Macy's, which is set to have closed about 100 stores by this year, needs to close even more of its fleet in order to rebound, according to Wall Street analysts.

Retail store closings this year are well on their way to outstripping the record number of closures in 2008, but Wall Street expects and wants even more cutbacks.

While pointing out that already in 2017 about 2,880 store closures have been announced, well over the 1,153 stores that closed by this time last year, Credit Suisse said in a research note taking a deep dive into the wobbly state of the retail industry that all signs point to more than 8,640 store closures by year-end. Store closures in 2008, the height of the Great Recession, totaled 6,163.

Credit Suisse said even more store closures could be seen over the full year, but such a dramatic industry-wide shift is necessary for retailers to carry on as foot traffic declines become permanent and the popularity of e-commerce continues to grow.

Over the next decade, the bank said e-commerce could take over more than 37 percent of retail sales, generating about $94 billion in incremental value and the sector could even be capable of sustaining a compound annual growth rate of 7 percent.

Credit Suisse said retail is facing “a watershed moment,” but one that holds plenty of opportunity for “brands capable of converting their messaging and sales channels away from mass marketing into the new consumer-first digital realm.”

Oliver Chen of Cowen & Co. agreed that there is opportunity for retail to thrive in the “disruption” it’s dealing with from e-commerce. Although online shopping is roughly two decades old, it has seen an accelerated rate of use given the rise of mobile and younger generations with spending power.

“The merger of bricks and clicks is a long-term growth opportunity,” Chen said. “There needs to be a focus on bricks plus clicks, on integrating.”

Certain types of retailers are immune to e-commerce and the rise of Amazon in Cowen’s view, namely off-price or “deep value” stores such as T.J. Maxx, which plans to open hundreds of stores in the coming years, as well as luxury and beauty retailers.

“Deep value is ‘unamazonable’…because we all love getting discounts. Beauty is all about the newness factor and luxury fashion customers really want to experience fashion,” Chen said.

Inside Sephora on 34th street.

Beauty retailers, like LVMH-owned Sephora, are considered impervious to the increasing e-commerce takeover in retail, in pat because of their constant “newness” in product, according to Cowen & Co.  Joshua Scott/WWD

Nevertheless, Cowen said it also sees e-commerce pulling in between 35 and 40 percent of retail sales over the next decade or so, compared with its current 20 percent share, but the firm sees this 40 percent as the maximum penetration for online.

As for store closures, Cowen commended retailers such as J.C. Penney and Macy’s for announcing store closures this year, but said they and others likely need even more stores to go dark than currently planned.

Specifically, Cowen said J.C. Penney should close 25 percent of its stores, compared to the 14 percent it’s announced, and Macy’s should close 20 percent, compared to the roughly 16 percent it’s announced. Meanwhile, Abercrombie & Fitch and Ascena both need to close 20 percent of their current stores and Gap Inc. needs to close 25 percent.

Cowen expects at least 20 percent of malls, or about 240 locations, to either close or be “repurposed” within the next 10 years as well, and said malls that stay open will by and large shift away from to department store anchors to entertainment anchors, like movie theaters.

After these necessary reductions, traditional retail could emerge “healthier,” so long as the industry proceeds with a “reinvention [and] a refocus on customers.”

About 75 percent of shoppers that responded to a Cowen survey in February said they still prefer shopping in-store to online, and the firm noted that consumers are largely “agnostic to channels with a preference for shopping done their way.”

“Customers just want what they want, where they want it and when they want it,” Cowen said. “The underlying principle is retail should aim to transform the consumer shopping experience by destroying pain points, increasing customer ease, and saving customer time.”

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