Brick-and-mortar stores rack up losses as online sales continue to rise.
Despite the retail industry’s strong Black Friday and Cyber Monday performance in 2019, some brick-and-mortar stores such as Macy’s and Pier 1 Imports are reportedly closing hundreds of locations as they face declining sales.
On January 8, 2020, Macy’s Inc., the parent company of Macy’s, Bloomingdale’s, and Bluemercury reported a 0.6% decline in sales in November and December 2019. This news followed Macy’s November, 2019, third-quarter earnings report, which shows a 3.9% decrease in sales following seven consecutive quarters of growth.
Macy’s, which employs 130,000 people, will reportedly close 28 of its stores and 1 Bloomingdale’s store throughout the United States in an attempt to increase its profits, according to sources. Macy’s will announce which stores will close on February 5, 2020. (In 2016, it announced the shuttering of 100 locations, following six consecutive quarters of losses.)
Macy’s CEO Jeff Gennette said in a press release that website issues, lower tourism rates, and weak performance in certain malls caused the dip in sales. He also cited a warmer shopping season as a reason for the drop. Shopping trends may actually change with the weather according to the Bureau of Economic Analysis (BEA). The BEA accounts for how weather patterns can affect data when it calculates the Gross Domestic Product, or GDP.
Department stores are reportedly struggling to keep up with the rise of discount stores such as Target and Walmart, which have adapted more quickly to the consumer shift toward online shopping, and also offer a wider variety of products to consumers, often at cheaper prices. They also compete with online-only retailers like Amazon that offer steep discounts and quick delivery times.
Meanwhile, home goods store Pier 1 Imports announced an 11.4% drop in sales from the previous year on January 6, 2020. This most recent quarter of losses is the latest in a series of nine quarters of losses for Pier 1 for a net loss of $59 million, according to Forbes. As a result, Pier 1 will close half or 450 of its stores nationwide.
Pier 1 will also reportedly lay off 40% of its employees and prepare to file for Chapter 11 bankruptcy. The company employed 4,000 people as of March, 2019. The rise of e-commerce businesses such as the furniture company Wayfair have contributed to Pier 1’s losses, according to Bloomberg.
Online Traffic is Up, Foot Traffic is Down
In 2019, online retail sales on Black Friday and Cyber Monday broke records, with shoppers spending $9.4 billion on Cyber Monday, according to Adobe Analytics. While online sales may be surging, foot traffic on the traditional shopping weekend to so-called brick and mortar stores fell by 6.2%, according to reports.
Macy’s and Pier 1 aren’t the only brick-and-mortar stores falling on hard times. In fact, the traditional retail industry has experienced significant problems in recent years, with several physical stores filing for bankruptcy or closing locations including J.C. Penney, RadioShack, Payless ShoeSource, and The Limited.
More about the Retail Industry
Since 2017, the retail industry has lost 140,000 jobs, according to recent reports.
The retail industry is also one of the largest segments of the economy, generating nearly $5 trillion in sales in the first ten months of 2019, according to the U.S. Census Bureau. That’s roughly one-quarter of the GDP, which is the total of all goods and services the economy produces.
Retail is also a big employer. About 16 million people work for U.S. retailers, or one in nine people, according to recent reports. Nearly 5 million people work as retail salespeople, according to the Bureau of Labor Statistics. The impending closures and layoffs at Macy’s and Pier 1 could affect thousands of retail employees.
Follow the Stash Way
Investing in the retail sector is one way to diversify your portfolio. Diversifying is part of the Stash Way. When you’ve diversified your portfolio, it will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs).