A whopping 45K retail stores may now close down in the coming years as retail’s physical footprint increasingly shifts, says UBS analysts.
The April 22 report is based on the premise that online retail penetration rises to 26% from 21% with retail sales growth of 4% by 2028.
Banks’ reluctance to lend, higher operational costs and consumers’ sustained inclination to spend on services instead of goods also drive store closing forecasts.
The U.S. still has too much retail square footage, the UBS analysts said, as third-party players like Temu and Shein are positioned to drive further e-commerce penetration without the overhead of managing and maintaining a physical footprint.
The analysts said apparel and accessories, consumer electronics and home furnishing retailers need to shrink their footprints the most.
Several major retailers with noteworthy physical footprints recently announced store closures or have gone out of business altogether.
They include Foot Locker, Sally Beauty, Tuesday Morning, Shoe City, and furniture retailers Z Gallerie and Mitchell Gold + Bob Williams.
Bed Bath & Beyond also closed stores when it filed for Chapter 11, but lives on as an online-only retailer.
Clothing, consumer electronics, sporting goods, hobby, book, music and home furnishing stores have closed the most locations since Q1 of 2019, per the report.
If the analyst’s estimates come to fruition, UBS says the total number of retail stores in the U.S. will fall to 913,500 from 958,533.
A decline in the economic environment may also drive the number of closings up.
“In our view, department stores continue to lose customers to off-price retailers.
This dynamic will likely cause department stores sales floor productivity to deteriorate, which should lead to fixed cost deleverage and ongoing operating margin compression,” UBS said.
However, retail is unlikely to reach a post-store era anytime soon, the analysts said in their 100-page report.
“Our analysis assumes that stores remain an important part of the overall retail ecosystem for retailers and consumers. In the simplest terms, stores serve as hubs of fulfillment and support distribution logistics,” UBS said.
“This is increasingly more important as consumers are becoming more demanding for convenience or immediate deliveries.”
The retailers best positioned to gain are those that are adopting and investing in omnichannel experiences.
UBS described it as “a biological evolution, similar to survival of the fittest. Thus, retailers like Walmart, Target, Costco, Home Depot, and other large, leading retailers stand to gain from this natural selection.”
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Also Read: A Massive Grocery Chain With 400 Stores Is Now Closing
Other Economy News Today
A massive shoe retailer now announces a new wave of layoffs to hit headquarters this summer, affecting over 700 employees.
Nike has announced its ‘second phase’ of mass layoffs, effective June 28, according to a Worker Adjustment and Retraining Notification (WARN) filing.
A total of 740 employees will be impacted in the retailer’s home state.
The layoffs are part of the 2% workforce reduction Nike announced in February, which is taking place across two phases, the company confirmed via email.
Nike said job titles and the number of employees in each category would be provided at a later date, once the company has determined them.
Bumping rights are not available for the impacted employees, reports Retail Dive.
“Nike’s always at our best when we’re on the offense. The actions that we’re taking put us in the position to right-size our organization to get after our biggest growth opportunities as interest in sport, health and wellness have never been stronger,” Nike said in a statement.
“While these changes will impact approximately 2% of our total workforce, we are grateful for the contributions made by all Nike teammates.”
The layoffs are tied to a cost-savings plan Nike unveiled in December, which is aimed at generating up to $2 billion in cumulative savings over three years.
Based on the company’s last annual report, the layoffs to 2% of its total workforce will impact more than 1,600 people.
Savings from the plan are set to be reinvested in driving growth, innovation and profitability.
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Also Read: A Massive Grocery Brand Now Files For Chapter 11 Bankruptcy
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