In the clothing and accessories business alone, eight big-name bankruptcies and closures have hit the retail industry the last two months, shutting more than 1,000 stores. The closed doors are symptoms of a bigger problem: America simply has too many stores.
BuzzFeed News
American retailers selling clothing and accessories have been through a grim winter death march of bankruptcies in the past two months: Wet Seal, Delia's, DEB Shops, C. Wonder, Gap's Piperlime, Kate Spade Saturday, Jones New York, and Caché.
If that feels like a lot of big-name bankruptcies, it's because it is. In clothing and accessories alone, more than 1,000 stores have either ceased to exist or are in their final throes, and thousands of retail employees have lost their jobs. While each of these brands fell for different reasons — and some of their competitors have thrived — the closures are symptomatic of an underlying problem: America simply has too many stores. The current round of shuttered doors and bankruptcies is just the start.
"We have way too much retail space ... we are way above any country in the world," Hana Ben-Shabat, a partner in the retail practice of consultancy A.T. Kearney, told BuzzFeed News. "It was a matter of time after the recession. Everybody said: 'We need to reduce the space.'"
Indeed, America has a staggering amount of real estate devoted to selling things, even when compared to the rest of the world's most heavily retailed nations.
The New Rules of Retail – Competing in the World’s Toughest Marketplace / Via Palgrave Macmillan / Robin Lewis and Michael Dart / ICSC calculation from Cushman & Wakefield, KSA and other sources
There was 7.5 billion square feet of shopping-center space in the U.S. in 2013, up from 3.3 billion square feet in 1980, according to the International Council of Shopping Centers. That's 20 square feet for every person in the United States; the U.K., with the second biggest amount of retail space, has just 3 square feet per person. And that calculation only includes gross leasable space and excludes freestanding retailers; the actual amount of all retail space is much higher.
Caché, best known for selling dresses for proms and other special occasions, said in a bankruptcy filing that one of its major missteps in recent years was expanding to 306 stores, saddling itself with money-losing locations and then struggling to downsize. C. Wonder, a "revenge retail" project out of Tory Burch's ex-husband Chris Burch, also flailed after rapidly expanding to 32 stores, many in pricey locations.
And while RadioShack had been struggling for years leading up to its bankruptcy filing on Feb. 5, the fact that it had more than 4,000 stores was a giant problem. Its lenders wouldn't let the chain shutter more than 200 per fiscal year, though the company sought to close many more than that, knowing it was saddled with hundreds upon hundreds of expensive and unproductive stores. Filing for bankruptcy enabled RadioShack to close up to 2,100 locations.
The past quarter "saw a higher level of bankruptcy activity than we've seen in many years," CBL & Associates, a large mall developer and owner, said on a Feb. 4 earnings call. It's spurred the company's leasing division to form special teams focused on reducing the impact from 2015 bankruptcies "as much as possible," CEO Stephen Lebovitz said on the call.
It's not the cold weather that led to a spate of winter bankruptcies: Retailers tend to report closures and bankruptcies in their fiscal fourth quarter, which ends in January, to take advantage of the busiest shopping season. It could help them get in the black, or provide extra traffic for liquidation sales.
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