Store closures, bankruptcies hit 12 area retailers

Tumbling like a line of dominoes, retailer after retailer has been hit by bankruptcies and store closures this year.

About a dozen chain stores have closed locations in the Fresno area or face an uncertain future as they wade through bankruptcy proceedings.

There are different reasons behind the gloomy news, ranging from lingering effects of the recession to even a little finger pointing at skinny jeans (more on that in a minute).

See the breakout at the end of this story for the status of stores in the Fresno-Visalia area facing bankruptcy or closure and the specific challenges that are dragging them down.

The shrinking middle class

The No. 1 reason these financial difficulties are happening is that people simply have less money to spend, said Howard Davidowitz, chairman of New York-based Davidowitz & Associates, a national retail consulting and investment banking firm.

“Our economy is growing very slowly and the middle class in America has been crushed,” he said.

Even though jobless rates are down and the economy is improving by several measures, people still are working fewer hours than they were before the recession. And household incomes are falling, with the median income in 2014 dropping 13 percent from 2004 levels, according to a report by the Pew Charitable Trusts.

All that means less money in people’s pockets to spend on clothing and sporting goods.

Families are shifting their spending to stores like T.J. Maxx and Ross, while stores like Macy’s, Nordstrom and Kohl’s are hurting, Davidowitz said.

“Most people’s lives are tougher,” he says. “They’re shopping for needs, not wants.”

Tastes change

In years past, teens and young people flocked to malls and spent much of their money on clothes.

That’s changing.

Teens in particular have other priorities, Davidowitz said.

“Their two biggest priorities are their iPhones and their sneakers – not a new sweater,” he said.

Bill Rice, a Fresno State marketing professor who also runs a business-consulting company, says he used to see a wider variety of clothing in his classes. Now he notices the iPhones.

“It’s amazing to me that having the latest electronic gadget is more important than having good-looking clothes,” he said.

Those changing tastes have hit mall retailers hard, with stores like Aeropostale and PacSun going bankrupt, Gap closing its Fashion Fair store and Wet Seal closing its plus-size stores in the Valley.

One Washington Post story even blamed the problem on skinny jeans. It said female shoppers already have the jeans and the knee-high boots and loose tops worn with them in their closets.

New fashions haven’t caught on enough to convince them to buy new styles. But some retail experts scoff at that idea, noting that flared jeans are becoming popular again.

And it’s worth noting that some retail experts say all these bankruptcies and store closures are normal for this time of the year. Retailers take stock after the flush holiday season, with 45% of closures happening during the first three months of the year, said Jesse Tron, spokesman for the International Council of Shopping Centers.

“When you have high-profile brand names, it seems like it’s a lot more,” he said. “I don’t think it’s going to be drastically different than what we’ve seen over the last few years.”

In fact, retail sales rose 3.5% in April.

And there won’t be any abandoned storefronts at malls, he said. Plenty of mall retailers are waiting in the wings, with Victoria’s Secret expanding into the space Gap left behind at Fashion Fair and other spaces already filled.

Competition

Competition plays a role in all this, too. Sports Authority’s woes, for example, were blamed on competition from Dick’s Sporting Goods and niche sportswear sellers like Lululemon and Athleta.

So called “fast fashion” stores such as Forever 21 and H&M have lured shoppers away from other clothing stores. Young shoppers are attracted by the two stores’ stocking new looks every time they visit and the rock-bottom prices.

And competition from online stores has played a big role, too. Amazon has won shoppers over with its one-click ordering and same-day delivery (and reportedly plans to roll out its own private label brand of food and vitamins). And people routinely compare prices on their phones.

“The issue is that we built brick-and-mortar stores 10 to 15 years ago without understanding where the Internet is going to go,” Rice said.

Or, as Davidowitz puts it: “We have too many stores.”

Now companies are trimming the fat, often viewed as a smart financial move in the industry.

A lot of the bankruptcies and closures are happening now because retailers have spent the years since the recession adjusting to shoppers’ new thrifty habits. Now that they’ve tried all their other options, it’s time for the more serious ones, Davidowitz says.

As for bankruptcies, in the past many retailers could emerge a more healthy company

“It’s now hitting the fan and the growth has slowed down in America,” he said.

In the past, retailers often survived Chapter 11 bankruptcy – which is a reorganization instead of a liquidation – and Macy’s, Kmart and Eddie Bauer have all done so.

But in today’s climate, things are different, Davidowitz said. Anna’s, RadioShack and Linens ‘n Things all hoped to emerge from bankruptcy alive, but didn’t.

“There are people who have survived, but the odds are against them,” he said.

 

Aeropostale

Status: Bankrupt but open. Has discount stores in Fashion Fair, Merced Mall and Tulare Outlets, plus a store in Visalia Mall.

What is it: Teen store selling casual clothing.

Why: Shrinking sales as competition takes a bite out of business and teens shop elsewhere. Has millions of dollars in debt.

 

Sports Authority

Status: Bankrupt and closing all its 450-plus stores nationwide.

What is it: Large chain of sporting goods stores.

Why: The company has $1 billion in debt, issues with suppliers and stiff competition from the internet and Dick’s Sporting Goods, all of which played a role in its demise. Sports Authority gave up trying to emerge from bankruptcy after failing to find a buyer.

 

Gap

Status: Fashion Fair’s Gap and Gap kids store closed in January. One store remains at the Tulare Outlets.

What is it: Mall store selling classic, casual clothing for adults and kids.

Why: The company is closing 175 stores as it faces competition from fast fashion stores like Forever 21 and H&M. With 800 Gap stores left, experts say there are simply too many locations. Sister stores Old Navy and Banana Republic sales are slipping, too.

 

Ethan Allen

Status: North Blackstone location closing soon.

What is it: Upscale furniture store.

Why: The people who run the Fresno store want to retire, but also cite the economy. The parent company appears healthy.

 

Urban Outfitters

Status: Fashion Fair store switched to an outlet store before closing last year.

What is it: Teen and 20-something clothing store with some gifts and home goods.

Why: The chain has been a bit wobbly, facing competition from Forever 21 and H&M. But overall, experts seem to believe the company (which also owns Anthropologie) is successfully turning itself around.

 

Kmart

Status: Two Kmart stores are closing in Tulare and Dinuba.

What is it: Discount retailer owned by Sears Holdings Corp.

Why: Sales are plunging, stores are closing and “the end is near,” say several analysts.

 

Frederick’s of Hollywood

Status: All stores closed. Sells only via website.

What is it: Racy version of Victoria’s Secret.

Why: Maybe sex doesn’t sell when people are cash-strapped or hit up Victoria’s Secret first.

 

PacSun

Status: Bankrupt, but Fashion Fair and Tulare Outlets stores are open.

What is it: Surf, skate clothing brand for teens and 20-somethings.

Why: Debt and high rent have hurt the retailer, along with online shopping and fast fashion stores.

 

Hancock Fabrics

Status: Bankrupt and all 255 stores in midst of going-out-of-business sales.

What is it: Fabric and sewing and craft supply store.

Why: More people buy fabric online, fewer people making their own clothes. The retailer struggled with pension and retirement costs.

 

Wet Seal

Status: Bankrupt. Experimental plus size stores in Valley closed last year. Stores at Fashion Fair, River Park, Visalia Mall and Hanford mall still open.

What is it: Contemporary mall clothing store for 18- to 24-year-olds.

Why: The out-of-touch retailer filed for bankruptcy and closed 338 stores a little over a year ago. Its turnaround plan looks promising.

 

Quiksilver

Status: Closed its Fashion Fair store a while ago.

What is it: Surf and skate clothing store.

Why: Quiksilver is emerging from bankruptcy after a Chapter 11 reorganization.

 

Sport Chalet

Status: Bankrupt with all stores closing soon, including Visalia location. Online sales halted.

What is it: A medium-sized chain of sporting good stores.

Why: Competition from online retailers, difficulties switching to different software and unusually warm weather in Northeast that hurt winter gear sales.

This story was originally published May 27, 2016 at 12:00 PM with the headline "Store closures, bankruptcies hit 12 area retailers."