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Why Retailers are Shuttering Locations and Laying Off Employees like the Great Recession

While the overall U.S. economy remains robust, the retail sector is showing worrying signs of seriously ill health.

Recent articles published by Bloomberg tally the latest declines. "Year-to-date store closings are already outpacing those of 2008, when the last U.S. recession was raging, reports Credit Suisse Group AG analyst Christian Buss. About 2,880 have been announced so far this year, compared with 1,153 for this period of 2016," according to an April 7 article penned by Lindsey Rupp, Lauren Coleman-Lochner and Nick Turner. If that pace continues, 2017 could see 8,640 stores close - far ahead of the 6,200 stores shuttered in 2008.

More sobering statistics:

  • Retailers cut 30,900 jobs in February and another 29,700 in March, according to the U.S. Bureau of Labor Statistics. Sector job losses in a two-month period haven't been that large since 2009, Bloomberg reports.
  • CoStar Group, a commercial real estate information and marketing provider based in Washington, D.C., tells Bloomberg that more than 10% of retail space in the United States—nearly 1 billion square feet -- "may need to be closed, converted to other uses or renegotiated for lower rent in coming years."
  • "The SPDR S&P Retail ETF, an exchange traded fund that tries to replicate the performance of the S&P Retail Select Industry Index, dropped 5.9% in the past year, compared with a 15% gain in the broader Standard & Poor's 500 Index," Stephanie Hoi-Nga Wong writes in an April 10 Bloomberg article.
  • The list of bankruptcies and store closings is long and growing. Retailers filing for bankruptcy protection already this year include HHGregg, Gander Mountain, Gordmans, Payless and RadioShack (that one for the second time in two years). Other retailers are closing stores to avoid a similar fate, among them Sears, Macy's and J.C. Penney Co. And still others, like Kenneth Cole and Bebe, are shuttering brick-and-mortar stores to concentrate on e-commerce.

Some of this is the result of an overbuilt retail sector; much of it comes from changing consumer habits. Shoppers clearly like the convenience and cost savings they are finding online, but brick-and-mortar retailers can hold onto customers by focusing on them, Oliver Chen, an analyst at New York-based financial services firm Cowen & Co., tells Bloomberg in the April 7 article.

"Management needs to be fixated on speed of delivery, speed of supply chain, and be able to test read and react to new and emerging trends," he says.






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