The graveyard of stores keeps growing.
At least four stores – from national names to locally owned places – are closing in the central San Joaquin Valley. More closures are happening nationwide at stores like Sears, Macy’s and CVS, and retail experts say more are coming.
So what gives? Why is this happening?
It seems like the closures are all happening at once because retailers wanted to eke out as much money as they could from the holiday season before closing.
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But there are several big-picture challenges driving the closures: All those predictions about online shopping hurting brick-and-mortar stores are coming true. Bargain hunters are increasingly turning to discounters and away from stores that have been household names for decades. And fast fashion stores like Forever 21 are also stealing young customers away from department stores.
It’s either evolve or die off.
Steve Jellinek, Morningstar Credit Ratings
But not all the stores mentioned here are in dire shape. The Ann Taylor chain and the Fresno Macy’s stores may be healthier than you think. And yet others – Sears and Kmart – may be worse off than you’d guess.
Here are the details on who is closing and why.
Ann Taylor at River Park is scheduled to close this weekend, but it’s not part of a big chain-wide closure. The discount Ann Taylor LOFT will remain open. River Park is already making plans for the soon-to-be empty space, but nothing has been finalized yet.
I’m not so worried about Macy’s as I am Sears and Kmart.
Steve Rontell, Colliers International
Sears hasn’t closed any locations in the Valley, despite announcing 58 closures nationwide in recent weeks. It’s owned by the same parent company as Kmart. Sales are slipping dramatically and the store recently sold off its popular Craftsman tools line.
One headline said it’s in a “death spiral,” and one analyst compared it to the sinking Titanic. More store closures would not be a surprise. But not everybody thinks things are that dire, with the manager of Manchester Center saying Sears tells him the store is one of their top-performing locations.
Macy’s recently announced 68 stores it plans to close, but none is in the Fresno area. The Macy’s Woman that closed last year was not part of that list. More closures are coming, however, as the retailer has said it wants to shut about 100 stores total. Holiday sales at Macy’s during November and December – when retailers usually rake in the big bucks – fell compared to the same time in 2015.
Asia Supermarket, the grocery store that took over the old Vons near Blackstone and Ashlan avenues, closed before it was open a year. It’s not clear why the store closed, but its original location on Tulare Avenue is still open.
Kohl’s closed 18 stores nationwide last May, none in Fresno. Its holiday sales also fell.
It’s worth noting that smaller mall-style stores close all the time. They’re quickly replaced with new retailers. That ebb and flow is a normal part of many malls and shopping centers.
But it’s the big boys who are in trouble here, especially department stores.
“The retail business has changed. Tastes changed, where people shop has changed,” says Edward Dittmer, vice president of Morningstar Credit Ratings, which monitors the health of retailers.
The weird part is that all of this is happening in the context of a holiday sales season that beat expectations and had the strongest rate of growth – 3.5 percent – since 2011, according to Conlumino, a New York retail research and analysis firm.
That seems puzzling until you realize online sales surged 17 percent this year, compared to 2.6 percent at physical stores.
The internet was the No. 1 place shoppers did their holiday shopping this year, with discount/value stores and departments stores lagging behind, according to information released by accounting firm Deloitte.
Amazon is the big player in online sales, announcing it saw a 200 percent increase in Cyber Monday sales in 2016, compared to 2015. It was also its “best-ever” year for devices like the Fire tablet and Amazon Echo.
“You definitely have the internet as the virtual department store. The need for brick and mortar today has become less and less,” says Steve Rontell, a retail broker with Colliers International who helps businesses and landlords lease or buy properties.
The country simply has too many stores, say some retail analysts.
Also, shoppers learned how to find the best deals during the recession. They are still streaming into stores like Nordstrom Rack, T.J. Maxx, Ross, Marshalls and dd’s DISCOUNTS. Discounters, including dollar stores, are healthy and growing while many department stores are not, Dittmer says.
“These full-line department stores are going to continue to struggle,” he says. “The discounters are really having an affect on them too.”
Stores like Forever 21 and H&M also take a bite out of department stores, noted Jeff Green of Phoenix-based retail consulting firm Jeff Green Partners. Those stores sell inexpensive clothes in styles that change quickly and appeal to younger shoppers. They are a contrast to the familiar older brands at department stores, such as Ralph Lauren and Polo that attract an older customer.
Kmart and Macy’s
Kmart in particular and Sears are bad shape. The stores are owned by the same company.
“It’s odd to see how far and how fast that company has fallen,” Dittmer says. “Sears is ... clearly in some distress. It’s hard to see how they’re going to turn that around at this point, and the Kmart division is in the same boat.”
Kmart has cut 26 percent of its stores since the end of 2015, Sears shut down 10 percent and there will be more, predicts a Morningstar report. Sears also is selling off one of the few things that differentiated it from competitors, its line of Craftsman tools.
Macy’s is in a different boat, particularly when it comes to the Fresno stores. The company has a challenging road ahead, according to a report by Conlumino CEO Neil Saunders.
One of Macy’s turnaround strategies is to open more Macy’s Backstage locations, which is essentially a Macy’s discount store within a regular store. A Macy’s spokeswoman declined to comment on the possibility of a Macy’s Backstage opening in the Valley and said the company had nothing more to share about the future of Central Valley stores.
Macy’s has a store in Visalia, a furniture store on Shaw Avenue in Fresno and two Macy’s department stores in Fresno. (The longtime Macy’s is in Fashion Fair mall, along with a separate Macy’s Men’s & Children’s store. The Macy’s in River Park took over the former Gottschalks space and carries different styles and merchandise.)
Though warnings by nation analysts sound dire, Rontell, the local retail broker, says the Valley is different.
Often big-name stores in the Valley are top performers in the chain, he says. That’s because the Fresno area is isolated, without lots of competition in nearby cities.
“We’re not real close to the Bay Area. It’s not like you’re in the East Bay and you’re going to go to San Francisco” to shop, he says.
The stores in Fresno each have their own set of shoppers, he says. Macy’s has also done a good job of luring bargain hunters with sales, coupons and Macy’s credit cards, he says. “I don’t see either one of them closing,” he says. “They really have hit the value-oriented button with a quality image.”