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