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The USA faces an apocalyptic level of retails store closures, according to recent reports. As many giant stores such as Toys R Us been forced to file for bankruptcy, the shareholders and employees of countless other US stores are left wondering what the future holds for them.
There are many reasons for this extreme downturn in the fortunes of high street retailers. Firstly, the rise of e-commerce, in other words doing your shopping online, has provided intense competition for the ‘brick and mortar’ stores of the USA.
As well as this, there has been an economic squeeze on living standards since the financial crash of 2008, which we are still feeling the effects of 10 years later. This has meant that the middle class, who tend to stimulate the economy more than anyone through their expenditure, have had less money to spend.
Moody’s Corporation, a company that tracks corporations’ credit ratings, said recently that almost 19% of the retail companies it rates are considered high-risk investments.
Their lead retail analyst, a man by the name of Charlie O’Shea, recently told CNBC, “I think the early part of next year will be pretty bad … I think it will be tough,” He worries that “highly leveraged” retailers will never be able to compete with Walmart and Amazon’s low pricing.
Just how bad is it?
While some businesses have complained that talk of an “apocalypse” is overblown, the US is believed to have had approximately 8,600 stores close in 2017. The previous record was 6,163 store closures in 2008, in the depths of the recession, when consumers had put a complete freeze on buying. And, according to Business Insider, another 3,600 store closures are already slated for 2018.
Take a look at this predictive graph that shows the amount of stores that are likely to close in 2018.
In an analysis of the trend, O’Shea remarked that it was unusual that so many retailers were failing in this environment, as “it’s happening in a macro environment that’s pretty good for retailers,”
As we mentioned above, for many of these large-scale retailers, the biggest problems they face are competition from online shopping and high long-term debt they have racked up to get through the difficult years since the crash.
Many physical retail outlets carry heavy borrowing debt, making it difficult for them to make the shift to focussing on their online shopping experience.
Here are some of the stores that are likely to be severely affected this year. A lot of these are household names!
1. Guitar Center
The business may be one of the largest musical instrument retailers in the world, and one of the most well-known, with more than 260 stores across the US, but its size may not save it from being overwhelmed by debt. Currently, the company has around 1 billion in bond debt that’s due to be repaid in 2019, and many speculate that the guitar giant will not be able to repay it.
2. General Nutrition Centers
The nutrition supplement retailer is looking very unhealthy going into the new year. After a November debt notice, the company’s shares fell by more than 18%. Part of this problem that the company faces is that the market for health and nutritional supplements has been moving heavily online, making it difficult for the mall-based retailer to compete.
3. Vitamin World
Another failing nutritional company, Vitamin World, has even more cause for concern at the start of 2018. At the end of the third quarter, they tried to pursue a strategy where they filed for bankruptcy and closed 124 of 345 stores, but unforeseen “liquidity concerns” mean that the company is selling off almost all of their assets.
The famous company looks to be a shoe-in for the 2018 death watch, as the company has been losing stores at a staggering rate, and didn’t even bother to buy TV ads during this year’s crucial holiday season. It’s held on by selling off assets and borrowing money and, with $4 billion more in liabilities than in assets at the close of the year, that doesn’t look like a long-term strategy.
RadioShack has long been a household name, but given that the company started 2017 by filing for bankruptcy and closing 200 of its stores, their outlook for the new year is not looking great. It gets even grimmer when you remember that the company already filed for bankruptcy just two years ago, and the moves that it has made since have proven unsuccessful.
It’s crazy to think that all of the stores above could be gone by this time next year. Which would you miss the most? Let us know in the comments!