Edited By Alain Sherter
/ CBS News
Dom's Kitchen, Foxtrot abruptly close
The retail industry is going through a tough time as it copes with inflation-weary consumers and a rash of bankruptcies, prompting chains to announce the closures of almost 3,200 brick-and-mortar stores so far in 2024, according to a new analysis.
That's a 24% increase from a year ago, according to a report from retail data provider CoreSight, which tracks store closures and openings across the U.S. Although some retailers are planning to expand this year, major chains have announced 4% fewer openings compared with a year earlier, the analysis found.
Blame changing consumer habits, as well as retailers' management struggles and bankruptcies, with the latter impacting companies including Rite Aid and Rue21. The largest number of store closures stems from Dollar Tree's announcement earlier this year that it plans to close more than 600 Family Dollar locations this year, with the discount store citing the impact of inflation on its customers as well as an increase in shoplifting.
"A lot of this year's closures are related to bankruptcies of chains that have been in trouble for a while, like Rite Aid and Rue21," Neil Saunders, managing director of GlobalData, told CBS Moneywatch. "We're also seeing several retailers, like Family Dollar, take action to weed out unperforming locations."
Although consumer spending has remained solid this year, there are "pockets of softness creeping in, and retailers want to ensure they are in good financial shape to weather any challenges" Saunders added. "That means optimizing store portfolios."
Brick-and-mortar retailers are also struggling with ongoing competition from online rivals such as Amazon.com.
By contrast, some companies blundered strategically, such as Express, which filed for bankruptcy last month and announced plans to close 100 of its 500 locations. The clothing chain, known for its workplace fashion, failed to connect with consumers after the pandemic ushered in working from home, Saunders said.
That put the company "firmly on the wrong side of trends and, in our view, the chain made too little effort to adapt," he said in a recent research note.
Are consumers cutting back?
Recent data shows that Americans are still opening their wallets. Consumer spending in March rose 0.8% (the most recent data available), which economists say represents solid growth.
But some signs consumers are starting to fade amid a modest economic slowdown. On Friday, the University of Michigan's Surveys of Consumer sentiment index for May dropped to 67.4, the largest monthly decline since mid-2021. Confidence is dipping because of expectations for higher inflation and softer growth, said Jeffrey Roach, chief economist for LPL Financial, in an email.
"Uncertainty about the inflation path could suppress consumer spending in the coming months," he noted.
Consumers have also spent down any remaining extra money they socked away during the pandemic, when federal stimulus checks and other benefits bolstered their bank accounts, Roach said in an earlier report.
"[T]here are potential risks to consumer spending," he said. "When households exhaust these accumulated savings, it could lead to a decline in discretionary spending."
Even so, some retailers are planning to open hundreds of new stores, CoreSight found. Dollar General, a rival of Dollar Tree, said it will add more than 800 locations this year, putting it at the top of the list of retailers opening new stores this year, according to the research firm.
In second place is 7-Eleven, which plans to open more than 270 U.S. locations this year, followed by discount store Five Below, with plans to open 227 outlets, the analysis found.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.