Retail apocalypse is still in ‘early innings,’ Cowen says

The US could be in for a
lot more store closures.
AP

• The United States still has far more retail space per
  capita than any other country.
• This suggests the US is still in the “early innings” of
  mass store closings, according to a new 50-page report by Cowen
  and Company.
• As more stores close, hundreds of poorly performing
  shopping malls will go dark.
• At the same time, sales are accepted to accelerate at
  the country’s top-rated malls.

The American retail industry has been rocked by record-high
store
closures, dozens of high-profile
bankruptcies, and the
death of hundreds of shopping malls over the last several
years.

But the amount of retail space in the US still far outweighs
other countries, which suggests that we are only in the “early
innings” of mass store closures, according to data compiled by
the advisory firm Cowen and Company.

The US has about 23.5 square feet of retail space per capita,
compared to 16.8 square feet of retail space per capita in
Canada, and 11.2 square feet of retail space per capita in
Australia, according to the report.

Cowen and Company, ICSC, Cushman &
Wakefield

“Retail square footage per capita in the United States has been
widely sourced and cited as being far above most developed
countries — more than double Australia and over four times that
of the United Kingdom,” Cowen analysts wrote in a 50-page report
on the state of the retail industry. The data “suggests that the
sector remains in the early innings of reduction in unproductive
physical retail.”

As mass store closings continue, hundreds more malls could go
dark.

The number of malls in the US is expected to drop from roughly
1,150 today to fewer than 850 within the next several years, the
report says, citing the commercial real estate firm Cushman &
Wakefield.

The closures will hit C- and D-rated malls the hardest. These
shopping centers are already battling declining customer traffic,
falling occupancy rates, and low sales productivity.

But it’s not all doom and gloom in the retail industry.

While many failing stores and malls are closing, sales are
expected to accelerate at the country’s top-rated malls.

“Our take is mall performance bifurcation will accelerate as
retailers continue to invest in top malls in the top metro areas
at the expense of lower performing malls in secondary and
tertiary markets,” Cowen analysts wrote.

And while retailers like Sears and Toys R Us have been closing
hundreds of stores,
dollar stores, Aldi, Lidl, and others are growing.