The 2024 holiday season saw a rise in retail spending due to an increase in consumer confidence and positive macroeconomic factors. However, according to the recently released Store Tracker by Coresight Research, there is some concerning news.
In the next year, it is estimated that there will be three times as many retail closures as openings. The analysts at Coresight predict that approximately 15,000 stores will close while only 5,800 new stores will open in the United States.
Despite this negative outlook for retailers, there are still some positive factors at play. The U.S. economy is expected to become more resilient with low interest rates and a strong labor market leading to optimism for increased retail spending in 2025.
However, retailers also face challenges from competitors such as cross-border e-commerce players like Shein and Temu who pose fierce competition. Inflation concerns may also impact lower-income consumers with CPI and PCE inflation predicted to remain above 2% in the coming year.
Additionally, changes in consumer preferences towards services over goods could lead to a rebalancing of discretionary spending which may negatively affect certain sectors within retail.
When looking specifically at different sectors within retail:
– Apparel: While this sector has seen store closures (Kohl’s and Macy’s), it has also experienced store openings particularly among off-price retailers.
– Department Stores: This sector has been impacted by both closures (Kohl’s) and mergers (JCPenney). Inflationary pressures have led consumers towards alternative formats.
– Discount Stores: These types of stores are expected to see long-term growth despite recent closures due mainly company-specific reasons.
– Drug Stores: Retail pharmacies have faced challenges from changing consumer preferences but potential store closings could result in “pharmacy deserts” benefiting national merchants like Costco or Walmart along with regional chains such as Kroger or Publix.
– Home-related categories: Sales for home goods, furniture, and appliances have been subdued due to a slower housing market. However, with an expected increase in home sales in 2025 there may be more demand for big-ticket items.
Overall, the retail industry is facing some challenges but certain sectors are still expected to see growth and opportunities for retailers remain despite the closures predicted by Coresight Research’s Store Tracker.
