You've probably heard about the "retail apocalypse" by now.
Brick-and-mortar retailers are announcing store closings nearly every day it seems as overextended businesses succumb to the forces of e-commerce and an over-stored commercial landscape.
The industry is on track for over 8,000 store closings this year, more than took place in the worst years of the recession.
Among the biggest victims are Radio Shack, which declared bankruptcy and has closed 1,000 stores since Memorial Day, and Payless Shoe Source, which is closing 800 locations.
Department store chains like J.C. Penney, Macy's, and Sears are fast shrinking, and fashion house Michael Kors was the latest company to retreat, saying it would close 100-125 locations over the next two years, as its sales have plunged.
However, there are a few brick-and-mortar concepts that are continuing to expand in spite of the retail apocalypse. As you'll see, not every retailer is feeling the pressure from the changing industry landscape.
Image source: Dollar General.
1. Dollar General
Discount chain Dollar General (DG -1.36%) has more retail stores under its banner than any other retailer in the country, with 13,601 as of its last earnings report. While some observers might think the company would have already saturated the U.S. market, the dollar-store chain is continuing to expand. The company plans to add 1,290 stores this year, growing its base by nearly 10%, and even acquired 322 stores from another retailer in April.
Like its rival Dollar Tree, Dollar General's model is relatively e-commerce-proof as it relies on low-income customers buying private and name brand goods in sundry categories like cigarettes, household products, canned goods, and snacks. The company offers products that are frequently used and replenished, meaning consumers don't have the time to wait for an online order to show up if they need them.
Thus far, Dollar General's retail strategy has proven to be solid. Comparable sales ticked up 0.7%, and revenue increased 6.5% in its most recent quarter. As long as comps are heading north, expect the dollar-store chain to keep expanding.
2. TJX Companies
Perhaps no brick-and-mortar chain has gotten more attention for its success than TJX Companies (TJX 0.77%), which is the parent of T.J. Maxx, Marshall's, and Home Goods. The so-called "treasure hunt" model has proven difficult to mimic online, as T.J. Maxx and Marshall's sell excess inventory at generous markdowns. That system means customers never know what they may find when they enter a TJX store, which keeps them coming back often to take advantage of deals.
Macy's CEO even blamed off-price brands like TJX for its recent challenges, and the company has launched its own imitator, Macy's Backstage.
Earlier this year, TJX announced plans to open 1,800 new stores worldwide over the coming years, growing its store base by 50%. The company aims for 1,300 of those locations to be in North America.
The company's recent store expansion has been more modest as its store count grew by 4%, but the company seems confident that its store format will be just as successful in the future. Comparable store sales have increased every year for 21 years straight, a remarkable streak, and e-commerce makes up just 1% of total sales.
In its most recent quarter, comparable sales at T.J. Maxx and Marshall's were just flat, but management seemed to think that was just a blip. If that persists, the company may need to change its expansion plan.
3. Costco
Costco Wholesale (COST 0.84%), like the companies above, has also been steadily opening stores despite the rise of e-commerce. In the past year, the company has added 27 new warehouses globally and 17 in the U.S., growing its footprint by about 4% worldwide and 3.5% in the U.S.
Though the company does make some products available online, its model overall does not lend itself well to e-commerce. The company sells bulk goods that would be difficult and expensive to ship, and also employs a similar "treasure hunt" model to TJX. In addition to food, electronics, and clothes, the company has plenty of one-time deals that make every trip to the store unique.
With its membership model, the company figures to be in the firing line of Amazon Prime, but thus far Costco's business has resisted the so-called retail apocalypse and the Amazon threat, continuing to grow.
Like Amazon Prime, Costco memberships are highly popular with its customers, with renewal rates around 90% thanks to the company's rock-bottom prices; Costco also ranks among the best retailers in customer service.
Through the first three quarters of the year, Costco's comparable sales increased 3% in the U.S. and globally, when the effects of gas prices and foreign currency exchange are stripped out. Management also said it's had success in smaller and mid-level markets, a promising sign for more stores away from the coasts. Expect the warehouse giant to continue its brick-and-mortar expansion.
