Happy New Year? Retail Tanks, 73,000 Stores Could Close

by Erik Sass, Dec 31, 2008, 5:46 PM

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After the worst holiday sales season in 40 years, up to 73,000 retail establishments could close in the first half of 2009, according to the International Council of Shopping Centers. Together with plummeting consumer confidence, also reaching its lowest level in decades, this news heralds a retrenchment in consumer spending in 2009 without recent precedent, experts say.

The ICSC prediction follows a net loss of about 33,000 retail establishments in 2008, with 148,000 total closings offset only partially by a smaller number of openings.

ICSC pointed to the plans of national chains like Sears and Talbots-- already in motion--to close hundreds of unprofitable stores, as well as the bankruptcy or liquidation of big chains like Circuit City, Linens'n Things, Mervyn's and Sharper Image. This wave of closings and bankruptcies will result from two adverse trends coinciding: The credit crunch is making banks especially leery of lending to troubled businesses, coupled with a sharp reduction in consumer spending.

The retail spending figures for the fourth quarter were bad, as economic woes were compounded by bad weather and a shorter shopping season (27 days this year versus 32 last year).

According to the ISCS, same-store sales dropped at least 2% in November and December, compared to the same months in 2007. Retail Metrics, a consulting firm, has same-store sales falling 5% in December, when Wal-Mart is excluded. SpendingPulse, a tracking service from MasterCard, has same-store sales down 2.5% in November and 4% in December, when autos and gas are excluded, with the sharpest declines coming in women's clothing (22.7%), electronics (26.7%), and luxury (34.5%).

Retailers tried desperately to head off a Christmas catastrophe: JC Penney adopted some innovative tactics, sending out circulars advertising a "second Black Friday" in mid-December and giving consumers free wake-up calls, while stores like Macy's and AnnTaylor are offering discounts of up to 70%, according to Bloomberg.

But these efforts seemed to mostly fall flat. In the last weekend before Christmas, store traffic fell 27% and sales fell 5.3%, according to ShopperTrak RCT Corp. Even e-commerce was down, albeit less severely, with a modest 2% decline.

Looking to the future, the prospects for a post-holiday bounce are dim as well. According to Deloitte, consumers spent 24% less on gift cards this year versus last year, reducing one source of likely spending in early 2009.

Indeed, consumer confidence reached a new low of 38 in December, against an index value of 100 (established as a baseline in 1985), according to the Conference Board, which tracks consumer sentiment. That's a marked decrease from 44.7 in November. Consumer perceptions of the "present situation" fell even more sharply, from 42.3 in November to 29.4 in December. Its expectations index, which measures consumer feelings about the future, fell from 46.2 to 43.8 during the same period.

Summing up, Lynn Franco, director of The Conference Board's Consumer Research Center, said these trends reflect "the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008." She added that the downturn will continue at least through the first half of 2009, and "only a modest recovery is expected in the second half."

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0 comments on "Happy New Year? Retail Tanks, 73,000 Stores Could Close ".

1. Ronald Littrell from Launch Padd Media International
   

   commented on: January 2, 2009 at 3:59 p.m.

   Just exactly how long is the general population going to let the media tell them what to think and do?
   I adamantly suggest that people start thinking and doing for themselves. Hopefully it's not going to be a bad thing, but the Media just told us who to vote into the Presidency. Don't let them destroy our economy by dwelling on the negative of "how bad it is, and how much worse it is going to be" for the sake of reporting. It's time we stop listening to those aggrandizing, "first to bring you the story on We're too KOOL-TV"! Remember, they're just people with perfect hair trying to make it to a station with higher ratings and bigger salaries.

   If you're swimming along just fine and then some idiot tells you you're in very deep water and you can't possibly make it, and you stop swimming, OF COURSE YOU'RE GOING TO SINK!

   We are a very resilient, intelligent and educated Country! Just because a few people, primarily in Congress, let us down, a few Corporations have taken advantage of us and a few clever financial manipulators scammed us, this is not the time to listen to the Media so they can thoroughly sink us!

   OF COURSE IF YOU STOP BUYING THE STORES ARE GOING TO CLOSE. Doesn't anyone realize the ripple effect? If the Media convinces you to stay at home and put your money in bag and bury it in the basement, what do you think is going to happen? If just half of the population doesn't spend that extra ten or twenty bucks each day, don't you realize that's at least ONE AND A HALF BILLION DOLLARS a day out of the economy and at least NINETY MILLION IN TAXES. THAT'S A DAY FOLKS!

   Stores close, people lose jobs. People without jobs tend not to buy things from other stores! GET IT?! STOP listening to those tan people with perfect teeth on the electronic box. THEY LIKE TO REPORT BAD NEWS, and if it's not bad enough, they'll surreptitously throw in their own opinion at the end of a tease just to keep you tuned in to their station during the commercial break. A break in which they need to sell commercial air-time for their station, or Network affiliate, so they can make more money personally. Neither they or their Union, A.F.T.R.A., are smart enough to realize that if sponsors, (stores) close, who is going to buy that eight and a half or nine minutes of commercial air-time?

   It's time for individuals, corporations and Unions to use the brains God gave them for the betterment of all!

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