Investors should be prepared for more sweeping store closure announcements — known affectionately in retail analytical circles as the “retail apocalypse” — after what is shaping up to be a lackluster holiday shopping season thanks to the COVID-19 pandemic.
“There are 110,000 stores in America. In total, we think there is going to be at least 25,000 of those 110,000 stores closed from now through the time COVID-19 ends and we get to the other side of it,” veteran retail executive and JRK Worldwide Enterprise founder Jan Rogers Kniffen told Yahoo Finance Live. “So in the malls, we could see of 1,100 enclosed malls in America, we could see half of those go dark or be changed dramatically in nature.”
The retail sector was well underway before the holidays to reaching some of Kniffen’s dire projections.
So far in 2020, more than 8,000 retail stores have closed according to data from Coresight Research. Some of the headline-grabbing closures have come from the likes of Macy’s (struggling financially), Lord & Taylor (now bankrupt) and Gap (struggling financially). Much of the retail sector has buckled under the weight of COVID-19 mandated store closures in the spring, and then tepid foot traffic since the summer amid re-openings.
And the trends at many retailers have hardly improved in the early start to the crucial holiday shopping season, setting the stage for a fresh wave of closures in early 2021 as retailers look to cut costs after weak fourth quarter sales and an uncertain return to normal post pandemic.
Shopper visits to retail stores on Black Friday crashed 52.1% year over year, per data from Sensormatic Solutions. Traffic fell 45.2% last week from a year ago as consumers avoided crowds during the pandemic and spent cautiously with unemployment rates back on the rise.
.@briansozzi reports on Black Friday shopping: “Crowds are just not here. You’re watching, really, the impact of the pandemic very much in real-time.” https://t.co/xpAujlllJF pic.twitter.com/l6768LBdyc
— Yahoo Finance (@YahooFinance) November 27, 2020
Meanwhile, online sales on Black Friday rose 21.6% year over year to a new record of $9 billion, according to data crunched by Adobe Analytics. But, the sales result fell far short of Adobe’s high-end estimate of $9.6 billion. Online sales on Thanksgiving Day clocked in at $5.1 billion, up 21.5% from a year ago, but short of Adobe’s $6 billion forecast.
“During our channel checks in New York City and Riverhead, NY, Paramus, NJ, Westport, CT, Washington, D.C., and Jacksonville, FL areas, we observed a much slower in-store start to holiday shopping than in prior years. In fact, Black Friday, in our view, looked like traffic on a typical Saturday for most of the day until picking up early afternoon,” remarked Deutsche Bank retail analyst Paul Trussell.
Already retailers are preparing investors for more post-holiday store closures.
Abercrombie & Fitch said last week it would close several large flagship stores to save millions in expenses. Gap outlined at an investor day in October a plan to close hundreds of more Gap and Banana Republic locations by 2023.
Said Kniffen, “We could see a whole of stores close. That’s not going to be surprising because it has been going on since before COVID-19.”
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