January is the traditional time for a retail chain to announce store closings. With the Christmas shopping season over and next Christmas a long way away, it is harder to defend the lackluster record of a retail location in January than it is in November. This year, the list of store closings is especially short, and this year, it features department stores. JCPenney is perhaps shrinking the most, with 33 on a recently announced list of closings, but Sears is closing its flagship store in Chicago along with a few other Sears and KMart locations where leases expire, and Macy’s has a list of store closings. Loehmann’s is closing completely, with liquidation sales underway in all 39 of its stores. Target, though affected by a recent payment card scandal, is closing just 8 stores.
Grocery chain Albertson’s is closing 26 underperforming stores in the next four weeks, half of those in California. In the Chicago area, Dominick’s closed most of its stores at the end of December. I know of at least three other grocery chains with closings underway. All in all, though, the number of store closings is tiny when you consider the total number of stores in the country.
It has led some analysts to wonder how retailers are managing to keep so many stores open. Some are predicting a “tsunami” of store closings over the next five years. Retail stores could be selling 30 percent fewer items, they think, with online purchases, 3-D printing, and increasing durability of products eating away at sales in stores. If stores are selling 30 percent less, they may be reducing their floor space accordingly. It sounds like a plausible scenario, but U.S. retail has looked overbuilt at least since 1989, yet the predictions of a crash have not come true yet.
With so many department store closings, some malls are losing their last anchor stores, but I am not aware of any malls closing right now. One saving grace for malls is that so few new stores are being built. Retail construction is picking up, but is still only 1/7 of the pre-2008 pace.