A man walks past a Banana Republic store, which ceases to operate, in New York City on January 10, 2021.
Scott Mlyn | CNBC
A retail research and advisory group predicts there will be up to 10,000 store closures announced by retailers in the United States this year, setting a new record as the Covid pandemic continues to bill the industry and companies rethink like many locations they can keep open.
10,000 closures would represent a 14% increase over 2020 levels, Coresight Research reported in a report released Thursday. Coresight also expects retailers to announce 4,000 store openings in 2021, driven by growth in grocery discounts and dollar store chains.
Last year, in the midst of a pandemic, Coresight predicted in June that there would be as many as 25,000 closures announced by retailers in 2020. But it ended up following only 8,741, along with 3,304 openings. This meant a slowdown from the 9,832 closures it tracked in 2019, the highest number Coresight has seen since it has been tracking business closures and openings.
The reason for the large gap between the final count and its initial forecast, Coresight said, was because some companies have “endured a rebound in store-based sales.” Many retailers have also been able to earn more time by reducing their rents and establishing agreements with their landlords so they can stay open a little longer, he said.
“In 2021, the [Covid] “Vaccination programs should lead to a partial recovery in store-based sales,” said Deborah Weinswig, CEO and founder of Coresight. “However, these programs can take many months to reach a broad consumer base.”
Some companies won’t be able to wait much longer, Weinswig said, especially those that didn’t have the holiday season they were waiting for. Consumers will continue to spend more money online, which is another reason for the increase in store closing forecast this year, he said.
As of Jan. 22, Coresight said retailers in the U.S. have already announced 1,678 closures, including those at Bed Bath & Beyond, Macy’s and JC Penney.
Weinswig also pointed to a pattern that materialized in the retail industry after the Great Recession, which could be repeated this year.
“Although retail trade had a significant impact in 2008 and 2009, the repercussions in terms of retail failures peaked in 2010,” he said. “We were able to see history repeat itself in 2021, which led to a greater number of store closures this year than we saw in 2020.”
Coresight said clothing retailers, including Ascena Retail Group and The Children’s Place, accounted for 36 percent of all store closures in 2020, totaling more than 3,000. The clothing category will likely account for a significant portion of closures this year as well, he said.
A study published earlier this week by First Insight found that 40% of consumers plan to buy clothes in brick-and-mortar stores, either the same amount or less after getting vaccinated, implying that they don’t there will be an immediate rush to return to the mall.