In its latest analysis, Coresight Research estimates U.S. store closures will reach “between 20,000 and 25,000” units this year “in light of the escalating impact of the coronavirus pandemic,” the company said in its report this morning.
Deborah Weinswig, chief executive officer and founder of Coresight Research, said the midpoint estimate is 22,500, which represents “a significant uplift from our previous estimate of up to 15,000 closures [gross].” Weinswig said the bulk of the closures — between 55 and 60 percent — will be mall-based stores.
The estimated closures compare to 9,821 retail closures in 2019. “We expect that bankruptcy filings among U.S. retailers will spike this year, and Chapter 7 filings may rise,” Weinswig also noted in her report. In regard to the severity of the shutterings of mall-based stores, Weinswig said the “rationalization of mall space has lagged physical store closures. The coronavirus outbreak could accelerate a correction in mall space that already looks overdue.”
In her analysis, Weinswig said while there “may be cases of distressed non-discretionary retailers, those selling selected categories of discretionary goods will lead closures, driven principally by diminished cash flows on the back of enforced store closures. Apparel retail and department stores look set to feature prominently in total store closures.”
The report also noted that while apparel retailers such as Abercrombie & Fitch and Gap Inc. have recovered between 70 and 80 percent of sales in reopened stores, Coresight Research expects that “a return to pre-crisis levels in off-line discretionary retail sales overall will be gradual, as we expect consumer confidence, demand and spending to be short of normal for some time.”
“Given that recovery to pre-crisis levels may be gradual, retailers that were struggling to stay in business pre-crisis are unlikely to have the wherewithal to stay the course on the road to recovery and could end up closing a number of stores,” Weinswig said, adding that, simultaneously, “temporary closure of nonessential stores looks to have accelerated the shift to e-commerce. Any permanent migration of consumer spending online may well lead some retailers to consider rationalizing their store fleets — particularly if those retailers discovered they could achieve meaningful sales retention through e-commerce when their stores were temporarily closed.”
Weinswig’s report follows news from the National Bureau of Economic Research, which said the U.S. was in a recession as early as February. The bureau’s Business Cycle Dating Committee, “which maintains a chronology of the peaks and troughs in economic activity in the U.S., has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020.”
The NBER said the peak marks the end of an economic expansion that started in June 2009 and lasted 128 months, the longest U.S. economic expansion since record keeping began in 1854.