The decline of the American mall is threatening to create more retail victims in 2015 as stores that count on enclosed shopping centers for foot traffic find they’re increasingly isolated from consumers.
Teen-clothing chains have been hit especially hard by the drop in mall visitors, with younger shoppers looking instead to the Web for fashion inspiration. And while an improving job market and lower gas prices have helped boost U.S. consumer spending, the rebound isn’t yet refilling mall parking lots.
The holiday season saw two clothing chains – Deb Shops and Delia’s Inc. – file for bankruptcy, with the latter retailer announcing plans to shut down entirely. Body Central Corp. has warned investors that its ability to keep operating is uncertain.
And this week Wet Seal said it would close 338 stores, including two in Wichita. It plans to try to continue to operate 173 stores and online.
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It’s not just clothing merchants suffering either. RadioShack Corp., the almost-century-old electronics chain, has said its status as a going concern is in doubt.
“The big question is, how many malls are there going to be in five years?” Bradley Snyder, executive managing director for Tiger Capital Group, a Boston advisory firm. “It’s certainly a concern for landlords, with the entire sector being impacted.”
For apparel sellers, the challenges have been building for years. E-commerce sites and fast-fashion retailers such as Hennes & Mauritz are luring away customers. Households also are spending less on clothing and putting more of their budgets toward mobile-phone bills and other expenses.
Higher-end stores aren’t immune either. C. Wonder, an upscale clothing and houseware chain with about a dozen U.S. stores, announced plans this week to shut down. Daniela Maron, a spokeswoman for the company, cited “the highly competitive nature of the current retail environment.”
The troubles could lead to thousands of store closings in the next year, according to Snyder. Already, chains are shuttering hundreds of locations as they try to cope with economic shifts.
Delia’s is closing 92 stores as part of its liquidation, while Aeropostale closes up to 240 locations of its main brand and all 125 of its P.S. children’s chain. Sears Holdings Corp. continues to shrink its store base as well, closing 235 locations in 2014. RadioShack operates more than 4,000 stores and is seeking to close as many as 1,100. If it files for bankruptcy protection, that number could multiply.
Most of the closings will be in malls, Snyder said. While malls with an “A” rating are thriving and can replace lost tenants, only about 30 percent are in that category, according to DJ Busch, an analyst at Green Street Advisors in Newport Beach, Calif. Overall sales growth will be sluggish at malls in the next few years, the firm predicts.
The teen-focused retailers known as the A’s – American Eagle Outfitters Inc., Aeropostale and Abercrombie & Fitch Co. – are paring back their locations. The companies plan to close 14 percent to 28 percent of their store bases in 2015, according to Bloomberg Intelligence analyst Jeffrey Langbaum.
Part of the reason is that consumers are diverting more of their discretionary spending toward monthly costs such as mobile-phone bills, rather than clothing.
In 2000, spending on clothing accounted for 5 percent of a typical U.S. household’s budget, said Craig Johnson, president of Customer Growth Partners, a New Canaan, Conn., consulting firm. It’s now about 2.8 percent, he said.
“In the last several years, apparel’s been a struggle,” said Brian Yarbrough, a retail analyst at Edward Jones & Co. in St. Louis. “Apparel’s had a tough time.”