For every US retailer closing stores, 5 are opening: IHL

August 18, 2019 - United States Of America

More than five retail chains are opening stores for every retailer that is closing stores in the United States in 2019, according to the IHL Group. This is up from 3.7 in 2018. The company also reports that the number of chains adding stores in 2019 has increased by 56 per cent, while the number of closing stores has decreased by 66 per cent in the last year.

IHL reports that fewer retailers make up the bulk of closures in 2019. In 2018, 20 chains represented 52 per cent of all stores closed. In 2019, the 20 announcing the most closures represent 75 per cent of all closures.

The IHL Group is a global research and advisory firm headquartered in Franklin, Tennessee.

The research report, titled ‘True Story of Store Openings/Closings’ 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, according to a company press release.

“US 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, vice president 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.

Sixty four per cent of retailers are increasing the number of stores in 2019, 12 per cent are decreasing and 24 per cent report no change in store counts. This compares to 2018 with 41 per cent increasing store counts, 37 per cent decreasing and 22 per cent with no change. For every chain closing stores, +5.2 chains are opening stores.

According to the research, the two primary characteristics of chains closing the most stores has been too much debt and rapid overexpansion driven by historically low interest rates for the last 10 years.

Lack of innovation and short-sighted private equity has also played a significant role in many of the chains. Retailers without these characteristics have continued to thrive in this market, 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. (DS)