stores have closed across the country. All this, despite the fact that consumer spending has been strong. So what’s going on?
“Around where I live, I mean, you can walk from one Walgreens to the other seemingly all day,” said David Swartz, a Chicago-based senior equity analyst at Morningstar.
He said Walgreens, CVS and Rite Aid have seen some of the highest store closure rates in retail this year because, in general, the U.S. has too much retail space.
That, combined with the rise of online shopping, is forcing these retailers to downsize, Swartz said.
There’s also been rising inflation and everything that’s come with it. John Mercer, head of global research at Coresight, said retailers like The Container Store that sell furniture or home improvement or anything related to buying a house are hurting.
“So that combination of kind of more muted discretionary spending, softer big ticket spending, pressures from interest rates have really kind of compounded,” he said.
And it’s all happened during what Mark Cohen, former director of the retail studies program at Columbia University, calls a COVID hangover.
During the pandemic, many stores got a break on what is one of the most expensive parts of their business: Real estate.
Troubled retailers got lease adjustments and rent deferrals, Cohen said, which helped keep them afloat. And now? “Those accommodations are pretty much all gone,” he said.
It means businesses that would have failed years ago are finally failing now.
And commercial real estate owners? “Those landlords are eagerly looking for new tenants who are, apparently, signing up,” Cohen said.
It’s all part of the churn of retail. Just instead of Big Lots and Footlocker, we’re getting more Wawa and Aldi.