Rite Aid, one of the largest pharmacy chains in the country, has joined the growing list of retailers to shed locations. The company filed for bankruptcy this month and is set to close more than 100 drug stores as the first step while negotiating a bankruptcy deal.
Following Rite Aid's announcement, Target, a leading U.S. retailer, shut nine stores in four states, where the company said, "theft and organized retail crime" lead to "unsustainable business performance."
In June, retail chain Bed Bath & Beyond declared bankruptcy and closed 896 stores, followed by Foot Locker, which is shutting more than 500 stores by 2026 as part of a shift away from shopping malls. Other retailers like Walmart, BestBuy, Party City have also announced closures of 20 to 30 stores.
So far this year, at least 20 major retailers in the United States have said they have closed or are set to close more than 2,800 stores across the country, according to a tally by Insider.
All told, there have already been more bankruptcies of retail companies in 2023 by the end of October than in the full year 2022 or 2021.
Retailers have recently been blaming what they said is a rising tide of theft and retail crime. Their trade association, the Washington D.C.-based National Retail Federation (NRF), said retailers have seen a dramatic jump in financial losses associated with theft.
In its September report, the NRF said that the losses reached 112.1 billion U.S. dollars last year, up from 93.9 billion dollars in 2021; while shrink, a measure of retail losses that includes external theft as well as other sources of loss, reached 1.6 percent of sales in 2022.
Experts said the closures aren't just about theft and crime. Still, several trends have contributed, including the slowdown in consumer spending, a reduction of credit availability, the continued shift to e-commerce, and higher costs to operate retail stores.
When store prices keep rising, consumers will mostly stop spending on discretionary goods and keep it solely essentials, said consumer behavior experts.
Worsening inflation concerns continue to weigh on U.S. consumers, as shown by the latest consumer survey.
Consumers have a more pessimistic economic outlook this month than in September, according to the Michigan Index of Consumer Sentiment. It also found that high-income consumers showed the biggest drop in confidence, showing that spending could slow.
There's a concern that consumer expectations of inflation could prompt the Federal Reserve to keep interest rates high. The Federal Reserve has engaged in a series of interest rate hikes in an effort to bring inflation down to a target annual rate of 2 percent.
Higher interest rates can result in higher cost of doing business for retailers, said experts, as this can increase the cost of credit and mortgages.
Investment bank UBS's retail analyst Michael Lasser estimated that 50,000 retail stores would close out of the current base of 940,000 stores in the United States by 2027. Store closings could accelerate to 70,000 to 90,000 if retail sales turn out to be weaker than expected.
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