The battered American retail industry took a few more lumps this week, with stores at both ends of the price spectrum preparing to close their doors.
At the bottom, the seemingly ubiquitous Payless Inc. shoe chain filed for bankruptcy and announced plans to shutter hundreds of locations. Ralph Lauren Corp., meanwhile, said it will close its flagship Fifth Avenue Polo store -- a symbol of old-fashioned luxury that no longer resonates with today’s shoppers.
And the teen-apparel retailer Rue21 Inc. could be the next casualty. The chain, which has about 1,000 stores, is preparing to file for bankruptcy as soon as this month, according to people familiar with the situation. Just a few years ago, it was sold to private equity firm Apax Partners for about a billion dollars.
“It’s an industry that’s still in search for answers,” said Noel Hebert, an analyst at Bloomberg Intelligence. “I don’t know how many malls can reinvent themselves.”
The rapid descent of so many retailers has left shopping malls with hundreds of slots to fill, and the pain could be just beginning. More than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed, converted to other uses or renegotiated for lower rent in coming years, according to data provided to Bloomberg by CoStar Group.
Urban Outfitters Chief Executive Officer Richard Hayne didn’t mince words when he sized up the situation last month. Malls added way too many stores in recent years -- and way too many of them sell the same thing: apparel.
“This created a bubble, and like housing, that bubble has now burst,” he said. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”
Year-to-date store closings are already outpacing those of 2008, when the last U.S. recession was raging, according to Credit Suisse Group AG analyst Christian Buss. About 2,880 have been announced so far this year, compared with 1,153 for this period of 2016, he said in a report.
New Peak
Extrapolating out to the full year, there could be 8,640 store closings in 2017, Buss said. That would be higher than the 2008 peak of about 6,200.