More Empty Storefronts Ahead

Kiplinger reports:

The downsizing of the American retail sector has a ways to go. Retail space vacancy rates won’t top out until at least the middle of next year. About 150,000 stores across the U.S. will shutter their doors this year, with the pace of closures remaining high for months after overall economic growth turns around. In a more typical year, about 135,000 stores close and 120,000 new stores open. Last year, however, net closures ran about 40,000 to 45,000, with both more closings and fewer openings. This year should be about the same.

The fact is, retailers have to keep closing stores. “At this point, they can’t cut inventory and expenses much more” to match consumers’ continued low spending levels, says Roxanne Meyer, a specialty retail analyst with UBS. And the slender improvement likely in sales during the second half of this year won’t come close to offsetting the decline during the first half. Indeed, even though sales in the later months of 2009 are likely to look markedly better than in the same month a year earlier, the increase will be deceptive -- a product more of the dismal 2008 performance than of strong sales in late 2009. All told, 2009 sales will come in about 1% lower than the 2008 level.

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