Skip to comments.Nine Retailers Closing the Most Stores
Posted on 03/13/2014 7:02:11 PM PDT by SeekAndFind
Brick-and-mortar retailers have been suffering from slow economic activity for years, as well as from increased competition from online retailers. The rise in store closings is a prominent sign of their struggles. Weakened companies cannot afford the real estate and personnel costs that go along with supporting hundreds of unprofitable locations. The clearest proof of the problem was Radio Shacks recent decision to close more than 1,000 stores.
Radio Shack is hardly alone. During that last several years Gap has closed 20% of its locations. Even Macys, which has forecast strong earnings and is considered the most successful of the mid-market retailers, closed stores recently.
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A number of factors can lead companies to close stores. One is mergers and acquisitions activity. As organizations join forces under a single umbrella, locations that once competed for sales can become redundant, leading to store closings. The most recent example of this is the marriage of Office Depot and OfficeMax, completed late last year. Management has made it plain that the merger would produce cost savings by consolidating jobs and closing stores.
The pressures businesses face from the growth of online retail is another factor that can contribute to store closings. In particular, the rise of Amazon.com, Americas largest e-commerce operation, has turned the entire retail industry on its head.
Bookseller Barnes & Noble was one of the first companies to be threatened by Amazon.com, which originally began its operations as an online bookstore. Online retailers, Amazon.com cheif among them, accounted for 44% of book sales in 2012 according to Bowker, a bookseller consultancy. Many of these sales came at Barnes & Nobles expense, as the companys own e-book business has languished.
Staples is a more recent example of a company pressured by Amazon.com. Following two years of sales declines, the office supply retailer announced that it will close 225 stores by 2015, 12% of its total store count.
Outside of those retailers undergoing mergers, or shrinking to limit costs and preserve their bottom lines, a number of retailers have had to shrink their store count in order to shift into new markets. Companies such as Abercrombie & Fitch and Aeropostale have are now competing with fast-fashion competitors such as H&M and Forever 21, which specialize in getting the latest trends from the runway to stores quickly and at low prices.
Companies close stores for different reasons. In the case of Sears Holdings, is likely to shutter a number of locations as part of a larger strategic overhaul to fund its transformation and make operations more efficient. Closing stores frees up capital, reduces losses and de-risks our model, the company said in an earnings presentation.
In contrast, J.C. Penney is only closing stores that noticeably underperformed. The companys sales have fallen sharply since Ron Johnson, previously Apples retail chief, took over as CEO nearly three years ago, and continue to have fallen since he was ousted by the board last year. But the company continues to make major investments in its conventional brick-and-mortar operations, and has only announced the closing of 33 out of more than 1,000 stores.
To determine the retailers closing the most stores, 24/7 Wall St. reviewed large retailers that have publicly announced store closings for 2014, or are in the middle of a multi-year plan to trim locations. In addition, we also reviewed company earnings and SEC filings.
These are the retailers closing the most stores.
1. Abercrombie & Fitch
Abercrombie & Fitch first announced its plans to close 180 stores by 2015 more than two years ago. In its most recent quarterly report, the company said it had closed 10 stores by November of last year and would close another 40 stores by the end of its fiscal year. This total does not include the 20 stand-alone Gilly Hicks brand stores, which the company also plans to shutter this year. Abercrombie & Fitchs stock has struggled, posting one of the largest declines in the S&P 500 during 2013. To improve performance, the retailer is planning to shift marketing for its Abercrombie & Fitch to older shoppers while transforming its Hollister stores to a fast-fashion approach in line with H&M and Zara. A succession plan for CEO Mike Jeffries is also in the works. Last year, shareholders from Engaged Capital publicly campaigned for Jefferies’ dismissal, citing the retailers failure to adapt to fast-fashion, and Jeffries statements about excluding customers that he thought were too heavy for the brand.
2. Barnes & Noble
Early last year, Barnes & Noble announced plans to shut a third of its stores over the next 10 years. As of this January, the company had already closed some 14 retail locations, dropping its store count to 663 from the 677 it had when the announcement was first made. Particularly painful for many book-lovers, the retailer chose to close its one-time flagship store in New York City this January. While cost-cutting has helped the company post profits, by some measures the companys prognosis remains bleak. Book retail has increasingly shifted to online and e-books, dominated by Amazon.com. But while Amazon.com has noted strong sales of its Kindle e-reader, Barnes & Nobles own e-reader, the Nook, has struggled. Revenue of the bookstores Nook division, which include hardware and digital sales, fell by more than 50% year-over-year, and the segment remains unprofitable.
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Aeropostale is the in the midst of closing 40 to 50 stores in 2014, and plans to shutter some 175 stores in total over the next few years. The teen clothing retailers net income dropped to $34.92 million in 2013 from $229.5 million in 2010, and its EBITDA fell to $157.89 million last year from $435.45 million in 2010. Pressure from competitors such as Gap and Abercrombie & Fitch, as well as declining mall sales, has driven the companys share price from $32.08 in 2010 to $7 as of March 2014. Private equity firm Hirzel acquired 6% of Aeropostale in November 2013. Currently, the company is rumored to be in talks with Barclays Plc. because it is seeking either additional financing or to be acquired. Aeropostales fast-fashion shipment model, which it took up last year, has largely been unsuccessful.
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4. J.C. Penney
After J.C. Penneys sales began to steadily decline, the company tasked Ron Johnson, formerly retail head at Apple, with reinventing the retailers pricing strategy, only to see sales, earnings, and cash flow fall off a cliff. After years of avoiding closing stores, the company has recently said it would be shuttering several locations. At the start of 2014, J.C. Penney announced 33 store closings, to be completed by May, leading to the loss of about 2,000 jobs. Some investors and pundits believe the company has not been aggressive enough in cutting stores. As of November, the company had 1,095 department stores, down only slightly from past years. Not all news has been bad for the retailer, which reported surprisingly strong earnings in February. Additionally, Standard & Poor’s recently upgraded the retailers credit outlook, although it noted changes will still be necessary to improve its credit long-term.
5. Office Depot
Office Depot merged with rival OfficeMax in November. Since the merger, the company has been cutting jobs at its combined headquarters. The next stage in integrating the two retailers, the company has stated, will be to cut store count. CEO Roland Smith admitted the companys merger was difficult for many workers, telling the Orlando Sun-Sentinel that it is difficult to focus on business when your personal future is uncertain.” The company had 1,912 retail stores at the end of its latest fiscal year, including 823 OfficeMax stores. Since the merger, the company has closed 15 of its Office Depot stores and seven OfficeMax locations.
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During the Super Bowl, RadioShack attempted to poke fun at itself, running an ad touting its store remodelling that playfully referenced the stores reputation as a throwback to the 1980s. But a reinvention alone may not save the electronics retailer — its previous attempt at rebranding itself as The Shack never caught on. The retailer recently announced it would close 1,100 out of its more-than 5,000 stores. The company has deemed these closings as critical to its cash-management and turnaround plans, which it hopes would help reverse recent poor results. Both the companys top and bottom lines have declined considerably in recent years, and its operating cash flow is also down from years past. The fourth quarter of last year, which coincides with the holiday season, was especially troubling. Sales declined 19% at stores open at least a year because of lower foot traffic and weak performance in mobile sales.
7. Sears Holdings
Sears has been heading downhill since 2005, when Wall Street billionaire Edward Lampert merged Sears Roebuck & Co. with Kmart in a deal worth $11 billion. Since 2010, the company has closed roughly 300 stores. One of the few surges in the company’s share price came at the end of January, after it announced the closing of its flagship store in Chicago in April. Shedding its assets has been a major part of the companys business for years. The company has not only dumped stores, but entire businesses, including Orchard Supplies Hardware Stores, Sears Hometown & Outlet Stores, Lands End, and a part of its stake in Sears Canada. Cowen analyst John Kernan recently noted that he expected Sears Holdings to close an additional 500 stores going-forward.
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Staples recently announced plans to close 225 stores, or roughly 12% of its total count, by the end of 2015. The closures reflect both the companys struggling sales totals, as well as its shift away from brick-and-mortar business to online retail. In its recent earnings release, the company said almost half of its sales come from online orders, and store closures reflect an opportunity to save money while improving the companys bottom line. This is not the first time headwinds have lead the company to close stores. In 2012, Staples shut 60 stores, mostly in Europe, as part of its plans to cut costs. The company referred to its shift to online sales.
9. Toys “R” Us
A Toys “R” Us was taken private by a consortium of companies in 2005. Nearly a decade later, disagreements among the companys ownership and a high debt burden have weighed down the retailer. In all, Toys “R” Us spent nearly three years trying to time an IPO, before backtracking last May. In early March of this year, industry sources told The Records NorthJersey.com that the company would soon close some 100 stores. Whether or not the company decides to close stores, major changes may be needed. Real estate giant Vornado, one of the three co-owners of Toys “R” Us, recently announced a more than $240 million writedown on its investment in the company. Among the reasons it gave were the company’s 2013 holiday sales results, and our inability to forecast a recovery in the near term. Toys “R” Us has struggled to keep up with online competition as well. A December report from Bloomberg indicated it was easier to find the holidays hottest toys on Amazon.com than through Toys “R” Us website.
Correction: An earlier version of this article stated that Barnes & Noble had closed 26 since it announced plans to close 200 stores over ten years. In fact, it closed 14 stores since the announcement.
Buy UPS: About 40% of their deliveries are from Amazon.
But really, why go to a specific store, when EVERYTHING in every store you go has the same exact copies of the same Chinese-made junk at all just about the same price?
#1,2,4 & 7 can kiss my butt. Not sorry to see them go.
That’s part of the 0bama recovery, yo. Good thing Democrats haven’t learned the term “creative destruction” that’s been used to describe capitalism. That’s all we’d have heard for the last 5 years.
I never understood the bad rap Walmart got. Many other retailers sell the same cheap crap they do. If I’m going to end up with cheap crap I might as well race them to the bottom and pay the lowest price.
America demands Justice for the Fallen of Benghazi!
Radio shack has been going down hill for years it used to be a place to actually get parts for radios or a larger selection of electronic parts for hobbyist like myself but now its just a phone and toy store.
I have a BN card so I get free shipping and a discount for $25 a year.
ATTN: RadioShack CEO
FIRST ORDER OF BUSINESS
CHANGE THE STUPID NAME!
When I hear radioshack that’s exactly what I think of. A shack filled with spare parts and nothing else. It doesn’t make we want to go there to buy electronics.
America demands Justice for the Fallen of Benghazi!
I thought Aeropostale was doing OK - their clothes are generally well made and decently priced (unlike A&F’s Hollister crap).
and they all have that smell.
What do you think about Pizza Hut?
Doesn’t effect me at all. The only store on the list that I’ve actually shopped in the past DECADE is B&N - and only because a good friend gives me a $25 B&N Gift Card for my birthday each year. I buy a book I want to read, read it, then sell it on Amazon for at least half of it’s retail value.
But, I’m cheap. The only thing I buy new are undergarments and socks and shoes.
And, FWIW, I spent $20 at Goodwill today and that bought me enough books to take me through the next 6 months. Adult books of any kind - $1.49 a pop! Life. Is. Good...when you know where to shop.
Movies and CDs? My Library. My Tax Dollars At Work! :)
every day gets more and more inline with the world decribed in book one of atlas shrugged
They just raised their “Prime” fee to $99.00/yr. Business is good!
Stupid Americans buy the Chinese-made junk because they need a LIFE. They buy MINDLESSLY.
I always thought that if a bride spent as much time on her MARRIAGE as she did on her WEDDING there would be almost NO divorces. MISPLACED, MINDLESS spending on one dress and one event...and to heck with the MARRIAGE.
And wasn’t that a stupid decision!
“I also buy most of my clothes from Macy’s - online, of course.”
Good move - Macy’s allow male transgenders to change in the women’s department.
Goodwill sells “adult books”??
Another sign of the end times!!
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