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Retailers Seen Closing Thousands of Stores Even After Pandemic

Roughly one in every 11 stores will close in the next year, according to an analysis by UBS.

(Bloomberg)—U.S. retailers could shutter tens of thousands of stores even after the pandemic subsides, as shoppers continue to turn toward e-commerce, according to a new report.

Roughly one in every 11 stores will close in the next five years, with office-supply, sporting-goods and clothing retailers among the hardest hit, according to the base case in a UBS analysis Monday. In the most dire scenario, more than twice as many stores -- about 150,000 in total -- could close over that span.

“An enduring legacy of the pandemic is that online penetration rose sharply,” the UBS analysts, led by Michael Lasser, wrote in the report. “We expect that it will continue to increase.”

U.S. stores shifted focus to online operations as the Covid-19 pandemic forced physical locations to temporarily close. Even upon reopening, visitors were slow to return and shops rushed to offer services like curbside pickup and virtual shopping to get consumers buying again. Foot traffic at malls has fallen about 30% from a year ago, according to real estate data firm Green Street.

More than two dozen major retailers filed for bankruptcy last year, including household names like J.C. Penney and Lord & Taylor.

Stores that sell clothing, consumer electronics and home furnishings will likely see the most closures, with 35,000 combined, according to the UBS report. Office-supply retailers are expected to see the biggest impact proportionally, with 45% of their store networks expected to shut their doors. Shopping malls will likely be a key source of closures.

Only auto-parts retailers are seen keeping about the same number of locations, with sales per store reaching an all-time high in the third quarter of 2020, the analysts found. These shops are more protected from digital options because they’re often needed by customers immediately and offer services that need to be done in person.

--With assistance from Nancy Moran.

© 2021 Bloomberg L.P.

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