Malls Face Ruinous Crisis

A new study forecasts that a global coronavirus pandemic could chop mall traffic severely, leaving both owners and department store retailers in deep trouble. It would be another blow to companies such as J.C. Penney Co. Inc. (NYSE: JCP) and Macy’s Inc. (NYSE: M). Medium-sized retailers, including Victoria’s Secret, The Gap and Old Navy, Footlocker, Aeropostale, and American Eagle Outfitters face severe difficulties as well.

Coresight Research tracks shopping trends in the United States. The firm said it expects consumer shopping patterns to change if the virus spreads rapidly, and it is already seeing some effect:

This report draws on a proprietary Coresight Research survey that found many already are avoiding public places.

Over a quarter of respondents say they already avoid many crowded places—and that jumps to three-quarters if the outbreak worsens.

Hardest hit are likely to be malls, shopping centers and other crowded locations.

Restaurants, theaters and other discretionary spending destinations could also be hit.

Presumably, restaurants include fast-food chains like McDonald’s and Starbucks.

Several wounded retailers cannot weather a period of sharp sales downturns. This includes J.C. Penney and what is left of Sears. While retailers like The Gap, which owns Banana Republic and Old Navy, have stronger balance sheets, they could end up with permanently smaller store footprints after an event that could chop sales into the double digits.

The problem is not merely what happens to sales at the retailers. Several employ close to 100,000 people. Macy’s has about 120,000 and J.C. Penney over 90,000. While a virus-driven business catastrophe might cause a loss of 1 million jobs across the U.S. economy, retailers would be hit harder than most industries.

The mall business was already shrinking. The spread of the coronavirus could knock it into a position from which it cannot recover.

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