U.S. Retail Hit by Store-Closure Streak

A wave of store closures announced by major U.S. retailers has many commentators wondering about the feasibility of brick-and-mortar stores.

Jan 29, 2014 at 11:12AM

The face of retail is evolving. Consumers are changing their shopping habits and are often turning to online alternatives in order to satisfy their shopping needs. The process has been ongoing for a while, but now it has once again been underscored by a deluge of announced store closures. Among the businesses that have been affected are huge names in American retail including Sears Holdings (NASDAQ:SHLD), J.C. Penney (NYSE:JCP), and Macy's (NYSE:M). What does the future hold for these companies?

Closing up shop
A wave of store closures has been announced in the U.S. lately. While the number of closures reported is usually higher in the first quarter of the year, the number seems to have surprised analysts. As the scope of online retail continues to grow, shoppers should expect to see a sharp decrease in both the number of brick-and-mortar retail locations and square footage per location.

Some estimate that the amount of overall retail space could be reduced by one-third to one-half over the next 10 years. Additionally, retailers seem to be making a move out of indoor malls, favoring outdoor mall locations or stand-alone stores instead.

Affected chains
As far as J.C. Penney is concerned, the store closures were expected. The retailer has been struggling with traffic and cash flow issues for some time now, and while the savings are unlikely to make a significant impact, they are necessary. Earlier this month, the company announced it will be closing 33 retail locations across the country as well as cutting some 2,000 jobs. The savings are estimated to be around $65 million, money the company needs desperately.

Sears is another major retailer that recently announced store closures, including its flagship Chicago store. The company had a very poor holiday season, reporting a 9.2% decline in comp-store sales for the period. Management has acknowledged the shift in consumer behavior toward online shopping and has stated it will work on developing this channel. Since 2010, the company has closed around 300 locations, trying to downsize its physical presence as store traffic continues to dwindle..

Macy's is also planning several store closures, albeit fewer than the previous two companies. However, the job cuts it announced earlier this month are quite startling. Macy's now plans to lay off some 2,500 workers. The market reacted very favorably to the news, sending shares up around 6%, presumably in expectation of an improved bottom line. Macy's stated it will be attempting to save up to $100 million a year with several cost-cutting initiatives, including five new store closures.

While analysts generally seem to believe that the store closures announced by big U.S. retail chains are a step in the right direction, questions remain as to the feasibility of brick-and-mortar stores in general. As shoppers increasingly migrate to the Web, and more products are offered online, some fear that traditional shopping locations may in the future become irrelevant. As such, the sector may be forced to reinvent itself, either by offering more products online or by somehow giving consumers services that are not available through the Internet.

The bottom line
These recent store closures raise questions about the sector's health. On one hand, the closures are a bad sign for retail, as this means traffic is simply insufficient. On the other hand, they can be seen as a necessary evil for companies to bolster their bottom line. With many retailers struggling to maintain business, Macy's, Sears, and J.C. Penney are being forced to downsize in order to survive.

Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.


Daniel James has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information