The holidays could make or break struggling stores
NEW YORK — Clothing stores and specialty retailers are offering big discounts and heavily promoting curbside pickup in hopes of rescuing a lackluster holiday shopping season in which surging coronavirus cases have kept many shoppers at home.
For some, it could be their last chance at survival. And even a last-minute sales boost could be too late to save them.
The holiday season, which accounts for about 20 percent of the retail industry’s annual sales, has always been make-orbreak for struggling stores. But it’s even more important this year as they look to make up for sales lost since the pandemic forced them to temporarily close locations.
That’s a big challenge given that the deadline to order online and get items in time for Christmas has passed. Retailers also can’t rely on big crowds of procrastinators because of restrictions on how many people can shop at once.
Big box retailers like Walmart and Target, which have been deemed essential and mostly allowed to remain open throughout the pandemic, have done well by attracting shoppers with safety concerns who don’t want to go to multiple stores. Supermarkets, home improvement stores and online retailers have also seen strong sales.
But many clothing and department stores have struggled, especially those in shopping malls, some of which were already in trouble even before the coronavirus upended the retail landscape.
“People are spending money. It’s just falling in pockets of areas like home improvement and food,” said Ken Perkins of RetailMetrics LLC, a retail research firm. “You have to worry about the mallbased retailer. When the dust settles after the fourth quarter, you’ve got to wonder what kind of position some of these chains are going to be in.”
Perkins expects fourth-quarter earnings for the roughly 100 chains he monitors to be down 2.1 percent, with mall-based retailers down nearly 30 percent and stores located outside of malls up 3.4 percent. A recent report from S&P Global highlighted seven publicly traded mall landlords who are facing a brutal winter.
Already, more than 40 U.S. retailers have filed for Chapter 11 since the pandemic started forcing shutdowns in March. And more than 8,600 stores have closed this year, according to Coresight Research. Just in the last month, music chain Guitar Center Inc. and clothier Francesca’s Holdings Corp. filed for Chapter 11 bankruptcy. Meanwhile, retailers like Neiman Marcus and J.C. Penney that emerged from bankruptcy this past fall are looking to regain their footing.
The worst could still be ahead, with COVID-19 cases on the rise in the U.S. and the possibility of more store closures and restrictions in 2021.
“Without this extra boost that they normally get, we are going to see an uptick in bankruptcies and store closures in the first quarter,” said Natalie Kotlyar, a national leader of BDO’s Retail & Consumer Products practice. “I think many retailers were holding out filing bankruptcy to see how the holiday season is going to go.”