- Business Insider
- Clothing retailers could benefit most from increasing the velocity of store closures in order to curtail poor brick-and-mortar store sales and improve e-commerce performance, according to a new analyst report from UBS.
- Analysts say the clothing sector is most in need of shutterings, followed by consumer electronics, home furnishings, sporting goods, home improvement, and auto parts.
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Clothing brands need to pick up the pace of store closures if they intend to capitalize on sales growth from e-commerce sales, analysts say.
According to a new report from investment banking firm UBS, retailers will benefit from shuttering low-performing stores at a quicker pace over the next several years as e-commerce sales continue to proliferate. Though the report found faster closings are advantageous across all retail sectors – ranging from consumer electronics to sporting goods and grocery – it’s most pressing for clothing, where e-commerce rates are expected to swell from 23% in 2019 to 36% in this category by 2026.
Analysts recommended that clothing companies shutter a total of 20,700 store locations, compared to the suggested 9,800 for consumer electronics, 8,400 for home furnishings, and 5,900 for sporting goods. (Rounding out the list is home improvement and auto parts, at 620 and 60 proposed closures, respectively.)
While more than 6,000 US retailers have already closed their doors in 2019 alone, the report found that the rate has slowed compared to recent post-recession years. Recent closures have largely been comprised of low-performing stores from companies like Fred’s, Charlotte Russe, Family Dollar, Victoria’s Secret, and JCPenney, among others.
The wide-scale closures will ultimately help grow productivity levels for both specialty stores and off-price retailers alike, according to the analysts. Category sales have shown a significant upward trajectory after the recession, and will only continue to grow with strategic investments and reallocation in online sales.
“We expect specialty retailers with large domestic footprints like [Gap Inc.] and [L Brands] will need to accelerate the closings of their most unproductive locations while off-pricers continue to add new stores,” analysts said in the report.