A record 7,000 U.S. stores could close this year, a retail analyst predicts,
citing cuts in consumer spending and retailers’ struggles to borrow money and
fend off competition.
"We’ve got a very difficult situation in the retail business," says Howard
Davidowitz, an independent analyst in New York. Several retail chains have filed
for bankruptcy protection and another 15 or so are "on the edge," he says.
Retailers’ debt jumped 30 percent in the past year, Davidowitz says.
"Just like consumer debt is up, corporate debt is up," he says. "Everybody’s
debt is up. It’s a real danger."
Amid a tight credit market and banks suffering from the subprime mortgage
mess, retailers are having trouble borrowing. Many retailers routinely use debt
to finance their inventories, but that lifeline is harder to come by, Davidowitz
"This is a terrible time to be dependent on bank debt and be in trouble
because the banks will be unmerciful…." he says. "There are many retailers out
there … who maybe could operate OK if they got some forbearance, but it’s a
terrible time to be dependent on bank debt."
Other factors are working against retailers. "Americans are spending less,"
Davidowitz says. "They’ve got the highest debt they’ve ever had." And consumers
are spending more for food and energy, leaving less for discretionary purchases.
And, he says, "We have too many stores."
"We have 19 1/2 square feet [of retail space] for every man, woman and child
in this country," Davidowitz says, suggesting that’s nearly double what is
Chains from Foot Locker to CompUSA have shuttered stores in the past year. In
2007, 4,500 stores folded, according to Davidowitz.
"Almost everybody closed because of too much competition," he says. "What
happened? Wal-Mart came along and closed them down. The consumer made a choice
to choose Wal-Mart. The prices were lower, the stores were bigger…."
U.S. Store Closings
A selected list of major recent retail closings:
Locker: 274 stores in 2007
• Ann Taylor Stores: 117 stores by 2010
Zales: 100 stores
• Wilsons Leather: 158 stores
• Talbots: 78 Talbots
kids’ and men’s stores by September
• Pacific Sunwear: 154 demo clothing
• CompUSA: 103 stores
• Bombay Co.: all 388 of its remaining
• Sharper Image: 96 stores
• Levitz Furniture: all 76 of its
Sources: Company statements and news reports.