Home > Uncategorized > The Ugly (Retail) Truth: Which Stores Will Close Or Survive

The Ugly (Retail) Truth: Which Stores Will Close Or Survive

 

images (2).png

I write about the intersection of retail and consumer trends.  Opinions expressed by Forbes Contributors are their own.

 

Whew. It’s ugly out there in the U.S. mall land.

More than a dozen retailers are shuttering hundreds of doors, while others kiss the American shopping landscape goodbye forever.

While no means a definitive list, here’s a Cliff Note’s-style rundown of 10 chains closing stores and liquidating their fleet, and a look at the saving-grace strategies of the merchants sticking around—for now.

1. Abercrombie & Fitch: Closing 60 Stores

Even though the teen apparel retailer shed its oversexed image and decreased its reliance on stuck-in-the-90s, logo-emblazoned fare, Abercrombie & Fitch’s U.S. sales continue to fall as fast-fashion retailers like H&M and Zara siphon business. Although the retailer’s Hollister brand is a bright spot, the namesake chain posted its 16th straight quarterly decline this month. To revive business, CEO Fran Horowitz is shifting A&F’s focus from image to “customer engagement,” reflected in its first new concept store in 15 years in Columbus. The store features a runway of 40 mannequins to inspire outfit guidance; tech-enabled fitting rooms, where consumers can adjust the lighting to see how an item would look at the beach or a nightclub; and phone recharging stations.

Analyst Sound Bite: “The continued double-digit negative comps at A&F and below-plan gross margin speak to the difficultly in re-positioning the namesake brand,” said Dana Telsey, CEO of Telsey Advisory Group, in a research note.

2. The Children’s Place: Closing 300 Stores By 2020

The children’s retailer is reimagining its business for the era of online shopping: It’s shuttering 300 stores by 2020, boosting inventory productivity, growing e-commerce to 20% of sales, expanding its presence on Amazon and spreading its international wings.

Analyst Sound Bite: Betty Chen, managing director of Mizuho Securities, said the retailer has managed to outperform the retail sector, citing market share gains from a “strong product assortment.” Looking ahead, “Alternative sales channels may become more critical in the future. The Children’s Place continues to grow the wholesale business with the rollout of a replenishment program with Amazon.”

3. Crocs: Closing 160 Stores

The plastic clog retailer, coming off a restructuring effort that included cutting operational costs and whittling down 40% of its product mix, Crocs will close 160 stores by the end of 2018, a whopping 28% of its fleet, as it consolidates its senior ranks and promotes its president to CEO.

Analyst Sound Bite: Crocs’ “marginal styles” and “the growing athletic trend is making Crocs more of an afterthought for retail accounts, particularly outside of core markets,” said Sam Poser, an analyst with Susquehanna Financial Group LLLP in a research note cited by Footwear News.

4. J.C. Penney: Closing 130-140 Stores

Under the guidance of former Home Depot executive Marvin Ellison, the department store for Middle America is deemphasizing apparel and making a bold investment in the 70% of its shoppers that own a home. After a successful test, J.C. Penney is expanding home appliance showrooms from 500 to 600 stores, as it tiptoes into offering home services, from bathroom remodeling to blind installation, in 100 stores, taking dead aim at ailing rival Sears, once an appliance powerhouse.

Analyst Sound Bite: “The previously announced store closures of 130-140 or 13%-14% of the store base (less than 5% of annual sales) is a positive, but at the same time the company continues to enhance the in-store experience whether it be through Sephora [beauty shops] an expanded home offering and services, and/or a rebranded Salon business,” said Dana Telsey, CEO of Telsey Advisory Group, in a research note.

5. Macy’s: Closing 100 Stores

The iconic department store is hoping for a miracle on 34th Street in the hands of a new CEO Jeff Gennette. But macro trends have been hitting Macy’s where it hurts. The retailer has been bleeding market share in apparel, its biggest single business, to off-price chains like T.J. Maxx (not to mention Amazon), just as the high cost of running an online business eats into profit margins. Macy’s is closing 100 stores and, pressured by restless activist investors, monetizing its real estate, some of which is being transformed into mixed-use properties, such as the retail, art gallery and artisanal restaurant development brewing at the former Macy’s Men’s Store in San Francisco’s Union Square.

Gennette’s survival plan relies on the expansion of in-store shops such as LensCrafters, Backstage, its off-price concept, and Blue Mercury, the beauty chain it purchased that eschews the department store counter service model in favor of open-sell environments akin specialty stores like Sephora that have been eating its beauty lunch.

Analyst Sound Bite: “We think Macy’s needs to reinvent itself and has prudently identified the need to change the store experience, leverage big data, and reduce field staffing to drive agility,” said Oliver Chen, an analyst with Cowen and Company, in a research note following the chain’s store closure announcement. “A new organization will unfold but this will take multiple years.”

6. Radio Shack: Closing 552 Stores

The struggling electronics chain, whose parent company General Wireless filed for Ch. 11 protection this month, its second in two years, is closing 552 stores this spring.

Founded in 1921, the retailer carved a niche as a local destination for small-ticket consumer electronics, from batteries and cords to cell phones and speakers. But it’s been a vulnerable niche to sustain amid the rise of phenomenon Amazon, which has been gobbling up consumer electronics market share. (Rest in peace, Circuit City.)

Meanwhile, Radio Shack’s co-branding effort with wireless provider Sprint has failed to revive the business.

Analyst Sound Bite: “No consumer electronics store sells a differentiated product,” Michael Pachter, research analyst at Wedbush Securities, told the Los Angeles Times. “There’s nothing they sell that you need to go to their store to get.”

7. Sears Holdings: Closing 150 Stores (108 Kmarts And 42 Sears)

Department store Sears and sister discount chain Kmart have been dying a slow death for over a decade now, posting sales declines for about that long. After closing 130 stores in 2016, the chains will shutter another 150 this year.

Sears is starving from a dozen-year underinvestment in stores and merchandising; an ongoing shakeup of senior ranks; and the spin-off of various assets to boost its liquidity–from Sears Canada and chunks of real estate to most recently, its iconic Craftsman tools brand to Stanley Black and Decker, a move that squandered what little brand equity it had left.

Meanwhile, Kmart failed to carve a distinct reason for being among discount brethren Wal-Mart, the low price juggernaut, and Target, champion of chic cheap.

And while CEO and majority shareholder Eddie Lampert continues to talk about the retailers’ return to profitability as though it’s just a matter of time, betting on a revival pegged to its Shop Your Way loyalty program, whose members account for about three-quarters of its sales, the clock is ticking for the cash-strapped retailer.

Analyst Sound Bite: “Overall, Sears Holdings remains highly distressed with significant cash constraints and will continue to close a significant number of stores and will likely continue to sell other assets to stabilize the business,” Chen said in a research note. “We believe this presents an opportunity for other department stores and broad line retailers to continue gaining share at Sears Holdings’ expense.”

… And Gone For Good (For Now, In Some Cases)

 8. American Apparel: Closing All 104 Stores

 In Ch. 11 bankruptcy protection for the second time, American Apparel is closing all 104 stores and has sold its intellectual property to Gildan Activewear Inc. for $88 million. The retailer made its mark as a seller of high-priced, U.S.-made basics and by soft porn-esque advertisements led by controversial founder Dov Charney, who the board ousted amid allegations of impropriety.

9. The Limited: Closing All 250 Stores

The Limited once owned the market on work wear with a provocative edge for young women. But amid mall traffic declines and an apparel sector that has been in a prolonged funk, save for off-price and fast-fashion retailers, the moderately priced clothing chain lost its reason for being.

10. Wet Seal: Closing All 150 Stores

After failing to find a white night in the form of a buyer or a new capital infusion, the teen retailer is shuttering its 150 doors this spring. Like many teen retailers, Wet Seal, after struggling through its second bankruptcy tour, fell prey to changing tastes.

I write about the intersection of retail and consumer trends.  Opinions expressed by Forbes Contributors are their own.

Whew. It’s ugly out there in the U.S. mall land.

More than a dozen retailers are shuttering hundreds of doors, while others kiss the American shopping landscape goodbye forever.

While no means a definitive list, here’s a Cliff Note’s-style rundown of 10 chains closing stores and liquidating their fleet, and a look at the saving-grace strategies of the merchants sticking around—for now.

1. Abercrombie & Fitch: Closing 60 Stores

Even though the teen apparel retailer shed its oversexed image and decreased its reliance on stuck-in-the-90s, logo-emblazoned fare, Abercrombie & Fitch’s U.S. sales continue to fall as fast-fashion retailers like H&M and Zara siphon business. Although the retailer’s Hollister brand is a bright spot, the namesake chain posted its 16th straight quarterly decline this month. To revive business, CEO Fran Horowitz is shifting A&F’s focus from image to “customer engagement,” reflected in its first new concept store in 15 years in Columbus. The store features a runway of 40 mannequins to inspire outfit guidance; tech-enabled fitting rooms, where consumers can adjust the lighting to see how an item would look at the beach or a nightclub; and phone recharging stations.

Analyst Sound Bite: “The continued double-digit negative comps at A&F and below-plan gross margin speak to the difficultly in re-positioning the namesake brand,” said Dana Telsey, CEO of Telsey Advisory Group, in a research note.

2. The Children’s Place: Closing 300 Stores By 2020

The children’s retailer is reimagining its business for the era of online shopping: It’s shuttering 300 stores by 2020, boosting inventory productivity, growing e-commerce to 20% of sales, expanding its presence on Amazon and spreading its international wings.

Analyst Sound Bite: Betty Chen, managing director of Mizuho Securities, said the retailer has managed to outperform the retail sector, citing market share gains from a “strong product assortment.” Looking ahead, “Alternative sales channels may become more critical in the future. The Children’s Place continues to grow the wholesale business with the rollout of a replenishment program with Amazon.”

3. Crocs: Closing 160 Stores

The plastic clog retailer, coming off a restructuring effort that included cutting operational costs and whittling down 40% of its product mix, Crocs will close 160 stores by the end of 2018, a whopping 28% of its fleet, as it consolidates its senior ranks and promotes its president to CEO.

Analyst Sound Bite: Crocs’ “marginal styles” and “the growing athletic trend is making Crocs more of an afterthought for retail accounts, particularly outside of core markets,” said Sam Poser, an analyst with Susquehanna Financial Group LLLP in a research note cited by Footwear News.

4. J.C. Penney: Closing 130-140 Stores

Under the guidance of former Home Depot executive Marvin Ellison, the department store for Middle America is deemphasizing apparel and making a bold investment in the 70% of its shoppers that own a home. After a successful test, J.C. Penney is expanding home appliance showrooms from 500 to 600 stores, as it tiptoes into offering home services, from bathroom remodeling to blind installation, in 100 stores, taking dead aim at ailing rival Sears, once an appliance powerhouse.

Analyst Sound Bite: “The previously announced store closures of 130-140 or 13%-14% of the store base (less than 5% of annual sales) is a positive, but at the same time the company continues to enhance the in-store experience whether it be through Sephora [beauty shops] an expanded home offering and services, and/or a rebranded Salon business,” said Dana Telsey, CEO of Telsey Advisory Group, in a research note.

5. Macy’s: Closing 100 Stores

The iconic department store is hoping for a miracle on 34th Street in the hands of a new CEO Jeff Gennette. But macro trends have been hitting Macy’s where it hurts. The retailer has been bleeding market share in apparel, its biggest single business, to off-price chains like T.J. Maxx (not to mention Amazon), just as the high cost of running an online business eats into profit margins. Macy’s is closing 100 stores and, pressured by restless activist investors, monetizing its real estate, some of which is being transformed into mixed-use properties, such as the retail, art gallery and artisanal restaurant development brewing at the former Macy’s Men’s Store in San Francisco’s Union Square.

Gennette’s survival plan relies on the expansion of in-store shops such as LensCrafters, Backstage, its off-price concept, and Blue Mercury, the beauty chain it purchased that eschews the department store counter service model in favor of open-sell environments akin specialty stores like Sephora that have been eating its beauty lunch.

Analyst Sound Bite: “We think Macy’s needs to reinvent itself and has prudently identified the need to change the store experience, leverage big data, and reduce field staffing to drive agility,” said Oliver Chen, an analyst with Cowen and Company, in a research note following the chain’s store closure announcement. “A new organization will unfold but this will take multiple years.”

6. Radio Shack: Closing 552 Stores

The struggling electronics chain, whose parent company General Wireless filed for Ch. 11 protection this month, its second in two years, is closing 552 stores this spring.

Founded in 1921, the retailer carved a niche as a local destination for small-ticket consumer electronics, from batteries and cords to cell phones and speakers. But it’s been a vulnerable niche to sustain amid the rise of phenomenon Amazon, which has been gobbling up consumer electronics market share. (Rest in peace, Circuit City.)

Meanwhile, Radio Shack’s co-branding effort with wireless provider Sprint has failed to revive the business.

Analyst Sound Bite: “No consumer electronics store sells a differentiated product,” Michael Pachter, research analyst at Wedbush Securities, told the Los Angeles Times. “There’s nothing they sell that you need to go to their store to get.”

7. Sears Holdings: Closing 150 Stores (108 Kmarts And 42 Sears)

Department store Sears and sister discount chain Kmart have been dying a slow death for over a decade now, posting sales declines for about that long. After closing 130 stores in 2016, the chains will shutter another 150 this year.

Sears is starving from a dozen-year underinvestment in stores and merchandising; an ongoing shakeup of senior ranks; and the spin-off of various assets to boost its liquidity–from Sears Canada and chunks of real estate to most recently, its iconic Craftsman tools brand to Stanley Black and Decker, a move that squandered what little brand equity it had left.

Meanwhile, Kmart failed to carve a distinct reason for being among discount brethren Wal-Mart, the low price juggernaut, and Target, champion of chic cheap.

And while CEO and majority shareholder Eddie Lampert continues to talk about the retailers’ return to profitability as though it’s just a matter of time, betting on a revival pegged to its Shop Your Way loyalty program, whose members account for about three-quarters of its sales, the clock is ticking for the cash-strapped retailer.

Analyst Sound Bite: “Overall, Sears Holdings remains highly distressed with significant cash constraints and will continue to close a significant number of stores and will likely continue to sell other assets to stabilize the business,” Chen said in a research note. “We believe this presents an opportunity for other department stores and broad line retailers to continue gaining share at Sears Holdings’ expense.”

… And Gone For Good (For Now, In Some Cases)

 8. American Apparel: Closing All 104 Stores

 In Ch. 11 bankruptcy protection for the second time, American Apparel is closing all 104 stores and has sold its intellectual property to Gildan Activewear Inc. for $88 million. The retailer made its mark as a seller of high-priced, U.S.-made basics and by soft porn-esque advertisements led by controversial founder Dov Charney, who the board ousted amid allegations of impropriety.

9. The Limited: Closing All 250 Stores

The Limited once owned the market on work wear with a provocative edge for young women. But amid mall traffic declines and an apparel sector that has been in a prolonged funk, save for off-price and fast-fashion retailers, the moderately priced clothing chain lost its reason for being.

10. Wet Seal: Closing All 150 Stores

After failing to find a white night in the form of a buyer or a new capital infusion, the teen retailer is shuttering its 150 doors this spring. Like many teen retailers, Wet Seal, after struggling through its second bankruptcy tour, fell prey to changing tastes.

Advertisements
Categories: Uncategorized
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: