With the Chapter 11 filing of Forever 21, 178 of its stores could be shuttered. This adds to a total of about 7,300 across the industry so far in 2019, according to a research firm that keeps count. The same group of experts believes that the tally by the end of the year could easily be 12,000. The dismantling of the brick-and-mortar retail industry has gone on for years, but the figure is staggering nonetheless.
The consulting firm BDO, which tracks the retail industry, recently published a study, “An Overview of U.S. Retail Bankruptcies and Store Closures in the first half of 2019,” that primarily focused on 12 retailers that have closed the most stores. Among these were well-known Chapter 11 filers ShopCo, Payless and Hollander Sleep. The report put the number of all store closings at major retailers at over 7,000. This was before the Forever 21 news.
The research looked at two other numbers. The first was from Coresight Research for total closings estimates in 2019: “For 2018 overall, total store closures were just under 6,000, while Coresight Research predicts over 12,000 stores will be closed this year.” It also cited employment tracking company Challenger, Gray & Christmas, which expects job losses to be the highest in a decade.
There are two reasons retail companies could close such a huge number of stores. One is the ongoing effect of Amazon.com and other large e-commerce businesses, including those owned by traditional retailers. Based on its earnings statement, Walmart.com has become a major force online. Every major retailer has a substantial online presence.
The other primary reason some retailers could be in trouble is stumbling during the holiday season. For some retailers, the last quarter of the year brings in all their profits. The National Retail Federation expects holiday spending by consumers to be higher than in 2018. However, economic activity in the United States has started to slow. Some economists expect the U.S. trade war with China to weigh heavily on exports and the cost of imports. It is yet another potential factor in slow retailer activity late in the year.
While 12,000 stores is an almost unimaginable number, the retail industry is falling apart so fast that 2020 could be worse.