Study: For every 5 retailers opening stores, one retailer closes
IHL reports that fewer retailers make up the bulk of closures in 2019.
More than five retail chains are opening stores for every retailer that is closing stores in 2019, according to new research from IHL Group, Franklin, Tenn. This is up from 3.7 in 2018. The company also reports that the number of chains adding stores in 2019 increased 56%, while the number of closing stores decreased by 66% in the last year.
The study, “Retail Renaissance – True Story of Store Openings/Closings,” reviewed 1,660 retail chains with 50 or more locations in the United States across nine industry segments. For each retailer, the company measured the total store counts at the end of 2016, 2017, 2018 and plans for 2019 year-end based on company filings and statements.
IHL reports that fewer retailers make up the bulk of closures in 2019. In 2018, 20 chains represented 52% of all stores closed. In 2019, the 20 announcing the most closures represent 75% of all closures.
“U.S. retail has increased $565 billion in sales since January of 2017, fed not just by online sales growth, but net store sales growth,” says Lee Holman, vice president of research.
Since 2017, all other segments (excluding retail and department store chains) represented 18,226 net new openings.
Additional findings include the following:
- 64% of retailers are increasing the number of stores in 2019, 12% are decreasing and 24% report no change in store counts. This compares to 2018 with 41% increasing store counts, 37% decreasing and 22% with no change.
- For every chain closing stores, 5.2-plus chains are opening stores. Specifically, these ratios by segments include the following:
- Food/drug/convenience/mass merchants: 9.5-plus
- Restaurants, fast food, table service: 6.3-plus chains opening vs. closing stores
- 2018 was a peak year in the number of chains closing stores with 37% reducing their store counts. This number dropped to 12% of total retailers in 2019.
According to the research, the two primary characteristics of chains closing the most stores has been too much debt and rapid over-expansion driven by historically low interest rates for the last 10 years. Lack of innovation and short-sighted private equity also played a significant role in many of the chains. Retailers without these characteristics have continued to thrive in this market, noting that when a retailer closes a lot of stores, it is more of an indictment on the individual retailer rather than an overall retail industry problem as has often been reported.