If asked to name the most competitive industry today, what would you say? Autos, fast food, or maybe smartphones? They’re all good choices, but retail is possibly the best. It’s brutal, the pressure relentless, and it’s impacted by many things out of our control. And that’s why so many are folding.
The next time you go to the business district or the local mall, you may notice something strange: Well-known stores you’ve patronized countless times are not in business anymore. And smaller ones you shopped at on occasion – they’re also gone.
Don’t be alarmed. You’re not entering “The Twilight Zone.” What you are seeing is real as rain, and happening not just in your neighborhood but in cities and towns around the country: Even retailers Americans have shopped at for decades are closing their stores like crazy, while many more are barely hanging on. There’s no question about it: Retail is not what it used to be - and may never be that way again.
Even Tougher
2023 was an especially difficult year for the industry, as all kinds of stores closed at a breathtaking pace. Unfortunately, so far, 2024 is much worse. If this trend continues, “The total number of stores closed in 2024 will be nearly 40 percent higher than the total number of stores closed in 2023,” reports The Economic Collapse Blog. “That’s what you call a crisis!”
And it’s not just retailers that are on the ropes. Everything with a sign on the front door welcoming customers is facing problems. Banks, for example, are closing hundreds of branches all around the country. So are restaurants and fast-food shops, which are in an even tougher situation; the numbers are so high that one analyst described it as a restaurant apocalypse. “If someone tries to convince you that the U.S. economy is in good shape, just ask them why so many once prosperous businesses are closing,” he said.
A recent article in the Daily Mail reported that nearly 2,600 stores were closed in just the first four months of this year. And those include stores that recently had been among the best known, long-established, and popular retailers in the US, including Macy’s, CVS, Walgreens, Foot Locker, and 7-Eleven.
Even discount shops such as Family Dollar and 99 Cents Only, which sell items at rock-bottom prices, have been forced out of business. Major drug chains including CVS and Rite Aid are reeling from the headwinds.
According to the Taste of Country website, “CVS has slowly been closing stores across America for the past couple of years.” The closures are part of CVS’ plan to close 900 – or ten percent – of its stores. So far, CVS has closed 600 stores since 2022 and will close 300 more this year. Rite Aid closed 77 locations earlier this year and in mid-April announced 53 more will be shut.
At this rate, 7,800 stores will be out of business by the end of the year. If last year has been described as an awful one for retail, how should this year be described? Walgreens is closing stores because of “unsustainable business performance.” They have already closed hundreds of locations and plans on closing dozens more. And they have a lot of company.
The obvious question is: What’s going on? How is it that once powerful retailers keep losing money and closing stores left and right?
These are very timely questions. Fortunately, there are various answers, and they range from bad management decisions to a weak economy and unprecedented lockdowns among them. Take JC Penney as an example.
Penney had been a major retailer for decades; then its fortunes began to change and gradually lost its footing, many of its customers, and finally its financial strength. The company filed for Chapter 11 (bankruptcy) in May 2020. Although the pandemic was the last straw, it faced many other problems, too.
In fact, Penney had been struggling for years. It had been unprofitable since 2010, sales declined sharply, and it accumulated approximately $4 billion in debt – a hefty burden even when business is strong. Analysts also noted the company was not competing effectively with other stores. And because of serious management mistakes, the company spent a great deal of money trying to appeal to a new group of consumers, but in the process alienated its bread-and-butter base. Other retailers are facing similar problems.
Some industry experts predict that an additional 50,000 stores may close in the coming years, among them clothing, electronics, and furniture businesses.
Retail was never an easy business, but it’s become even more difficult since the pandemic. The usual suspects certainly share some of the blame. Specifically, ongoing weakness in the economy has cut deeply into consumers’ ability to spend money. “Shrink” is another problem. Shrink is the amount that a store’s inventory declines for reasons other than sales, and it includes shoplifting, employee theft, fraud, and related factors. It is estimated that shrink now costs US retailers more than $100 billion a year, and in a growing number of cases, stores simply cannot absorb such high losses and have no choice but to close shop.
Another factor is that because of high interest rates, making payments on credit card debt (and other loans) has become much more difficult. On the bottom-line consumers are tightening their belts and do not have the available funds to shop the way they had when business was better.
According to Mark B. Spiegel, Managing Member & Portfolio Manager of Stanphyl Capital Partners, retailers including Target, Lowe’s, Macy’s, Kohl’s, Best Buy, and Foot Locker are just some of the retailers that reported lower year-over-year sales comparisons – and that’s before taking inflation into account. And others, such as Dollar General and Burlington, reported higher same store sales but before adjusting for inflation.
Retailing doesn’t offer the excitement or thrills that some tech stocks have, but it has produced many lip-smacking winners over the years - Walmart, Amazon, Home Depot, and Costco to name just a few.
The nightmare we are seeing now in retail may have a silver lining, as the survivors will have less competition, potentially giving them a larger slice of the pie, and paving the way for solid growth in the future. Still, it may take some time until investors get to savor that. Hopefully, they’ll be able to hang on in the interim.
Sources: bloomberg.com; democratandchronicle.com; tasteofcountry.com; theeconomiccollapseblog.com; yahoo.com; YouTube: Why Are So Many Stores Going Bankrupt?
Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.
