Investors are demanding it. Industry analysts are pushing for it. Even retailers and property owners, to a certain degree, agree more needs to be done. So why are companies moving so slowly to close down a chunk of their stores?
Though at first glance it appears a high-profile wave of such announcements is drowning out strip centers and malls — just think about Sears or Gap — a closer examination shows how misleading the headlines can be.
According to the International Council of Shopping Centers, an industry trade group, just 1,422 store closures were announced during the first quarter. That compares to an average 2,160 announcements during that period over the past six years. Trends during the first quarter are important to monitor because on average, some 50 percent of retailers' closure plans are announced during that window. However, the ICSC noted that it does not expect trends to accelerate in the second quarter.
Looking at the number of occupied shops across the U.S. further highlights the discrepancy. According to the ICSC, shopping center occupancy rates reached 93.2 percent at the end of the fourth quarter. That marked the highest year-end reading since 2007. The rate ticked slightly higher again during the first quarter, to 93.5 percent — the highest-quarterly reading since 2008.
Yet as new and existing retailers continue to open stores in the U.S., with several of the companies that are closing stores simultaneously opening new concepts, analysts argue many need to move faster to shrink their square footage. Retailers' dismal comparable-sales results in the first quarter only added fuel to the fire.
For retailers not teetering on bankruptcy, however, the decision to put a location on the chopping block is becoming more complicated, as many of their money-sucking properties have already been surrendered. What's more, with many of these stores out of their portfolio, there's no longer as dire a need to shutter a location before the lease expires — a decision that can be costly to their bottom line.