50,000 Stores Could Close in the Next 5 Years, UBS Says

Store closures are expected to pick up again in 2023 and could total more than 50,000 in the next five years.

That’s according to a recent report from UBS, which found that store closures in 2023 are already up significantly compared to the prior year. In the last few months, various retailers have announced plans to consolidate their store bases and close stores. Foot Locker last month announced a decision to close more than 400 stores locations through 2026 focus on higher-performing doors. Walmart also recently announced a plan to close seven underperforming stores, including its last two pickup and delivery concept locations.

By the end of 2027, UBS estimates that about 50,000 stores will close across the current U.S. store count of about 940,000 stores, meaning there would be less than 5 percent fewer stores by the end of 2027.

Retailers have announced about 2,600 store closures and 5,100 store openings for the year, according to Coresight Research cited in BDO’s bi-annual bankruptcy report. Store openings this year have been mainly led by dollar store and discount chains, which have benefitted from cost-cutting consumers.

As for the reasons for the predicted closures, UBS outlined a few key factors. For starters, the cost to run a store is going up, especially as wages increase and rents stay high. At the same time, a general slowdown in consumer spending, less available credit and e-commerce growth are also to blame.

UBS predicts e-commerce penetration to grow from its current 20 percent to 26 percent by 2027, with 25 percent of online sales being fulfilled from stores. This model also assumes that retail sales grow 4 percent annually.

The National Retail Federation forecast that retail sales will grow between 4 percent and 6 percent in 2023, with sales reaching between $5.13 trillion and $5.23 trillion this year. While NRF has said a recession is unlikely in 2023, a recession could result in even more store closures, UBS said.

The stores at risk of closures are those of smaller chains, department stores and specialty retailers with mainly discretionary items.

“In our view, these smaller chains and mom and pops are most at risk of closures given these firms typically have less access to capital needed to invest in developing a robust omnichannel offering,” UBS analysts wrote in the report.

Meanwhile, off-price retailers and dollar stores are set to continue to grow their presence as they resonate with cost-conscious consumers.

Like store closures, retail bankruptcies are set to come back into play in a big way in 2023 after a relatively slow year in 2022. Between the start of 2023 through the end of February, six major retailers filed for bankruptcy, according to BDO’s bi-annual bankruptcy report. That’s more than the total number of retail bankruptcies in 2022.

In some cases, these bankruptcies could correlate with store closures for chains as well.

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