Fung Global Retail & Technology tracks store openings and closures for a select group of US retailers.
What Is Happening This Week?
We forecast that a total of 9,452 stores will be closed in 2017, surpassing the total number recorded in 2008, with 6,164 stores shuttered, and representing a 361% year-over-year increase over 2016. This past week, private equity firm Sycamore Partners has agreed to acquire US office supplier Staples for $6.9 billion. Meanwhile, Sears will close 20 more stores, bringing the store closure total for the year to 246. Outdoor wear retailer Eddie Bauer is seeking a buyer, due to a heavy debt burden, while Bed Bath & Beyond is considering shuttering stores in the next few years as leases are set to expire. Finally, online consignment and thrift retailer ThredUP is moving into the brick-and-mortar space with plans to open five stores in 2017.
9,452 Stores Expected to be Closed in 2017
We forecast that there will be 9,452 announced store closures by the end of 2017, driven by the shift to online retail and retailer bankruptcies. Our forecast represents a 361% year-over-year increase, and exceeds the 6,164 stores closed in 2008. The second half of 2017 will continue to be a tough period for the retail industry, with struggling retailers continuing to close stores or even file for bankruptcy.
Sycamore Partners Acquires Staples for $6.9 Billion
Following up on our report last week concerning the possible acquisition of Staples by Sycamore Partners, details have now emerged that the private equity firm will acquire the office supplies retailer for $6.9 billion. The acquisition comes at a time when Staples is facing multiple headwinds, which include a continuous decline in sales performance and a failed attempt to acquire Office Depot in May this year. It will be a challenge for Sycamore Partners, which specializes in investing and turning around retail brands, to revive Staples. The office supplies retailer currently has 1,237 retail locations in the US. The acquisition is expected to be closed by the end of 2017.
Sears Closing 20 More Stores
Sears Holdings will close 18 Sears stores and two Kmart stores by September this year, on top of the previously announced closures, as reported by Retail Dive. The new closure announcement has brought the total number of store closures for Sears to 246 stores this year. Management said the closures are in accordance with its plans to shutter unprofitable locations and “aggressively evaluate store space and productivity.” We expect more closures in the pipeline for Sears.
Bed Bath & Beyond Considering Closing Stores
Bed Bath & Beyond is considering closing stores, as the leases of 80–100 stores are set to expire in the coming few years, according to management comments made during its recent earnings call. No further plans have been announced and the decision will depend on whether the retailer can rationalize its store footprint and negotiate favorable new leases with landlords. Management has stressed that all stores are profitable, despite criticism of being too slow in trimming its physical footprint amid the headwinds facing retailers. We have not included this potential store closure into our year-to-date store closing total.
Eddie Bauer Up for Sale
Outdoor-wear retailer Eddie Bauer is reported to be up for sale, according to Reuters. The retailer has hired investment banks Guggenheim Partners LLC and Financo LLC to explore options that include a sale. None of the parties have commented on the report. The retailer, however, is certain to be plagued by its significant debt load, which includes a $225 million loan due in 2020 and $200 million in revolving credit due in 2019. It has suffered from declining sales and a declining gross margin in recent years.
ThredUP Opening Offline Stores
The online consignment and thrift retailer has opened its first physical store in the US, with plans to launch four more by the end of 2017. The “smart store” opened by ThredUP is powered by proprietary technology that is geared toward providing consumers with an omnichannel shopping experience. These stores will also provide ThredUP with valuable in-store analytics that could help better target customers and manage inventory.