What Do These Big Store Closings Really Mean for Independent Retailers?

Even as the retail business continues to do well and vacancy rates around the country are at near-historic lows, headlines keep blaring out about massive store closings by some of the biggest retail chains in the country.

So, what does it all mean?

First off, you have to look who is actually closing stores. It turns out that many of the closings are from chains that are in bankruptcy or, even worse, liquidating. Rue21 is liquidating its entire 500-store operation while the Body Shop has done the same, both in the U.S. and in the U.K. Big Lots has announced hundreds of closings and the total may approach 800 locations before it’s done. (That would still leave it with around 1,000 stores by the way.) LL Flooring, which looks like it will revert to its original Lumber Liquidators name, is shutting half of its 400 locations under its bankruptcy plan. And Rite Aid expects to close about 50 percent of its 500 stores as it emerges from bankruptcy.

The largest store closing surge is coming in two channels: drug chains and dollar stores. In addition to the Rite Aid closings, CVS is in the third year of its downsizing, totaling some 900 locations while Walgreen has shut 150 stores this year. These two chains will still continue to operate thousands of locations when these steps are finished.

In the dollar channel, Dollar Tree is closing about 600 of its Family Dollar locations and there could be some additional shuts in its parent company brand too. Rivals Dollar General and Five Below have not announced any closings but both are posting disappointing financial results leading to speculation that some stores will be shuttered. What’s interesting is the both big dollar companies – Dollar Tree and Dollar General – have also said they will be opening hundreds of stores this year and next, diminishing the overall impact of the closings.

Finally, you have relatively healthy retail chains that are closing stores, led by Macy’s which expects to eventually shut down about 150 locations in the next 36 months. Foot Locker, Best Buy and even Walmart and Target have announced small rounds of closings as well.

So, stores are closing but they are concentrated in the channels that are struggling. Macy’s is opening more small-format stores under both its namesake brand and Bloomingdale’s. In the off-price sector, TJX, Ross and Burlington are all opening a number of new stores under their various nameplates. And Aldi, Lidl and Trader Joe in the supermarket channel have new-store plans in place.

These expansion plans are all creating one of the tightest retail real estate markets in recent business history. So when you read the headlines about store closings make sure you read the small print, it’s a different story.