Downfall of Sears, Toys ‘R’ Including Jobs Slashed At Ikea Gives Lift to Retail’s Survivors (#GotBitcoin?)
As millions of Americans flock to stores on Thanksgiving evening and Black Friday, some will be making fewer stops after the drumbeat of retail closings this year. Gone are hundreds of Toys “R” Us, Sears and Bon-Ton department stores.
Thousands of stores have closed this year, but that’s good news for other chains chasing Black Friday shoppers.
The disruption is delivering a silver lining to surviving chains, which are picking up business from displaced shoppers hunting for new places to find deals on toys, washing machines and clothes.
“The shakeout in the retail space has been ongoing for many years,” Best Buy Co. Chief Executive Hubert Joly said this week. “We see an increasing difference between the winners and losers.”
U.S. retailers have announced the closure of 5,468 stores this year through Nov. 16, according to Coresight Research. That compares with 6,765 closures during the same period in 2017, when familiar names like RadioShack and The Limited disappeared from American cities.
Retailers from department-store chain Macy’s Inc. to electronics specialist Best Buy Co. all pointed to the closing of competitors as one reason for the lift in their recent quarterly sales—and an opportunity to capture new spending this holiday season.
To capture market share as Sears and others retreat, Best Buy said it has been expanding its appliances and improving its ability to deliver such products to homes. This year Best Buy also sent out toy catalogs and boosted its assortment of Barbies and Lego sets to win over shoppers that used to visit Toys “R” Us for holiday gifts. The big-box toy chain liquidated its U.S. business earlier this year, closing 881 stores.
“Whenever I go Black Friday shopping Toys ’R’ Us was at the top of my list,” said Maxine Dalada, 31, a technology consultant in Sacramento, Calif.
“My kids and I talked about it,” said the mother of two boys. “I had to say ‘Listen, we don’t have a store like that anymore.’ It’s going to have to be Walmart or Target.”
Macy’s said its Midwestern stores are getting a sales lift from the failure of Bon-Ton Stores , a regional chain that filed for bankruptcy and closed all its locations earlier this year. Macy’s CEO Jeff Gennette said the company is targeting Bon-Ton shoppers with its marketing and hiring former Bon-Ton store managers and sales associates.
“We believe approximately one-third of our store base is being favorably affected by department-store-competitor store closings,” Bruce Besanko, the finance chief of Kohl’s Corp. , told analysts on Tuesday when the company reported rising sales.
Even J.C. Penney Co. , which has been struggling with losses and falling sales, said it was picking up business from the demise of Babies “R” Us, which was part of Toys “R” Us. In a direct challenge to Sears, J.C. Penney reintroduced appliances two years ago, after exiting the category in 1983.
Speaking of J.C. Penney…
Landlords Relish—or Fear—J.C. Penney Store Closings
Some mall owners seek better-paying tenants, while others consider rent cuts or other incentives.
No one knows how many stores the struggling J.C. Penney Co. may shut this year. But landlords aren’t waiting around to find out if theirs will be among the closures.
Property owners of vibrant malls are already seeking better-paying tenants, while the less successful ones are considering rent cuts or other incentives if they fear a new anchor tenant would be tough to land, landlords and analysts say.
Sales have been falling at J.C. Penney, which has more than 860 stores in shopping centers across the U.S. and Puerto Rico. The Plano, Texas-based company said earlier this month that it is closing three stores and is evaluating closing more. It expects to announce details at the end of February when it reports its financial results.
Real-estate executives said J.C. Penney could announce as few as 20 or as many as 200 stores will close. Shopping center owners will also be assessing how sustainable the company’s plan is for the remaining stores.
“All of them are expecting these conversations,” said Andrew Graiser, co-president of A&G Realty Partners, a real-estate advisory firm that works with retailers.
If J.C. Penney moves aggressively, it would be the second major department store to carry out widespread closings in recent months. Since Sears Holdings Corp. filed for bankruptcy protection in October, it said it would close around 260 stores.
U.S. store closures this month have outpaced openings, extending the recent trend. As of Jan. 25, U.S. retailers have announced 1,674 store closings and 1,380 store openings in 2019, according to Coresight Research.
Children’s apparel retailer Gymboree Group Inc. filed for bankruptcy protection this month and plans to close around 800 stores, while Green Bay, Wis.-based Shopko Stores Operating Co. filed for bankruptcy and said it would close more than a hundred stores this spring.
Larger stores are among the most vulnerable. J.C. Penney said it prefers stores between 70,000 and 90,000 square feet, a sweet spot that enables it to display all its merchandise without having excess space, say property executives who spoke with the retailer. Some stores are as big as 150,000 square feet.
As with Sears, landlords are welcoming or dreading a J.C. Penney closing based primarily on how likely they are to find a preferable replacement.
Those with better-located shopping centers are eager for J.C. Penney (and its decades-old leases) to exit so they can attract higher-paying tenants. J.C. Penney pays as little as $3 a square foot in gross rent. Landlords say that they can get more than four times the rent for some of the spaces.
Others plan to redevelop their malls. In the Philadelphia area, Simon Property Group is planning to build an outdoor plaza, residences, a hotel and an office building in the King of Prussia Mall, which had a J.C. Penney store that closed in 2017.
At Natick Mall near Boston, landlord GGP Inc., which was recently taken over by Brookfield Property Partners, secured a grocery tenant for a space that formerly housed a J.C. Penney store. Wegmans Food Markets Inc. opened a store there last April.
“The building shells are more valuable in that they offer opportunity, and are very adaptable to a variety of uses,” said Angelo Carusi, a principal at architecture firm Cooper Carry.
But owners of struggling malls are considering rent reductions to keep the chain from leaving. The department store’s departure could also allow other mall tenants to seek rent concessions or close their stores before their leases end without penalty.
“It might be less expensive and more economical to keep a department store,” said David Berliner, restructuring and turnaround services partner at BDO USA LLP, an audit, tax and advisory firm.
While the shift to online shopping has had an effect, so have long-simmering competitive factors. Department stores, for instance, have been losing ground to fast-fashion retailers and discount chains for three decades. And even before the rise of Amazon.com Inc., a heavily indebted Toys “R” Us was struggling to hold its ground against Walmart Inc. and Target Corp.
Despite the thousands of store closures in recent years, there are still too many brick-and-mortar stores in America, according to some retail executives, landlords and analysts. The U.S. has 23.6 square feet of retail space per capita, compared with 2.7 square feet for Europe, according to the International Council of Shopping Centers.
Gap Inc. CEO Art Peck said he is looking at whether to close hundreds of Gap stores in locations that don’t generate enough profits or foot traffic. He said some had deteriorated to the point where they were hurting the brand’s image.
“It’s my strong belief that we’ve kicked the can down the road on this,” Mr. Peck told investors on Tuesday, “and offered a deteriorating customer experience, and it does have a negative effect on the health of the brand.”
Sears Holdings Corp. , which has closed hundreds of Sears and Kmarts in recent years, is liquidating about 200 more this holiday season after the long-struggling department store chain filed for bankruptcy protection in October. Earlier this year, Best Buy closed all 250 of its mobile-phone stores in the U.S., saying the smartphone market had matured and the smaller formats were more expensive to operate than its big boxes.
Even as some chains have shut stores, others have opened them. So the net loss of capacity has been much less. According to Coresight, U.S. chains have announced 3,060 store openings so far this year in addition to 3,408 openings in 2017.
Dollar General Corp. has plans to open 900 stores this fiscal year. Other retailers that are expanding include Dollar Tree Stores Inc., supermarket chain Aldi, teen-retailer Five Below Inc., and Ulta Beauty Inc.
“It’s about having an equilibrium between closures and openings, and we are starting to see that gap close a bit,” said Michael Brown, a partner in consulting firm A.T. Kearney’s consumer products and retail practice.
Not all retailers will benefit from the demise of competitors. Some experts are predicting a shakeout among chains adding toys to their lineup such as sporting-goods retailers and grocery stores.
“Consumers need to think of the retailer as an expert in the category for the share gains to be sustainable,” said Rod Sides, the leader of Deloitte LLP’s retail consulting practice. “It’s likely some of the chains jumping into toys this year won’t be there next year.”
IKEA To Slash Thousands of Jobs in Restructuring
Swedish furniture giant is grappling with changing shopper behavior.
IKEA, in its most dramatic restructuring ever, is slashing thousands of jobs and creating new ones as the furniture giant scrambles to cope with fast-changing shopper behavior that has hammered brick-and mortar retailers globally.
The Swedish flat-pack giant on Wednesday said it would cut 7,500 jobs mainly focused on office-based work like communications, human resources and administrative functions. At the same time, it plans to open 30 new stores in city centers, and invest in delivery and digital, creating 11,500 new jobs over the next two years. IKEA employs about 160,000 staff.
“The retail landscape is transforming at a scale and pace we’ve never seen before,” said Chief Executive Jesper Brodin.
The restructuring is a rare event for IKEA, which has so far appeared largely immune from the troubles that have hurt big department stores and shopping malls. The last time it cut a large number of jobs was during the financial crisis.
Retailers selling clothing, homeware, digital appliances, toys and even food have struggled to make up for few visitors to their stores as customers increasingly prefer the bargains and convenience of shopping online. Once indomitable retailers like Sears and Toys “R” Us have been felled by the shift.
Tolga Öncü, IKEA’s head of retail, said in an interview that the job cuts would cut red tape and speed up decision making. He said the new jobs would be focused on enhancing IKEA’s online and delivery offerings as well as the in-store experience.
“So far as we can recall we haven’t had this before,” he said of the restructuring. “We do it because we want to secure IKEA for the future.”
Mr. Öncü said growth in the number of customers visiting its existing stores has stalled, prompting IKEA to change how they look.
The company’s research has shown that 80% of customers research their planned purchases online before visiting a store. In response, IKEA is cutting the number of products it displays, freeing up space for more mocked up living rooms and bedrooms. Mr. Öncü hopes the change will motivate more customers to visit stores.
IKEA plans to open its biggest city-center store to date in Paris in the spring at 5,000 square meters. It also intends to eventually open a city-center store in New York, but this is still at the exploratory stage. If New Yorkers take to the concept, IKEA plans roll out similar stories in cities such as Washington, D.C., Los Angeles and San Francisco, Mr. Öncü said.
Founded in 1943, IKEA initially sold pens, wallets, table runners, watches and nylon stockings. Over the years, it evolved into the world’s largest furniture retailer, selling sleek Scandinavian designs relatively inexpensively and in easy to transport flat packs.
The company has for decades followed a successful model of opening sprawling, out-of-town stores that act as showrooms, storage depots and restaurants. IKEA opened its first 72,000-square-foot store in 1958 in the Swedish village of Älmhult, discovering that people were prepared to travel long distances to visit the shop.
More recently, the company has said that 70% of the world’s population will live in cities by 2050, forcing it to rethink its decades-old strategy. IKEA has tried to make its furniture accessible to more people, opening centrally located stores and click-and-collect sites, improving delivery and rolling out websites in more countries. Last year it bought online marketplace TaskRabbit to make it easier for customers to assemble its shelves, sofas and beds. It has also said it would test selling its furniture on third-party websites.
“We see of course that the world around us is changing and we want to be part of that,” said Mr. Öncü.
Last month, IKEA reported its retail sales for the financial year of €34.8 billion ($39.69 billion), up just slightly from the €34.1 billion it reported the prior year.
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