Coresight Research estimates there will be another wave of store closures by 2025 as legacy companies face relentless competition.
Continuous eruption of US store closures expected to continue in 2025 as legacy companies face relentless competition from eCommerce platforms Shein and Temu.
Coresight Research, a retail and technology firm, estimates that foreclosures will rise to 15,000 by 2025. The company also plans to open about 5,800 stores nationwide this year, but it is leading to a net loss.
With a wave of bankruptcies and closings announced in 2024 at major companies such as Big Lots, Party City, and recent announcements from Kohl’s and Macy’s extending into 2025, Coresight Research estimates that more than 1,900 store closings are expected by the second week of 2025.
To put this in perspective, 7,323 stores closed in 2024, marking the highest number of closures since 2020, when nearly 10,000 stores closed, according to Coresight Research.
It was a nearly 60% increase compared to the same 52-week period in 2023.
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John Mercer, head of international research at Coresight, told FOX Business that the same problems plaguing the industry in 2024 will continue, “mainly competitive pressures” from fashion platforms that have increased dramatically in recent years as inflation-adjusted consumers increase their cheap prices. .
Shein and Temu offer a range of products and clothing at affordable prices. Companies face criticism regarding labor practices, environmental concerns, and business ethics such as intellectual property violations.
Sales and store closing signs at the Macy’s store in the Brooklyn neighborhood of New York, US, on Tuesday, Jan. 14, 2025. (Yuki Iwamura/Bloomberg via Getty Images/Getty Images)
Still, people continue to shop on platforms, making them a threat to US retailers.
“We think Temu and Shein together globally are a $100 billion threat to retailers,” Mercer said. “We think they made about $100 billion in revenue globally last year. Most of that is going to be taken from vendors that are dying… take sales, take market share at their expense,” Mercer continued.
Coresight believes that “the threat from Temu and Shein is an unknown pressure on many retailers” and that “there is little prospect of that competitive pressure abating,” according to Mercer.
Another factor influencing their ratings is the coming period of “policy disruption,” according to Mercer.
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“We are not sure what will happen with the tariffs. We are not sure how the prices will affect the prices of the stores, the domestic consumers and how the consumers will react to that,” he said.
Mercer said the risk of the tax is that “you end up with inflation.”
A shopper walks into a Party City store in Richmond, California, US, on Thursday, Dec. 26, 2024. (David Paul Morris/Bloomberg via Getty Images/Getty Images)
“We saw how badly US consumers reacted last time when the currency went up. The risk is that we get more inflation and consumers react the same way again,” he added.
Taxes aside, positive trends in Coresight Research’s consumer sentiment metrics and growing economic indicators suggest consumer demand could be reasonably strong, according to Mercer. But even if the demand is strong, “the danger for the sellers is that, as I said, the demand of the buyers, is going to the new players.”
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Coresight Research CEO Deborah Weinswig said in a statement that inflation coupled with “a growing preference among consumers to shop online for cheaper deals” has hurt many brick-and-mortar retailers in the past year.
For sale signs outside a Macy’s store in the Brooklyn neighborhood of New York, US, on Tuesday, Jan. 14, 2025. (Yuki Iwamura/Bloomberg via Getty Images/Getty Images)
Several brands were hit, including American Freight, which announced it was closing all 329 of its locations as part of its parent company’s bankruptcy proceedings, and Big Lots filed for bankruptcy. Chapter 11 bankruptcy security in September to facilitate the sale of “substantially all” of its assets to “horse bidder” Nexus Capital Management. It also announced plans to permanently close a number of stores.
Macy’s also began closing locations as part of a turnaround strategy announced in February 2024. The CEO, Tony Spring, told analysts during a recent earnings call that the company now expects to close about 65 locations this year, up from its previous forecast of 50 announced. at the beginning of the year.
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Party City, with 738 expected closings, and Big Lots, with 661 expected closings, lead the pack for closings so far this year. 7-Eleven is not far behind with 333 expected closings.
Coresight also tracked the expected closings of Aldi, CVS Health, Dollar General, Dollar Tree, Family Dollar, Five Below, JD Sports, Kohl’s, Macy’s, The TJX Companies and Walgreens Boots Alliance.
However, many of the mentioned companies open locations at the same time throughout the year.
Mercer said it is important to note that there are three phases to the closure of stores. Sometimes the merchants may close all the shops because they are selling their goods. There are also distressed retailers who are reorganizing and closing stores, but not all.
A third type of closure is when estate agents realize they need to reshape their properties to better respond to changing consumer preferences.