Bed Bath & Beyond’s (BBBY) bankruptcy filing on Sunday won’t be the only major retail bankruptcy to occur in the next few years.
A new study from investment bank UBS highlights the impact of costs associated with retail operations, such as top mall lease fees and employee hourly wages.
UBS retail analyst Michael Lasser predicts 50,000 retail store closures by 2027 from the current 940,000 stores in the US.
“While store closures have been on hold for the last few years, we believe this activity will accelerate rapidly,” Lasser said.
Based on Lasser’s research, the retail sector seeing the most closures includes an estimated 23,000 clothing and electronics stores.
Lasser pointed to several key factors in the looming closure.
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Deceleration in private consumption
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Decrease in available credits
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Increasing penetration of e-commerce shopping
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Higher costs of running a retail store
A decade after the demise of once-dominant retail chains Sports Authority, Circuit City, Linens N’ Things, and most recently Sears and Kmart, the era of online shopping has seen too many It continues to put pressure on retailers by opening brick-and-mortar stores.
At the same time, seasoned analysts see the wave of store closures as an “investable” theme.
Market share will shift further to domestic powerhouses as smaller retail chains such as Bed Bath & Beyond disappear from the market.
According to Lasser’s calculations, if 50,000 stores close over the next five years and average sales per store reach $5.7 million, retail sales will equate to $285 billion in “immediate availability.” will be Assuming 26% of those sales go online, major national chains like Walmart (WMT), Home He Depot (HD) and Costco (COST) could hit $210 billion in sales. Lasser thinks
Jan Kniffen, retail expert and CEO of J Rogers Kniffen WorldWide, told Yahoo Finance: “Poorly capitalized retailers like Bed Bath & Beyond no longer matter.”
The collapse of Bed Bath & Beyond will close 360 banners of the same name and 120 banners dedicated to buybuy BABY.
Brian Sotzi Editor-in-chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and LinkedInAny tips on deals, mergers, activist situations, etc? Email brian.sozzi@yahoofinance.com
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