Former Macy’s CEO Terry Lundgren told CNBC that retail store closures could continue into 2021 as disruption persists. While the holidays will remain a bright spot in an otherwise difficult year, Lundgren expects the following months to be a challenging period for the industry — though the survivors will have a chance to thrive in the aftermath.
More than 11,000 stores have closed in 2020, totaling nearly 150 million square feet of retail space, according to data from real estate firm CoStar Group. The firm also reported 40 major bankruptcies across the industry, with Francesca’s and Guitar Center among the most recent victims (although Guitar Center is planning to exit Chapter 11 by the end of December 2020). Lundgren believes this trend will continue through the new year.
“Retailers who have a weak balance sheet today aren’t going to get relief in January,” said Lundgren in an interview with CNBC. “It’s going to get tougher. When the volume of purchases drops dramatically after Christmas, the expenses remain.”
Small independent retailers and larger companies in poor economic positions will be hit hardest by the pressures of the lingering pandemic, according to Lundgren. However, he expects well-positioned retailers with a brick-and-mortar presence to thrive in the second half of 2021. Lundgren noted that the U.S. has been “an over-stored country for more than a decade,” and that a smaller overall retail footprint will create space for successful companies to open more stores.
“They’re actually going to have an opportunity to grow again,” said Lundgren. “That’s the upside, the green shoots, from that perspective of store closures.”