75,000 more stores need to close, UBS estimates, as online sales grow

Clothing retailers, consumer electronics companies and home furnishing businesses will need to close more stores across the U.S., as e-commerce sales continue to account for a larger portion of total retail sales, according to one investment firm.

UBS in a note to clients this week said that “store rationalization needs to accelerate meaningfully as online penetration continues to rise.” Assuming online sales’ share of total retail sales in the U.S. grows to 25% by 2026, from 16% today, roughly 75,000 more retail doors, excluding restaurants, need to close, analysts Jay Sole and Michael Lasser said. That means for every 100 basis-point (or 1%) increase in online penetration, roughly 8,000 to 8,500 stores need to close. A lot of that growth is being fueled by Amazon, which is expected to account for roughly half of the U.S. e-commerce market.

Within that 75,000 number, about 21,000 clothing stores, 10,000 consumer electronics stores, 8,000 home furnishing stores and 1,000 home improvement stores should close, UBS estimated, based on the firm’s assumed growth rates of online penetration within each retail sub-sector. It added about 7,000 grocery stores could close if online grocery penetration rises to 10%, from 2%, by 2026.

UBS also analyzed the productivity of stores across the country, which it said accelerated throughout 2018, based on the amount of sales made per store.

However, the firm said: “We believe this pace of store productivity improvement is unlikely to be sustained in 2019 as the boost from fiscal stimulus fades. … This will likely lead to an acceleration in physical store closures in the upcoming year.”

Already this year, more than 5,000 store closures have been announced by retailers across the country, according to a tracker by Coresight Research. That includes those by Gap, Victoria’s Secret, Charlotte Russe and Gymboree — notably many clothing companies.

Lasser and Sole also said, however, that as more stores close “it should help the store productivity of surviving locations.”

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