Retail Store Closures to Follow Sales

Just as post-holiday sales are sure to follow Christmas, there’s a long tradition of store closings following the big year-end sales as weak and struggling retailers call it quits.

This year will be no different, with what looks to have been a less-than-stellar holiday retail season combining with a flurry of industry mergers to put even more stores than usual on the endangered list.

Based on the numbers through Christmas, retailers are on track to post a modest 3.3% increase in annual sales over last year, said analyst Britt Beemer, chairman of America’s Research Group, a Charleston, S.C., consumer research firm.

“It might be a shade better than last year, but overall, I would say that retailers are going to be disappointed,” Beemer said Monday.

And store owners shouldn’t count on a boom in post-holiday gift card spending to save them. Although nearly 56% of people surveyed say they received a holiday gift card -- up from about 48% last year -- they will be using those cards just when the stores are offering their biggest discounts, Beemer said.

“Because of the sales, the transaction numbers just aren’t that big after Christmas,” Beemer said.

Shoppers are likely to see a greater rate of store closings after this season compared with a year before in part because so many big retail mergers were consummated in the last year, said Marshal Cohen, chief retail analyst at NPD Group in Port Washington, N.Y.

This year, Kmart Holding Corp. bought Sears, Roebuck & Co. for $12.3 billion and Federated Department Stores Inc. spent $11 billion to purchase May Department Stores Co.

Now both companies are likely to trim unprofitable stores and sell off valuable real estate.

Federated said it would close at least 29 locations in Southern California as it phases out the Robinsons-May brand to focus on its Macy’s and Bloomingdale’s chains.

They will launch “going out of business” sales on Jan. 29 and are likely to be shuttered by May, spokesman Jim Sluzewski said.

A similar announcement of store closures is expected from Sears, said Burt P. Flickinger III, managing director of Strategic Resource Group, a New York business strategy firm.

“Sears and Kmart have had real downdrafts in same-store sales, so they would be on the much-more-likely list to potentially close stores,” Flickinger said.

Meanwhile, there are the usual announcements of plans to close struggling locations as the holiday shopping season winds down. Many retailers count on the period between Thanksgiving and New Year’s Day for a third or more of their sales, which provides an incentive to keep underperforming stores open through the holidays.

Now, with Christmas over, Whitehall Jewelers Inc. plans to close 77 of its 389 locations. Levitz Home Furnishings Inc. is closing 35 of its 114 stores. Casual Corner Group will close or sell all 525 of its stores in 42 states and Puerto Rico.

“With the retail environment we have today, a company just can’t keep weak stores going if it wants to remain profitable,” Beemer said.

Although the national economy is growing at a healthy 4.1% rate based on third-quarter gross domestic product, there was little to ignite shoppers’ interest this year, Beemer said.

There was no must-have toy or hot apparel to corral shoppers. Moreover, Microsoft’s new Xbox 360 video game platform actually worked to damp sales, he said.

Because it was not widely available, shoppers held back from buying games for the older Xbox console, as well as rival systems and games, as they waited to see how the market sorts out this year, Beemer said.

“Had there been 1 million Xboxes to sell rather than 50,000, the season might have turned out differently,” he said.

Adding to retailers’ woes is the growth of online sales. Through Christmas, non-travel online consumer spending was on track to hit $26 billion, up 18% from last year, said Vikram Sehgal, an analyst with Jupiter Research in New York.

Amazon.com Inc. said Monday that it experienced record holiday-period sales.

The largest online retailer said shoppers ordered more than 108 million items between Nov. 1 and Christmas, including books, Apple Computer Inc.’s iPod music players, jewelry and more than 600,000 gift certificates.

Out in the bricks-and-mortar stores Monday, a growing number of retailers such as Coach Inc., Target Corp. and American Eagle Outfitters Inc. rolled out some spring merchandise while KB Toys Inc. was pushing new versions of Barbie and the funky Bratz dolls.

Beemer said the retailers were hoping to get shoppers to use up their gift cards on full-profit new items that were not part of the big markdowns.

Still, most shoppers were clamoring for a deal.

“We’re looking for anything on sale,” said Jennifer Westfall of Charleston, W.Va., who brought her mother and 7-year-old daughter to a mall. “Only cheapo markdowns.”

Westfall found several deals, including a $130 cocktail dress for $20 and children’s clothes discounted 90%.

At the Robinsons-May store in Canoga Park, hundreds of people stood outside in the rain before the 6 a.m. opening.

Retailing behemoth Wal-Mart Stores Inc. was one of the companies that looked likely to hit its target of a 4% gain in sales this Christmas, analysts said.

Yet even so, its moves to maintain growth continue to send ripples through the industry.

For example, the nation’s largest retailer is shutting down stores across the nation to open more Wal-Mart Supercenters, said Robert Bach, national director of market analysis for real estate company Grubb & Ellis.

The properties may be snapped up by other retailers, or could just as easily be razed to make way for homes or other uses, he said.

And when a Wal-Mart leaves a shopping center, surrounding stores suffer, said Gregory Stoffel, a retail strategist in Irvine.

“What was a thriving center with a Wal-Mart anchor ends up being a has-been center that’s going nowhere,” Stoffel said. “I see that everywhere.”

In many markets, particularly in the West, demand for housing may prompt landowners to convert some retail centers into residential developments, Stoffel said.

“In the last two weeks, I’ve seen three candidates where an anchor store already moved out and the city is pushing the developer to go into more of a mixed-use project,” Stoffel said.

He declined to provide specifics because it would violate his confidential business agreements.

But one example involving the Robinsons-May closures is already in its initial stages. This month, developers unveiled plans for the Robinsons-May site in Beverly Hills, a $500-million luxury condominium project. The development also includes a high-end restaurant and a few shops.

Where properties are particularly valuable, such as in Southern California, some retailers may find they’re better off selling or subleasing a site than continuing to occupy the store, Flickinger said.

Sears has a number of its namesake and Kmart stores in such locations in the Los Angeles area, where they are struggling but another retailer might flourish, he said.

“Sears is becoming as much of a real estate company as it is a retailer,” he said. “Sears has talked to folks like Home Depot and Target and others in terms of selling off stores.”

The bottom line, said retail analyst Walter Loeb of Loeb Associates in New York, is that “we are over-stored.”

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Associated Press was used in compiling this report.