Store Closures — Led by Department Stores — Will Accelerate in 2023, UBS Says
After a relatively stable 2022, store closures are expected to pick up again in 2023 — and department stores will likely lead the way.
As retailers face challenges in traffic, sales and margins going into 2023, more retailers are likely to downsize their store fleets, according to a Dec. 13 note from UBS analyst Jay Sole. And department store closures are set to outpace the industry average next year. Between Q4 of 2019 and Q1 of 2021, the store count of department stores dropped 33%, Sole noted, though store counts remained relatively stable throughout 2022.
Now, as department stores like Nordstrom and Kohl’s anniversary their quarters of big store closures last year, sales growth is likely to take a hit, Sole said, adding that the lack of store closures in 2022 already contributed to weaker sales in the second half of 2022.
Macy’s in 2020 outlined a plan to close 125 stores in lower-tier malls by 2023. And in June, Morningstar analysts identified 10 Kohl’s properties that are set to expire before fiscal year 2023.
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But as of now, mass department store closures in 2023 have yet to be announced. In total, U.S. retailers have 522 planned closures and 1,846 planned openings for 2023, according to Friday data from Coresight Research. None of these closure announcements included department stores yet, as of Dec. 23.
In fact, Kohl’s in May announced a plan to open 100 new, smaller format stores in markets previously untapped by its physical presence over the next four years. And Nordstrom has at least six new Rack stores slated to open in 2023.
The stores with the most planned openings in 2023 live in the off-price and discount sector — Dollar General, Five Below and Family Dollar are all in the top five retailers with the most store openings slated for 2023, Coresight found.
As Sole noted, the off-price and luxury sectors both made significant additions to their store fleets in 2022.
“These trends are likely not good for department stores as both luxury companies as well as off-price retailers compete directly with department stores,” Sole wrote. “We expect department stores to close locations as challenges persist.”
