Retail Closures Likely to Outnumber Retail Openings in the Next Year

An increase in consumer sentiment and positive macroeconomics led to increased retail spending during the 2024 holiday season.

That’s the good news. The bad news?

According to Coresight Research’s just-released Store Tracker, retail closures will likely outnumber retail openings three-to-one in 2025. The Coresight analysts estimate that:

• 15,000 stores will close in the U.S. in the coming year, while 5,800 stores will open during the same period

• So far in 2025, there have been an estimated 1,925 store closures and 1,035 store openings

Why So Glum?

The Store Tracker acknowledged that the U.S. economy should transition from a “weaker, inflation-impacted economy to greater resilience amid low interest rates.” The Coresight analysts also point to a solid labor market as one factor driving “optimism for robust retail spending in 2025.”

But there are headwinds impacting retailers as well. Specifically:

• E-commerce players. The Store Tracker pointed out that cross-border players like Shein and Temu are fierce competitors.

• Inflation concerns. Coresight analysts said the consensus is for CPI and PCE inflation to remain above 2% in 2025. “This could exert the greatest pressure on lower-income consumers,” the report said.

• Discretionary spending rebalance. The Store Tracker indicated potential risks to retail from “a multi-year rebalancing of discretionary spending in favor of services.” This is partly due to what the report called “the bloating of U.S. retail since 2020 and the continued goods/services imbalances versus pre-pandemic levels.”

Not All Are Created Equal

Retail encompasses a broad arena. As such, the Store Tracker narrowed its discussion to sectors including the following:

• Apparel. While the apparel sector has been closing the most stores, Coresight analysts noted that it’s also opening stores, particularly in the off-price space.

• Department Stores. This sector is experiencing store closures (Kohl’s and Macy’s) and mergers (JCPenney and SPARC). According to the report, inflationary pressures led to a decline in sales and a move to alternative retail formats.

• Discount Stores. Discount stores continue to see robust action, and the Store Tracker said they will “likely see long-term growth.” While Bit Lots and 99 Cents Only Stores closed, the analysts said this was due to company-specific factors.

• Drug Stores. Retail pharmacies and drug stores have taken a hit due to changing consumer preferences, competition and increased digitalization. Coresight analysts point out that closures could lead to “pharmacy deserts” in the U.S., which will benefit national merchants (Costco and Walmart) and regional chains (Kroger, Publix, Hy-Vee and Albertsons).

• Home-Related Categories. While home goods, furniture and appliances fell in response to a subdued housing market, the Store Tracker suggests that home sales will likely increase in 2025, leading to more demand for big-ticket categories.