High-profile retailers are shuttering stores, but that doesn’t mean a broader ‘retailpocalypse’ is imminent

The trend: Several prominent retailers plan to significantly reduce their store counts this year.

• Gap Inc. aims to close roughly 350 stores, or about 43% of its North American Gap and Banana Republic locations, by year-end.
• Macy’s plans to announce 10 store closures this month as part of its plan to shutter 125 locations, about one-fifth of its fleet, over the next three years.
• Bed Bath & Beyond—which is reportedly in the early stages of planning for a chapter 11 bankruptcy filing—is in the midst of closing 150 stores, about 16% of its store count.
• Makeup brand Morphe is shuttering all of its 20 US stores.

Perception versus reality: Those store closures suggest an abrupt shift from the prevailing trend last year, when there were 5,103 major US store openings announced, compared with just 2,603 announced store closures, according to Coresight Research data reported in Insider. And they also could spark the resurgence of a narrative focused on the so-called retail apocalypse (or retailpocalyse)—when retailers such as Bon-Ton (parent company of merchants such as Carson Pirie Scott and The Boston Store), Toys R Us, JCPenney, and others closed thousands of stores. However, the reality is far more nuanced.

• Some are adjusting their store mix. While Gap closes many of its Gap and Banana Republic stores—particularly in malls that no longer generate strong foot traffic—it is on track to open 30 new Athleta stores and 10 Old Navy locations in fiscal 2022. Similarly, Macy’s is shifting away from some of its traditional on-mall locations, as it expands its off-mall small-format Market by Macy’s concept. It is also replacing some large Bloomingdale’s locations with smaller-format Bloomie’s stores.
• Others are dealing with idiosyncratic challenges. Bed Bath & Beyond faces self-inflicted wounds from former CEO Mark Tritton’s attempt to boost the company’s margins and differentiate its offerings by pivoting away from national brands and launching private labels. And Morphe is dealing with the aftermath of scandals that forced it to sever ties with the social media stars who helped it reach a $2 billion valuation.

At the same time, several retailers continue to expand their physical presences. For example, Five Below plans to open over 200 locations in fiscal 2023 and is also converting over 400 stores to its Five Beyond concept, which features higher-priced items, per Chain Store Age.

What’s really going on: As always, the retail landscape is changing. Malls are evolving, retailers are investing in experiential stores, and direct-to-consumer brands like Allbirds and Brooklinen are expanding their store counts.

• While the ratio of openings to closing may narrow, consumers continue to find value in physical stores.
• We expect physical stores will account for 84.2% of retail sales this year, down slightly from 85.3% last year.

The big takeaway: There are some serious challenges facing mid-tier retailers, which is evident as merchants such as Macy’s and Chico’s recently lowered their Q4 outlooks.

• Yet that doesn’t mean that we’re headed toward a large-scale shuttering of brick-and-mortar stores.

This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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