Downfall of Sears, Toys ‘R’ Us Gives Lift to Retail’s Survivors (#GotBitcoin?)
Gone are hundreds of Toys “R” Us, Sears and Bon-Ton department stores. Downfall of Sears, Toys ‘R’ Us Gives Lift to Retail’s Survivors
Thousands of stores have closed this year, but that’s good news for other chains chasing Black Friday shoppers.
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.
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.
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.”
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