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25,000 Stores Might Close in 2020, Endangering Shopping Malls

By Rich Duprey – Jun 18, 2020 at 1:08PM

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The outlook is grim for the retail landscape even as stores begin to reopen.

Simon Property Group (SPG -1.14%) doesn't have enough money to buy up all of the retailers that are going to close their doors this year.

The shopping mall operator has been on a spending spree, buying up bankrupt retailers in an effort to keep them from closing down and leaving vacant storefronts, but a new report by Coresight Research says as many as 25,000 stores could be shuttered this year, a number that would undoubtedly overwhelm Simon's finances.

Abandoned shopping mall

Image source: Getty Images.

The mall is a ghost town

The COVID-19 pandemic is accelerating retail's exit from the mall. Starbucks (SBUX -0.85%), for example, previously announced it was moving its mall-based coffee shops out of malls experiencing declining customer traffic and into so-called "third place" locations people could congregate outside of their home or workplace.

Where Starbucks had planned to do it over three to five years, the coronavirus is causing it to now achieve the goal within the next 12 to 18 months.

Yet the darkened doors the Coresight analysis envisions isn't just businesses moving to someplace else, but rather closing down or reducing their footprint. Even though Simon Property Group is reportedly in negotiations to acquire bankrupt J.C. Penney (JCPN.Q), the department store chain is preparing to liquidate 136 stores this week.

Coresight had formerly forecast 15,000 stores closing this year, but has upped its prediction to between 20,000 and 25,000. The bit of solace malls might be able to take from the news is that it had predicted some 12,000 stores would close in 2019, but only 9,000 or so ultimately did.

Still, even if a quarter fewer close, that's more than many underperforming malls could assimilate, and it may lead to their own demise, creating a snowball effect of destruction.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Simon Property Group Stock Quote
Simon Property Group
SPG
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J.C. Penney Stock Quote
J.C. Penney
JCPN.Q
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