A pandemic shakeup in 2020 led to a surge in store closures, coupled with dozens retailers filing for bankruptcy, which emptied out shopping malls and left vacancies scattered along the streets major markets including New York City.
The aftermath, though, was a temporary relief from closures, as companies took the chance in 2020 to quickly slim down their store counts when consumers were holed up at home. In fact, in 2021, retailers reported net store openings, marking a sudden reversal from years of net declines. Companies seized the opportunity to take advantage of cheap rents and an eagerness among Americans to get out and shop again.
While analysts at UBS see more pain ahead, it’s not as many closures as the investment bank had initially projected about a year ago.
Brick-and-mortar shops have proven to serve a critical role for retailers’ businesses during the Covid pandemic, the bank said in a new report on Wednesday, and retail sales growth has remained strong, in part due to rising inflation. This all bodes well for the future of physical stores, according to UBS retail analyst Michael Lasser.
UBS is now projecting between 40,000 to 50,000 retail stores in the United States closing over the next five years, down from the 80,000 closures it previously forecasted. That’s out of about 880,000 total retail stores that the firm tracks nationwide, excluding gas stations.
This estimate assumes that U.S. retail sales grow about 4% annually, moving forward, and that e-commerce sales as a percentage of total retail sales grows to 25% by 2026, from 18% in 2021, Lasser said in the report.
UBS sees the most closures shaking out among clothing and accessories retailers, consumer electronics businesses and home furnishing chains, or about 23,500 cumulatively within these categories by 2026.
(source:CNBC)
