The Strategist

American retailers announce closure plans

04/06/2017 - 14:44

Falling sales and growing competition from online retailers are forcing US retailers to restructure their operations and close stores. Just two weeks after Sears chain of stores warned about possible shutdown, one of the largest American retail chains Payless ShoeSource filed for bankruptcy. On the same day, Ralph Lauren announced closure of its flagship store on Fifth Avenue and another round of optimization.

Gars129 via flickr
Gars129 via flickr
Payless ShoeSource chain manages around 4,500 shoe stores in 30 countries. Yesterday, the company announced filing of bankruptcy petitions in court in accordance with Article 11 of the US Bankruptcy Act. This article implies restructuring of a company to protect the business from creditors because of the company's inability to service its debt. Payless ShoeSource is immediately closing about 400 stores in the US and Puerto Rico; fate of other stores will be decided during the restructuring.

Bankruptcy of one of the largest shoe retailers in the United States was announced two weeks after the country's fifth largest supermarket chain, Sears, said its results "raise doubts about the company's ability to continue its operations." Back in January, this retailer announced plans to close 150 stores as part of the restructuring. In February Sears decided to cut costs by $ 1 billion a year and reduce the debt burden by $ 1.5 billion.

Above that, manufacturer of premium apparel and accessories American Ralph Lauren, managing almost 500 stores in many countries of the world, told about plans to optimize its operations. The retailer is closing one of its flagship stores in New York on Fifth Avenue. In addition, the company announced measures to reduce costs, which should annually save about $ 140 million a year.

American offline retailers have lately been experiencing problems because of growing competition from online stores. In the season of pre-holiday sales in 2016 in the US, competition with Internet retailers was visible particularly clear. On Thanksgiving Day, American consumers preferred to shop online, rather than go shopping. Online sales then exceeded $ 1.9 billion, which were 11.5% higher than in 2015. Meanwhile, convenient retail stores, which used to be closed for Thanksgiving, were now also fighting for customers and trying to work all day, also offering discounts.

Yet, these attempts didn’t help much, and increasingly more retailers are declaring shutdowns. In addition to Sears, Payless ShoeSource and Ralph Lauren, JC Penney in February said that it would close 130 to 140 stores, and a month earlier Macy's announced plans to close about 100 stores. In mid-March, retailer Neiman Marcus, which sells premium goods, said it is looking for a potential buyer of its operations, abandoning plans for an IPO that was due in January. 

A similar trend is observed in China. In an interview at the World Economic Forum in Davos, Jack Ma said that his online shopping mall Alibaba directly and indirectly created 14 million jobs. Ma is China's richest man and the 13th in the list of the world's wealthiest people, his fortune is estimated at $ 35 billion.


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