JLL Retail: Store closure summary, October 2017

Retail store closure summary

10-23-2017

JLL Retail Research

What’s new in closures?

• Toys R Us has filed for bankruptcy protection.

Toys R Us filed for Chapter 11, and plans to use its

bankruptcy filing as a way to reemerge on the

cutting edge of the retail world, closing

underperforming stores and transforming others

into "interactive spaces“.

• Perfumania files for bankruptcy protection.

Mall-based retailer chain Perfumania has sought

chapter 11 protection with plans to reorganize

around its better-performing stores. The company

plans to close 64 of its 226 stores during the

bankruptcy process.

TBD closures

+64 closures

Retailers to watch for closures

Source: Credit Intell

RetailerCredit Intell

RatingRetailer

Credit Intell

Rating

Academy Sports + Outdoors D1 Bon-Ton Stores E2

Boot Barn D1 Claire's Stores E2

J.C. Penney Company D1 Toys R Us E2

Jo-Ann Stores D1 99 Centers Only Stores F1

Tailored Brands D1 bebe stores F1

Staples D1 hhgregg F1

Christopher & Banks D2 Sears Holdings F2

Conn’s D2 Le Chateau F2

Destination Maternity D2 Gordmans Stores DIP

Lands' End D2 Sports Authority DIP

Stage Stores D2 Gander Mountain DIP

Rent-a-Center E1 Gymboree Corp DIP

Hudson's Bay Company E1 rue21, inc DIP

Stein Mart E1 Aeropostale DIP

Fred's E1 American Apparel DIP

J. Crew Group E1 Michigan Sporting Goods DIP

Neiman Marcus Group E1 Wet Seal DIP

Rite Aid Corp E1

Credit Intell Rating Definitions

CI ratingEquivalent

S&P ratingCredit quality

D1 B Below satisfactory

D2 B- Below satisfactory

E1 CCC+/CCC Poor

E2 CC Poor

F1 C Critical

F2 D Critical

DIP - Filed for bankruptcy

• These retailers all have credit ratings below satisfactory. Future closures may be

imminent.

What’s new in openings?

• Lidl is expanding. By the end of September, the

grocer will have opened 37 locations in five states on

the Eastern seaboard: North Carolina (13), South

Carolina (8), Virginia (14), Delaware (1) and Georgia

(1). Lidl plans to open as many as 100 stores in the

next year.

• Aldi targets 2,500 stores by 2022. The grocer

recently announced a $3.4 billion investment to

boost its U.S. presence by nearly 50% to 2,500

stores by the end of 2022. This puts the company on

a pace to become America’s third-biggest grocery

retailer by locations behind Wal-Mart and Kroger.

Source: PNC

+100 new stores

+800 new stores

(by 2022)

More than 5300 locations will close by end of 2017

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. 5

0

500

1000

1500

2000

2500

2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q4

Effective closure date

# of stores to be closed

Source: Creditntell, JLL

California has highest planned closures


Source: Credit Intell, JLL

*JLL-tracked closures

9.5%

7.0%5.9%

5.0% 4.8% 4.6%3.7% 3.3% 3.1%

California Texas Florida Illinois Ohio New York Pennsylvania Michigan Indiana

% of closures announced in 2017

The below 10 states make up just over half of announced closures in 2017

Apparel and electronics will make up almost half of 2017 closures


Source: Credit Intell,JLL

*JLL-tracked closures effective in 2017

33%

16%13%

9%

6%

5%

18%

Closures announced for 2017

Apparel

Electronics

Shoe stores

Department store

Discount department store

Grocery

Other

• Changing demographics, shifting

consumer tastes in favor of

discounters and fast fashion and some

sales loss to online sellers have all

helped to close some apparel stores.

• Bankrupt retailers like The Limited,

Wet Seal, BCBG Max Azria and

American Apparel are leading the

store closure count.

• Electronics stores like hhgregg and

Radioshack are also shuttering

hundreds of locations due to

bankruptcy.

Apparel and electronics closing the most stores


2736

1378

997

489

379

370

361

296

241

235

213113

110

108

100

70

50

10

8

6

3

Apparel

Electronics Stores

Shoe stores

Restaurants

Specialty food & beverage

Office supply

Department stores

Discount dept. stores

Books & Music

Sporting goods

Specialty stores

Grocery stores

Dollar stores

Home Furnishings

Accessories

Drug stores

Auto centers

Off-price retail

Thrift stores

Jewelry stores

Wholesale clubs Announced closures

Source: PNC, Creditntell, JLL

Retailers closing 100 or more stores


1000

700

400

379

350

300

268

250

240

220

200

188

180

172

171

160

150

141

140

135

120

110

106

105

100

100

RadioShack

Payless Shoe Source

rue21

Teavana

Gymboree

Office Depot

Ascena Retail Group

The Limited

Family Christian

hhgregg

Banana Republic/Gap

Kmart

Bebe

The Children's Place

Wet Seal

Crocs

GameStop

JC Penney

Vanity Shop

Sears

BCBG Max Azria

American Apparel

Gordman's Stores

Applebee's

Foot Locker/Lady Foot Locker

Michael Kors Announced closures

Source: PNC,JLL

More than half of announced closures* due to bankruptcy


Source: PNC,JLL

*JLL-tracked closures

52%48% Announced closures

Filing for bankruptcy Not filing

Retailers who recently announced bankruptcies


Source: PNC,JLL

1000

700

400 350250 240 220 171 140 120 110

10668 65 63 63 59 51 36 32 27 27 21 18 12

Announced closures

Apparel and sporting goods are seeing the most bankruptcies


Source: JLL

Apparel8

Sporting goods5

Specialty stores

4

Shoe stores3

Electronics Stores

2

Specialty1

Discount dept.

stores1

Books & Music1

Toys/Games1

Grocery stores1

# of retailers filing for bankruptcy


Source: PNC, JLL

1568

1220

712

240 213207

106 65 18

Apparel ElectronicsStores

Shoe stores Books &Music

Specialtystores

Sportinggoods

Discountdept. stores

Specialty Grocerystores

Announced closures

Apparel and electronics stores closing the most locations because of bankruptcy

Department and discount department stores will close over 650 locations


Source: PNC, Creditntell, JLL

• Discount department stores

like JC Penney, Kmart and

Gordman’s are closing the

most locations.

JC Penney

141

Kmart188

Gordman's106

Macy's76

Sears135

Other11

Announced closures

Midwest states have the most department store closures

Source: Credit Intel, JLL

Top 10 announced

department store closures

Number of announced

department store

closures

Purchases of office supplies move online


Office Depot

300

Staples70

Announced closures

• Office supplies are highly

commoditized products, making it

easy for consumers to purchase

online.

• As a result, office supply retailers

are shrinking their store count.

• Office Depot’s acquisition of Office

Max means the retailer must also

close redundant locations.

Source: PNC, JLL

Sporting goods retailers are closing 235 stores


MC Sports

68

Golfsmith59

Gander Mountain

32

Eastern Mountain

Sports27

Hibbett Sports

25

Bob's Stores21

Big 5 Sporting Goods

3

Announced closures

Source: PNC, JLL

• There are five major bankruptcies

happening among sporting goods

retailers, resulting in 207

• store closures.

• In comparison, Dick’s Sporting

Goods is a strong performer and is

steadily expanding its footprint,

planning 43 new stores in the next

fiscal year.


Yes, some retailers

are expanding!

More stores are opening than are closing


-3133

-400

82

153

345

674

728

1700

1905

2026

Specialty softgoods

Department stores

Superstores/Wholesale clubs

Specialty hardgoods

Drug stores

Supermarkets

Bars/Restaurants

Convenience stores

Mass merchandisers

Fast food

Net store growth

Source: IHL Group,JLL

+4,080 Net

Stores

Opening

Despite headlines, retail openings still trounce closures

MOVE-OUTS

MOVE-INS

23.5 MILLION S.F.

Mall square footage opened or closed over the last 12 months

15.7 MILLION S.F.

Source: CoStar, JLL Research

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Mill

ion

s

Mall SF vacated Mall SF absorbed

Mall space absorbed outweighs space vacated

Source: CoStar, JLL Research

Wireless stores plan aggressive expansion


1820

1750

552

496

466

425

413

357

297

234

168

158

110

45

29

25

12

11

9

Wireless

Dollar stores

Apparel

Health & beauty

Restaurants

Auto parts

Convenience stores

Grocery stores

Discount department…

Specialty stores

Shoe stores

Sporting goods

Home furnishings

Pet supply

Wholesale clubs

Home improvement

Electronics

Jewelry stores

Department stores Announced openings

Source: PNC,JLL

Retailers openings 50 or more stores


15001000

650412

320300

240200195

155120106100

100

100100

9590

8080

7573

70

70676560

56505050

T-Mobile

Dollar General

Dollar Tree

7-Eleven

Sprint

Taco Bell Cantina

Old Navy/Athleta

Aldi

O'Reilly Automotive

Autozone

GNC

Sally Beauty

Five Below

Lidl

Tractor Supply

Ulta

SportsClips

Foot Locker/Lady Foot Locker

HomeGoods

IHOP

Advance Auto Parts

Carter's/Oshkosh

F21

Ross stores

Target

TJ Maxx/Marshalls

Hobby Lobby

Hibbett Sports

Aerie

Hammer & Nails Grooming

SkechersAnnounced openings

Source: PNC, IHL Group, JLL

Why so many closures?


• Consumers tastes are

changing, especially as

millennials increase their

prominence and buying power.

• E-commerce penetration is a

reality and it’s growing

(although not as much as some

people fear).

• Consumers want experiences,

convenience and value. Stores

that fulfill those functions well

stay open. Those that don’t will

close.

Does e-commerce tell the whole story?


Nope. Here’s why:

• While e-commerce is growing at a

steady pace, the fact is most

purchases still take place within a

store.

• What's more, 1.7 percent of sales

occur on bricks-and-mortar

retailers’ websites, and some online

orders even take place inside a

store.

• Even more important: online

retailers are opening physical

locations, proving the importance of

bricks-and-mortar.

ICSC Research Analysis of U.S. Census

Bureau’s Quarterly E-Commerce Report

Pure-Play E-Commerce

3.3%

In-Store E-Commerce

0.9%

Non-Merchandise

Receipts

0.6%

Omni-Channel E-

Commerce

1.7%

In-Store sales

93.5%

What can we expect in the future?


The store function is shifting from

simple transactions to full-on

experiences. Here is what stores will

increasingly look like:

• Fluid transactions – no waiting at

cash register.

• Showroom/museum feel with

curated products.

• Emphasis on connecting with

consumers over selling.

• Experiential and interactive

environments that entertain

consumers.

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of JLL and shall be kept

confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of JLL. All information contained herein is from sources deemed reliable; however,

no representation or warranty is made as to the accuracy thereof.

Jllretail.com

Contacts

James D. Cook

Americas Director of Research, Retail

+1 317 810 7191

+1 602 363 6691

[email protected]

Keisha Virtue

Senior Research Analyst, Retail

+954 990 0844

+954 449 3182

[email protected]

mailto:[email protected]

mailto:[email protected]

JLL Retail: Store closure summary, October 2017

Retail

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