The Supply Side: Store openings in 2021 nearly double closures

by Kim Souza ([email protected]) 1,250 views 

Remember when retail stores were considered a thing of the past? Not anymore, according to Coresight Research, who said: “for the first time in four years, U.S. retailers will open more brick-and-mortar stores than they will close.”

Deborah Weinswig, CEO of Coresight, identified two forces that are driving the phoenix of physical retail, and both are rooted in the digital world. She explained that digital businesses now depend on physical stores, which they’ve learned are eager to ship from and make great places to pick up and return online purchases. She said physical stores also help fulfill e-commerce orders.

Through Nov. 28, Coresight reports American-based retail chains opened 4,361 more stores than they closed. Last year the sector closed 6,573 more stores than it opened. The National Retail Federation (NRF) said 2021 has been a “banner year for store openings.” The trade group’s research runs through the end of the third calendar quarter (Oct. 31).

NRF said retailers made roughly 5,725 store opening announcements this year, nearly double the 2,890-plus store closing announcements over the same period. The trade group said that change in momentum highlights retailers’ optimism and recognition of the importance and longer-term benefits of physical stores.

NRF CEO Matthew Shay said the lower number of store closings reflects several factors, including large numbers of actual closings in the past several years, especially when the pandemic hit in 2020 and U.S. retailers made more than 10,700 store closing announcements.

“A stimulus-driven rebound in consumer spending, pandemic-driven lease renegotiations and balance sheet restructuring have also helped keep the store closing numbers down,” Shay said.

DOLLAR STORES LEAD EXPANSION
The dollar store segment continues to lead new store openings with footprint expansions across the U.S. this year and beyond.

Goodlettsville, Tenn.-based Dollar General has opened 1,050 new stores in 2021, more than any other retailer. The retailer said it would have more than 18,200 total locations by the end of January. That includes 100 more of the Popshelf stores in 2022. The new concept store caters to higher-income households in suburban areas. Dollar General had 30 Popshelf stores in six states at the end of October. Texas is Dollar General’s next target for Popshelf stores, which are expected to debut by early spring.

Dollar Tree, which had 15,685 stores at the beginning of the fiscal year, plans to open 600 new stores under its two banners, Dollar Tree and Family Dollar, next year. Dollar Tree is raising prices after the first of the year on many items because of higher supply chain costs and inflationary pressures. Dollar Tree is turning to a model used by Five Below, a discount store that carries an assortment of general merchandise mostly priced below $5.

Five Below, led by former Walmart.com executive Joel Anderson, said the company will open between 170 and 175 new stores this year, giving it nearly 1,200 locations. Anderson said the more extended-term target is 2,500 stores across the U.S. over the next five years.

OFF-PRICE GROWTH
While the dollar store segment has claimed the lion’s share of the new store openings, the off-price segment is also eager to expand its footprint.

TJX, the off-price leader in terms of market share and sales, announced 120-plus new stores this year to give the retailer that owns the banners TJ Maxx, Marshall’s and HomeGoods more than 4,572 locations in the U.S. and Puerto Rico.

Burlington added 100 new stores on a base of 761 this year, and it’s also downsizing the store size to be more similar to TJ Maxx. The store expansion came on the heels of the company shuttering its online business in early 2021.

Laurie Hummel, senior vice president and general merchandise manager at Burlington, said the retailer’s decision to shutter the online business made sense given the model deals in closeouts and operates on lower margins. She said the cost of fulfillment, final-mile delivery and returns was too costly. With money saved by shuttering e-commerce, Burlington plans to open another 100 stores over the next year. The company plans to grow its store count to 2,000 over the next few years.

This year, Ross Stores added 45 new namesake stores and 20 DD’s Discounts locations, giving the retailer roughly 1,860 stores. Ross CEO Barbara Rentler said the company is back to its pre-pandemic plans to open about 100 new stores each year on the path to 3,000.

AUTO PARTS & OTHERS
Auto parts stores are also growing physical footprints, with AutoZone adding 200 new U.S. sites giving it more than 6,700 locations. According to the NRF report, O’Reilly is planning a net 165 to 175 stores on top of 5,616, and Advance Auto Parts expects to open 80 to 120 new stores on a base of 4,800-plus.

Digitally native retailer Warby Parker is opening 35 store locations this year, giving the eyewear retailer a store base of 160 sites. Fabletics added 24 new stores to its base of 50, and home goods banner Parachute opened 20 new stores, giving it 30 in all. Raymond James analysts expect the trend to continue the next couple of years as more online retailers tip-toe into brick-and-mortar to allow for an omnichannel shopping experience.

Online retail giant Amazon also recently announced plans to open small department stores in California and Ohio. The locations will be about 30,000 square feet and roughly one-third of a size of a traditional department store. Amazon has not provided any additional information on this upcoming pilot. Home good e-tailer Wayfair also said it will open three stores in 2022.

CLOSURES SLOW
The onslaught of retail closures seen in recent years has slowed dramatically this year. Department stores and mall-based stores are among the most brutal hit in recent years.

Macy’s continues to close 125 underperforming stores by 2023. About 45 of those occurred in 2021, leaving 60 remaining closures. Macy’s said 10 of those will happen in January.

NRF said nine retailers had announced 100 or more store closings this year, including Christopher & Banks, which filed Chapter 11 in January and subsequently said it would close all 449 stores in 44 states. Foot Locker plans to close 345 of its 2,950-plus stores, and Francesca’s, which filed Chapter 11 in December 2020, said in January 2021, it would close half of its 550 stores. American Eagle Outfitter is shutting 225 of its 880 U.S. stores by 2023.

Specialty chains were also hit hard. Disney closed 60 U.S. stores in 2021, and Bed Bath & Beyond shuttered 43 stores. Children’s Place closed 122 stores this year, completing the 300-closure goal announced at the end of 2020.

CVS announced plans to shutter nearly 900 locations over the next three years. The retailer said the closures relate to more online sales since the pandemic.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.