Stores Are Closing at a Record Pace as Amazon Chews Up Retailers

Stores Are Closing at a Record Pace as Amazon Chews Up Retailers
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The battered American retail industry took a few more lumps this week, with stores at both ends of the price spectrum preparing to close their doors, according to Bloomberg.

At the bottom, the seemingly ubiquitous Payless shoe chain filed for bankruptcy and announced plans to shutter hundreds of locations. Ralph Lauren, meanwhile, said it will close its flagship Fifth Avenue Polo store, a symbol of old-fashioned luxury that no longer resonates with today’s shoppers.

And the teen-apparel retailer Rue21 could be the next casualty. The chain, which has about 1,000 stores, is preparing to file for bankruptcy as soon as this month, according to people familiar with the situation. Just a few years ago, it was sold to private equity firm Apax Partners for about a billion dollars.

The rapid descent of so many retailers has left shopping malls with hundreds of slots to fill, and the pain could be just beginning. More than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed, converted to other uses or renegotiated for lower rent in coming years, according to data provided to Bloomberg by CoStar Group.

Year-to-date store closings are already outpacing those of 2008, when the last U.S. recession was raging, according to Credit Suisse Group analyst Christian Buss. About 2,880 have been announced so far this year, compared with 1,153 for this period of 2016, he said in a report. Extrapolating out to the full year, there could be 8,640 store closings in 2017, Buss said. That would be higher than the 2008 peak of about 6,200.

Retail defaults are contributing to the trend. Payless is closing 400 stores as part of a bankruptcy plan. The mammoth chain had roughly 4,000 locations and 22,000 employees, more than it needs to handle sluggish demand. HHGregg, Gordmans and Gander Mountain all entered bankruptcy this year. RadioShack, meanwhile, filed for Chapter 11 for the second time in two years.

Other companies are plowing ahead with store closures outside of bankruptcy court. Sears, Macy’s and JC Penney are shutting hundreds of locations combined, reeling from an especially punishing slump in the department-store industry. Others are trying to re-emerge as e-commerce brands. Kenneth Cole Productions said in November that it would close almost all of its locations. Bebe Stores, a women’s apparel chain, is planning to take a similar step, people familiar with the situation said last month.