These 2 Beloved Department Stores Are "Slowly, Quietly Dying"
After a legacy of over 125 years, these iconic retailers may not make it through 2021.
Two department stores narrowly escaped closure in 2020, but their outlook for 2021 is looking grim. Once considered thriving big box staples, Sears and Kmart—both owned by the same parent company, Transformco—barely scraped by without filing for bankruptcy this year. Their "slow, quiet death," as CNN put it, comes after decades of declining sales as competitors Walmart, Home Depot, and Target thrived among their customer base. Read on to find out what the future holds for Sears and Kmart, and for more on beloved stores that are struggling, check out This Legendary Chain Is Closing Over 1,000 Stores by March
Experts say that while Sears (founded in 1892) and Kmart (founded in 1899) marginally avoided bankruptcy, their survival "is not a sign of health." With a floundering commercial real estate market that has especially curtailed the value of big box stores, the two companies had no viable exit strategies for offloading their assets. "Everything is up for grabs. But of course, there is no market for department stores," Mark Cohen, the director of retail studies at Columbia University and a former Sears executive, told CNN. "They are, for all intent and purposes, done."
CNBC explains that the stores' decline was a long time in the making. Sears and Kmart were purchased by hedge fund manager and CEO Eddie Lampert in 2004 and 2005 respectively, then merged to form a larger home goods conglomerate. Neil Saunders, managing director of GlobalData Retail, recently explained to CNBC that this was Lampert's chief mistake. "The solution to Sears' problems was to buy another retailer not doing well, and that was Kmart. Then they got a bigger bad business," he explained. "Sears wasn't investing or changing, and they started to suffer because of that."
Instead of filing for bankruptcy, which the companies had already done in 2018, they are instead moving ahead with what experts are calling "slow motion liquidation." The stores have made little effort to grow sales, and experts say they expect both Kmart and Sears will progress to swifter closures once the commercial real estate market regains value.
Already, they've whittled down their store counts dramatically, with just 122 brick and mortar locations left between them: 74 Sears locations and 48 Kmarts. As CNN reports, that's 60 fewer compared to May of 2020, when malls reopened after pandemic shutdowns, 400 fewer than when they came out of bankruptcy in 2019, and roughly 1,000 fewer than Q1 of 2018, three years ago. Read on for more stores that are barely staying afloat, and for more on store closures, check out This Popular Clothing Chain Just Announced It's Closing 100 More Stores.
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Pharmacy chain Rite Aid has been in decline for several years, and according to USA Today, Moody's Analytics considers the company to be a "very high credit risk."
While Rite Aid's revenue increased in both retail and pharmacy sales during the pandemic, they have struggled with their bottom line. The company reportedly took on additional costs to meet the needs of the pandemic, including hiring 6,000 new employees for its store and distribution teams. And for more on major store closures, check out This Beloved Brand Is Closing All But 2 of Its U.S. Stores.
Macy's, once an iconic department store and retail industry leader, has seen better days. In Feb. 2020, the company announced plans to close roughly one fifth of its total store locations in coming years, cutting over 2,000 jobs.
However, Macy's Inc. chairman and CEO Jeff Gennette said in September that the timeline for store closings will be up for review as they monitor pandemic recovery. "Retail today has been disrupted. And while that disruption creates challenges, it also holds opportunity," Gennette said. "With many competitors closing or struggling, we see the potential to bring new customers into our brands and gain market share," he added.
It's no surprise that a company whose success hinges on people gathering for parties would be struggling right now. After all, large parties are currently illegal in some states.
However, not all of the Party City's problems were caused by this year's bans on gatherings. The company was already amassing hundreds of millions of dollars in debt every year, including $264 million in debt over the first nine months of 2019, and $432 million during the same time period in 2020. And for more on stores that are struggling to make ends meet, check out This Iconic Department Store Will Close 165 Locations by Early Next Year.
Minneapolis-based apparel company Christopher & Banks was already struggling to stay afloat before the pandemic, and was even delisted by the New York Stock exchange for failing to meet the minimum market capitalization in Apr. 2019. The company brought on strategic advisors and obtained new loans to the tune of $10 million this past June, but neither was enough to save the company from its perilous position.
"We believe that COVID has had an outsized impact on our customer demographic as her shopping behavior is more pragmatic with limited demand for new outfits in the absence of social engagements," Keri Jones, president and CEO, said in a Dec. 10 statement. "In addition, based on our own retail traffic trends we believe she remains hesitant to shop in stores."