Retailers Now Opening More Stores Than They're Closing

U.S. retailers have announced more store openings than closures so far this year: 3,199 openings versus 2,548 closings, according to retail data specialist Coresight Research. If the trend holds throughout the year, that will represent a complete turnabout from 2020, when the coronavirus pandemic and other factors drove more than 8,950 closures but only a shade less than 3,300 openings nationwide.

There are a number of reasons some retailers are eager to jump back into the game, CNBC reports, including the fact that not all brands suffered during the pandemic, that retailers want to test new concepts post-pandemic and that a surfeit of vacant retail space means there are deals to be had when it comes to rent and concessions.

“There’s more space available, and we’re able to get better terms today than two years ago,” Fabletics CEO Adam Goldenberg told CNBC.

After the massive number of retail closures last year, a record 159M SF of retail space came on the market, pushing the U.S. average retail vacancy to 5.7% this year, the highest rate since 2015, Forbes reports, citing CoStar data. Also, average retail rents fell 0.7% in 2020 compared with 2019.

One retailer that never quit opening stores during the pandemic, and which will not stop now, is Dollar General. The discounter, which has more than 17,100 stores nationwide, opened about 1,000 new stores in its fiscal 2020 (ended Jan. 29) and closed only about 100. 

Dollar General's growth has been buoyed by strong returns, as consumers buffeted by last year's economic maelstrom sought cheaper goods. Its net sales increased 21.6% to $33.7B in fiscal 2020, compared to $27.8B in fiscal 2019, while same-store sales grew 16.3% year-over-year in 2020. Operating profit for fiscal 2020 grew 54.4% to $3.6B compared to $2.3B a year earlier.

"The company believes consumer behavior driven by Covid-19 had a significant positive effect on net sales and same-store sales," Dollar General said in a statement regarding its fourth-quarter results. The company plans to open more than 1,000 new stores in 2021 as well and sell more fresh and frozen food in its stores.  

Retail was also marked by a number of major bankruptcies in 2020, and while many of those were pandemic-related, others were at least partly strategic in nature, according to a new report by Fitch Ratings. The goal in those cases was to reduce debt and get out of leases, rather than liquidate completely.

"In these cases, capital structures were untenable and a default may have occurred over the medium term," Fitch Director Judah Gross said in a statement. "Examples of this trend include Tailored Brands and Ascena."

Even so, Fitch reported, liquidation was the fate of many retailers last year. Nearly half of retail and supermarket bankruptcies were resolved that way, the company found, compared with 11% for corporate bankruptcies in general.