Tags: retail | closures | stores | bankruptcies | apocalypse

Retail 'Apocalypse': More Store Closures, Bankruptcies Seen for '18

Retail 'Apocalypse': More Store Closures, Bankruptcies Seen for '18
(DreamsTime)

Friday, 29 December 2017 10:05 AM

Store closures and the retail “apocalypse” haunted the retail industry this year and the pain reportedly is expected to keep coming.

So far in 2017, nearly 7,000 store closure announcements have been made, up more than 200 percent from a year ago, CNBC reported, citing FGRT.

The closures came as consumer preferences changed and sales continued to migrant to online platforms such as Amazon.com Inc. To be sure, many of these retail locations have yet to close, with some companies making plans that date out to 2020.

"Store closures are a major theme in U.S. retail, as many overspaced retailers are reacting to the migration of sales online by closing physical locations," FGRT's Deborah Weinswig wrote in a recent note to clients.

Still, shoppers may not yet realize the full impact of these changes, CNBC explained.

“While announcements were made by retailers such as Charming Charlie, Perfumania, Crocs and GameStop, among others, some have yet to shutter their doors. The closure may not come until 2020, in some cases, CNBC reported.

According to FGRT, the most closure announcements so far stem from RadioShack, Payless and Rue21, all of which filed for bankruptcy protection in 2017, CNBC reported.

More store closures are expected to come from the parent of Sears and Kmart, which has said it plans to continue to use its real estate to unlock cash in a bid to return to profitability and operate with a leaner physical footprint.

"I think the big theme is companies have really over-levered themselves," Moody's analyst Christina Boni told CNBC. "If they can't make critical investments, they have to ask themselves if it makes sense to plod on another year or if it's of better interest in the long term ... to make a better [store] structure."

Despite what could be the strongest holiday shopping season on record for both brick-and-mortar and online retailers, smartphone and mouse-and-click shopping continues to haunt physical stores.

For example, United Parcel Service Inc. said it is on track to return a record number of packages this holiday shipping season, a sign that e-commerce purchases surged to new heights over the past month, Reuters reported.

The world’s largest package delivery company and rival FedEx Corp. get paid by retailers like Amazon.com Inc. and Wal-Mart Stores Inc. for handling e-commerce deliveries.

Both have benefited from booming delivery volumes over the past few years, but also have had to invest billions of dollars to upgrade and expand their networks to cope.

UPS said on Wednesday it handled more than 1 million returns to retailers daily in December, a pace expected to last into early January. It said returns would likely peak at 1.4 million on Jan. 3, which would be a fifth consecutive annual record, up 8 percent from this year.

All the returns come as MasterCard Inc. reported that U.S. shoppers spent over $800 billion during the season, more than ever before.

To be sure, former department store executive Jan Kniffen warned CNBC that 2018 won’t be any better for traditional brick-and-mortar retailers.

"This year we'll see more stores closure announcements than ever in history, and it's the best year I can ever remember in retail [overall]," said Kniffen, CEO of consulting firm J. Rogers Kniffen Worldwide Enterprises.

During 2018, "we're going to see more bankruptcies, more store closures. That's not changing," Kniffen told CNBC.

Kniffen, who was a senior executive for May Department Stores for 20 years, said most retailers had a decent holiday season but the "winners and losers" will not change next year. He added that "bad retailers" will get hammered by the GOP's tax overhaul.

The tax bill reduces the corporate tax rate from 35 percent to 21 percent.

"The guys who are maximum taxpayers at 35 percent are going to 21 percent. They save 14 percentage points," Kniffen said. "People who don't have the advantage, because they are bad retailers and don't make money, are going to get pounded."

"The lesson is the world is still going online, that hasn't changed," he said. "And the lesson is we're still going to see lots of stores close."

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Economy
Store closures and the retail “apocalypse” haunted the retail industry this year and the pain is expected to keep coming.
retail, closures, stores, bankruptcies, apocalypse
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2017-05-29
Friday, 29 December 2017 10:05 AM
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