A Tsunami Of Store Closings Is About To Hit The US — And It’s Expected To Eclipse The Retail Carnage Of 2017

Dead MallRolling Acres Mall in Akron, Ohio.Nicholas Eckhart

On January 1, 2018, Hayley Peterson writes on Business Insider:

  • More than 12,000 stores are expected to close in 2018 — up from roughly 9,000 in 2017, according to Cushman & Wakefield.
  • A rash of bankruptcy filings and announcements to close stores are expected at the start of the year, when retailers are flush with cash from the holiday season.
  • Among the companies most likely to file for bankruptcy within the next yearare Sears, Bon-Ton Stores, Bebe Stores, Destination Maternity Corp., and Stein Mart.
  • The closings would push hundreds of shopping malls to the brink of death.

Retailers are bracing for a fresh wave of store closings in 2018 that is expected to eclipse the rash of closings that rocked the industry last year.

“Landlords are panicking,” said Larry Perkins, the CEO and founder of the advisory firm SierraConstellation Partners. “The last year was pretty apocalyptic from a retail standpoint, and the macro issues haven’t changed. There will continue to be a high degree of bankruptcies and store closures.”

2017 was a record year for both store closings and retail bankruptcies. Dozens of retailers including Macy’s, Sears, and J.C. Penney shuttered an estimated 9,000 stores — far exceeding recessionary levels — and 50 chains filed for bankruptcy.

But there’s still a glut of retail space in the US, and the fallout is far from over.

The number of store closings in the US is expected to jump at least 33% to more than 12,000 in 2018, and another 25 major retailers could file for bankruptcy, according to estimates by the commercial real estate firm Cushman & Wakefield.

Store closuresCushman & Wakefield

Nearly two dozen major chains including Walgreens, Gap, and Gymboree have already announced plans to close more than 3,600 stores this year.

Many more announcements on closures and bankruptcies are expected in the coming months.

The start of the year is a popular time to announce store closings and bankruptcies because retailers are typically flush with cash after the busy holiday season — and closing stores and filing for bankruptcy are costly.

Among the companies most likely to file for bankruptcy within the next year are Sears, Bon-Ton Stores, Bebe Stores, Destination Maternity Corp., and Stein Mart, according to S&P Global Market Intelligence.

Mass store closings will force shopping malls out of business

When combined with last year’s record-high store closings, an even higher rate of closings in 2018 would push hundreds of low-performing shopping malls to the brink of death.

The commercial real estate firm CoStar has estimated that nearly a quarter of malls in the US, or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor tenant.

Anchor tenants are retailers like Macy’s and J.C. Penney that occupy the large, multistory buildings at mall entrances.

BI Graphics_Store closing in 2018_v2Business Insider/Samantha Lee

The loss of even one anchor tenant can trigger a multidecade downward spiral for mall owners.

That’s because the malls don’t only lose the income and shopper traffic from that store’s business; such closings often trigger clauses that allow the remaining mall tenants to exercise their right to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the vacant anchor space.

That’s good news for retailers looking to grow their physical assets — it means they are more likely to score low rent and favorable lease terms.

But it’s terrible news for retail landlords, some of whom are now trying to stop the bleeding by suing the companies that are closing stores.

Mall owners are suing retailers to keep stores open

Simon Property Group, one of the biggest mall operators in the US, sued Starbucks this year after the coffee chain said it planned to close all 379 stores in its Teavana chain, 77 of which are located in Simon Property Group malls.

The mall owner demanded that Starbucks keep running the tea shops located in its malls, arguing in part that their closing would reduce traffic to surrounding stores.

A judge ruled in Simon Property Group’s favor in December and ordered Starbucks to keep operating the Teavana stores in question.

Shopping MallOli Scarff/Getty Images

Whole Foods was also recently sued for closing a Seattle-area store, with the owners of the property fighting the company for breaking its long-term lease.

A judge has since ordered Whole Foods to reopen the store, which the grocer had closed in October.

As mall operators become increasingly desperate to keep the lights on, many more retailers could find themselves in court, fighting to shut down struggling stores.

Not all retailers and shopping malls are doomed

To be sure, there are still hundreds of high-performing shopping malls in the US that are expected to remain immune from the fallout of shrinking retailers.

Only the lowest-performing malls — of which there are roughly 300 — are in danger of going out of business.

There are also plenty of retailers, mostly discounters, that are growing their physical assets while others shrink.

Dollar General, Dollar Tree, Lidl, Aldi, Ross Stores, and TJ Maxx are planning to open hundreds of new stores next year.

“Retail isn’t going away by any means,” Perkins of SierraConstellation said. “We just got a little bit out of control with the volume of retailers and the number of stores.”


Gary Reber Comments:

For a healthy economy, there must be a universal state of “customers with money” to create demand for goods, products and services, and continuously spend their earnings from their production to achieve general affluence and sustain economy growth.
The problem is the vast majority of Americans are losing or under the threat of losing income to support themselves and their families, because of tectonic shifts in the technologies of production and globalization, which destroys jobs that enable people to live comfortably and not constantly having to seek out the lowest possible price on products and services. Because consumers will always seek the lowest cost/quality/performance alternative, for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services.
And with stagnate incomes and reduced incomes, consumer debt tends to rise, putting more and more people in financial jeopardy.
On the other hand, the wealthy capital ownership class, the top 10 percent of the nation, are not the drivers of a mass production/mass consumption economy as they produce so much through owning productive inputs to the economy that they have attained general affluence and use their excess earnings to reinvest instead of spending it on consumption.
The problem is technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor. Thus, when the “tools” of capital owners replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate.

Sadly, we are living in a “holistic” society, which is about the ability of greedy rich people to rig the system and manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the wealth through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success – always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.”

It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well being.

In a democratic growth economy, based on binary economics (human and non-human productive inputs), the ownership of productive capital assets would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income, from full earnings dividend payouts, would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote environmentally responsible economic growth and more profitable enterprise. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy. As a result, our business corporations would be enabled to operate more efficiency and competitively, while broadening wealth-creating ownership participation, creating new capital owners and “customers with money” to support the goods, products and services being produced.

1 thought on “A Tsunami Of Store Closings Is About To Hit The US — And It’s Expected To Eclipse The Retail Carnage Of 2017”

  1. I got stuck at the first sentence. Pure socialism has never existed. It would bring more market than capitalism may afford. First it would eliminate unemployment by shortening work hours. That would bring justice to the distribution of wealth. Then it will open market to every public work post all the time. Jobs will go to the best available worker. That would require regulation of the work responsibilities. Capitalism cannot compete with economy where each job goes to the best available worker so that it would finish down in history. Socialism will bring stability and abundance. You may find more about that at my web site http://www.sarovic.com . I agree with the rest of the text here.

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