By November of this year retail store closures were already nearly 55% higher than during the entirety of 2018. That's according to advisory firm Coresight Research, which put the number of closures at more than 9,000 as of Nov. 1.
The total announced closures could hit 12,000 by the end of 2019, Coresight estimates. "Initially it was something of a surprise, but I think you could see the momentum building as the year went on," John Mercer, head of research at Coresight, said of this year's closures. "It's up very strongly against last year." he added. "2018 was, in retrospect, maybe something of a lull in closures between two very strong years."
Where do the closures stop? "If we're talking in annual terms, maybe this year is the peak," Mercer said. "But I don't think that means it's going to abate rapidly and meaningfully. U.S. retail is still over-spaced."
David Berliner, head of BDO's restructuring and turnarounds unit, said a recession could intensify bankruptcies and foreclosures. He also points to a self-feeding closure cycle, especially in malls. It's being driven not only by distressed retailers but also those trying to adapt their footprint to the rise in internet shopping.
"Take some of the lower B or C malls, and you start walking around the mall, as the tenant mix starts dropping where there's fewer and fewer, that even good companies now have a bad location," Berliner said. "They are going to close that store because they can no longer justify being in that mall because it's dead or dying."
Retailers that have closed more than 100 stores in 2019
|Charlotte Russe||women's apparel||500|
|Family Dollar||dollar stores||359|
|Charming Charlie||women's apparel||261|
|Destination Maternity||women's apparel||210|
|The Kitchen Collection||home||160|
Source: Coresight Research. (Figures include some estimates.)
Scott Carpenter, head of the retail solutions unit at B. Riley Financial's liquidation arm, Great American Group, recently said that mass closures could go on for up to two more years. Carpenter said that "most retailers" are over-stored, meaning another 30% of current retail space "would cease to exist in its current form, as consumer buying trends shift increasingly online," he said.
With all that in mind, here is a look at some of the biggest and most surprising closure announcements from this year, as well as quieter closures that pointed to broader trends in the industry.
Payless ShoeSource is the biggest liquidation in retail history by store count. The footwear retailer shuttered 2,100 stores in the U.S., according to Coresight, during its second Chapter 11 in as many years. As such it accounts for an outsized share of 2019's swelling closure total. According to Coresight's research, Payless accounts for more than 23% of the total stores closed in the U.S. so far this year.
In February Payless' lenders-turned-owners decided to pull the plug on the footwear retailer, opting to wind down its physical operations two years after its first Chapter 11 in 2017, which cut out some debt and hundreds of stores. In doing so, Payless joined Gymboree and Charming Charlie in filing a second Chapter 11 (also known as Chapter 22) this year and liquidating on the second go around.
Ascena Retail Group in May announced it would shutter its Dressbarn unit. In doing so it closed some 650 stores — accounting for nearly 5 million square feet of retail space — and eliminated 6,800 jobs.
Closing the nearly 60-year-old banner wasn't cheap. By August, Ascena had already racked up $50 million in costs associated with the wind-down, according to its 10-K. But the company said closing Dressbarn would make it perform better overall.
"Dress Barn" was the name founder Roslyn Jaffe chose in 1962 when she opened her first store for working mothers, creating the company that would bear the same name until it became Ascena. But the discount brand had lost sales and customers in recent years as off-price and fast-fashion players expanded deeply into the market. In late October, Ascena announced it would sell the Dressbarn intellectual property to a subsidiary of Retail Ecommerce Ventures LLC that plans to relaunch the banner online next year.
Charming Charlie was another Chapter 22 this year, and another that liquidated its entire footprint. Like Payless and Gymboree, the retailer's failure is a sign of bankruptcy's limits in nursing sick companies to health.
Founded in 2004 by Charles Chanaratsopon, the retailer made its name largely via its approach to merchandising, grouping products together by color. But the color-scheming led to inventory overages. Charming Charlie, along with Charlotte Russe and dozens of other companies to go bankrupt or which are teetering on the edge, also fell prey to the broader malaise in the apparel sector.
Gap Inc. executives told analysts early this year that the company would shutter 230 locations belonging to its namesake banner. The announcement came shortly before the company announced it would spin off its Old Navy business. While its lower priced sibling took off, Gap has lost customers and sales over the years.
The closures represented roughly half of Gap's fleet at the time of the announcement. That's a big chunk of stores — more than many retailers close in bankruptcy. But Gap did it outside of a court process, as part of a strategic shakeup within the company.
And Gap is certainly not alone. With the U.S. broadly over-stored, and many malls still ailing, retailers of all stripes are paring their footprints to varying degrees. Some, like J. Crew and H&M, are both closing and opening stores.
Going into the year with roughly 590 stores, Fred's went through several waves of mass closures as it frantically worked to align costs with falling sales.
By this summer Fred's had managed to reduce its cash burn, pay down some of its asset-backed loan and was working with lenders to refinance its debt. At the same time, a liquidity crunch was accelerating sales declines as Fred's struggled to keep its shelves stocked. In the end, it filed for bankruptcy with plans to liquidate its remaining stores and sell off its pharmacy business. Like Shopko, which also liquidated this year, Fred's struggled to compete in the drugstore space against well-capitalized, large-scale rivals like CVS and Walgreens.
GameStop's CFO said in September the company was on pace to close 180 to 200 underperforming stores across its business by the end of fiscal 2019. These were "opportunistic" closures, but the pace would likely accelerate in the coming years as the retailer tweaked its store analysis process, the executive said at the time.
GameStop has well over 3,500 stores in the U.S., and sells a product that is rapidly digitizing, but CEO George Sherman told his team that "we don't have a real estate problem." Rather, he explained to analysts earlier this year, the gaming retailer is looking to make its existing space more productive by shifting its merchandise allocation. But if push came to shove, GameStop's average lease life is two years, giving it flexibility to exit a good section of its footprint without a court process.
Deep discount is one of the few expanding retail sectors, where profits, sales and store counts are generally on the rise at a breakneck pace. Family Dollar is the exception. After Dollar Tree acquired the banner in 2015, it has struggled to turn around its performance. CEO and President Gary Philbin said that Family Dollar's turnaround "continues to gain momentum." In the same breath, the company said it closed 296 Family Dollar stores during the second quarter and re-bannered another 100 as Dollar Trees.
After Dollar Tree announced in March that it would close nearly 400 Family Dollars stores this year, GlobalData Retail Managing Director Neil Saunders said that it showed the company "does not want to spend time and money refurbishing" the banner's stores. "The blunt truth is that despite the synergistic savings they have extracted, the Family Dollar acquisition has not been the success it was billed to be," he said.
A previous version of this story incorrectly identified Great American Group's parent company.