Study: Retail is opening new stores at solid rate
Too much dept and overexpansion is a frequent catalyst of store closings.
A new report looks to debunk the ongoing retail apocalypse narrative.
More than five retail chains are opening stores for every retailer that is closing stores in 2019, according to research from IHL Group, which is up from 3.7 in 2018. The company also reports that the number of chains adding stores in 2019 has increased 56%, while the number of closing stores has decreased by 66% in the last year.
Fewer retailers make up the bulk of closures in 2019, according to IHL’s Retail Renaissance – True Story of Store Openings/Closings. In 2018, 20 chains represented 52% of all stores closed. In 2019, the 20 announcing the most closures represent 75% of all closures.
According to the research, too much debt and rapid overexpansion driven by historically low-interest rates for the last 10 years are the two main characteristics of chains closing the most stores. Lack of innovation and short-sighted private equity has also played a significant role. Retailers without these characteristics have continued to thrive, the report said, noting that when a retailer closes a lot of stores, it is more of an indictment on the individual retailer rather than an overall retail industry problem as has often been reported.
“U.S. retail has increased $565 billion in sales since January of 2017, fed not just by online sales growth but net store sales growth,” said Lee Holman, VP of research for IHL Group. “Clearly there is significant pressure in apparel and department stores, however, in every single retail segment there are more chains that are expanding their number of stores than closing stores.”
Since 2017, apparel and department store chains have seen the net closure of 9,651 stores. During this same period, all other segments represented 18,226 net new openings. Additional findings include the following:
Sixty-four percent of retailers are increasing the number of stores in 2019, 12% are decreasing and 24% report no change in store counts. This compares to 2018 with 41% increasing store counts, 37% decreasing and 22% with no change.
For every chain closing stores, +5.2 chains are opening stores. Specifically, these ratios by segments include the following:
• Food/drug/convenience/mass merchants: +9.5
• Apparel, hard goods, department stores: +3.7
• Restaurants, fast food, table service: +6.3 chains opening vs closing stores
• 2018 was a peak year in the number of chains closing stores with 37% reducing their store counts. This number has dropped to 12% of total retailers in 2019.
IHL reviewed 1,660 retail chains with 50 or more locations in the United States across nine industry segments. For each retailer, the company measured the total store counts at the end of 2016, 2017, 2018, and plans for 2019 year-end based on company filings and statements. The net total increase or decrease in their store count was noted and that data was tallied across companies.
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