Shakeout expected to continue in US retail

August 1, 2008 by Dave Haynes

Retail watchers say the wobbly US economy is not in meltdown mode, but the spate of store closings across that country is by no means over, reports Media Post.

Yes, there will be more to come: In its most recent report, the International Council of Shopping Centers predicts that close to 144,000 stores–or about 36,000 per quarter–will bite the dust in 2008. That’s a 7% jump from 2007, and the largest increase in 14 years. But the trade group points out that those numbers mask the many stores that will open. For instance, it says, in 2006, 139,000 stores failed–but 123,000 new ones sprung up. Clothing stores, it says, continue to be the most vulnerable, with such chains as Wilson’s Leather, Geoffrey Beane-outlet stores, Goody’s Family Clothing, Ann Taylor and Talbots among the many retailers that shuttered stores in the first half.

But the retail deathwatch is enough to set tongues wagging about even the strongest brands. Macy’s recently had to respond to concerns about its financial health, with the CEO filing a letter with the Securities & Exchange Commission to defend its finances: “Our same-store sales trends are better than J.C. Penney, Kohl’s, Dillard’s, Nordstrom, Bon-Ton, The Gap and Limited Brands, to name a few,” he wrote.

Some experts believe the worst of the shakeout will be restricted to smaller, weaker chains. “Retailers that have a reputation for offering good value, those that have diverse geographic portfolios–both in the U.S. and around the world, and those that offer a broader selection of merchandise are in a better position,” says Tony Gao, Ph.D., marketing professor and retail expert at Northeastern University’s College of Business Administration in Boston, who points out that Mervyns and several of the other more troubled chains had a strong presence in California, which has been particularly hard-hit by the housing downturn. “And specialty stores tend to file for bankruptcy first.”

What that means in our sector is not entirely clear. There’s lots of retail activity, still, from what I know and hear. But there’s also any number of retailers like the a big one I am chasing right now, which has gone from red hot to lukewarm on its plans in the last couple of months.

The ones who are looking at putting screens in, but don’t necessarily have a real plan as to why … they’re probably going to hold off (and probably should). But the ones who’ve really looked it over, run the numbers and nailed a plan (like Wal-Mart US), they’re going forward.