The coronavirus pandemic is speeding up brick-and-mortar’s downfall.
As many as 20,000 to 25,000 stores in the United States could close their doors for good this year, according to retail data firm Coresight Research. About 55% to 60% of those locations can be found in malls — which are facing challenges compounded by the health crisis.
The new figure broke the record set last year, when more than 9,500 outposts across the country permanently shuttered. In the past few years, traditional retailers had already been contending with the challenges of digital disruption and waning foot traffic. Now, as shoppers pull back on discretionary spending and steer clear of large public spaces due to COVID-19 fears, an increasing number of retailers are failing to pay rent, making it difficult for malls to meet their own mortgage payments.
“If the anchor tenants close stores in the mall, other tenants are likely to follow suit,” CEO Deborah Weinswig explained in the report. “Department and large apparel-chain store closures in malls will therefore create a ripple effect that spells bad news for malls.”
In March, when the pandemic took hold in the U.S., Coresight predicted roughly 15,000 store closures. It warned that some of the units that were shuttered due to lockdown restrictions might never reopen their doors.
“The enforced closures will hit retailers with limited cash/low liquidity, those already pinched badly by structural shifts and company-specific weaknesses, and those that are unable to translate whatever remaining consumer demand there is into sales on their websites,” the firm wrote at the time.
So far, Nordstrom and Victoria’s Secret as well as Wilsons Leather and G.H. Bass parent G-III Apparel Group are among the retailers that have announced permanent shutdowns of stores. To bolster their balance sheets, many companies have cut operating expenses, tapped into their credit lines and furloughed workers.
What’s more, a number of boldface retailers — including J.Crew, Neiman Marcus and JCPenney — have filed for Chapter 11 bankruptcy protection amid the outbreak.
Coresight previously predicted that some already-struggling chains could file for Chapter 7 protection and completely liquidate their assets, versus Chapter 11, which allows companies to restructure their debts, trim their fleets and rework their finances for the future.