Major US retailers announced more than 7,300 store closures last year, up 57% from 2023, according to Coresight Research. That’s the highest annual number of closed stores since 2020 when the pandemic led to mass disruption of businesses across the country.
Some of the most recognizable chains in America left strip malls and shuttered across city street corners. Family Dollar closed 718 stores. CVS and Walgreens closed more than 1,000 stores combined. Big Lots closed nearly 600. LL Flooring disappeared for good, and Party City’s liquidation is underway. The Container Store filed for bankruptcy and may be forced to close some of its 100 stores.
Restaurant chains also shrank last year. Institutions like Red Lobster and TGI Fridays filed for bankruptcy and Denny’s and Applebee’s announced major closings.
Brandon Bell/Getty Images
There’s no single reason why all of these chains closed last year. But they have a few factors in common: They each were hurt by the highest inflation in 40 years and faced competition from bigger and better-positioned rivals. Many also made strategic mistakes like overexpanding or were slow to pivot to online shopping.
“Price-sensitive consumers are looking for the best prices and finding them online,” said Deborah Weinswig, chief executive at Coresight Research. “They have also lost patience with stores that are hard to shop, have out-of-stock items all the time, poor customer service, and other issues, and they’re deciding to shop elsewhere.”
Closures accelerated because the retail sector’s 2020-2022 sugar high ran out. In the early years of the pandemic, consumers snapped up new couches, televisions, and clothing. But companies raised prices higher than many consumers could afford and interest rates soared, making it more expensive to borrow money for big-ticket items or to get a mortgage or a car loan. Consumers reached their breaking point and stopped buying items they didn’t need, hurting these retailers.
Competition from juggernauts like Amazon, Walmart, Costco, Home Depot, and Temu also squeezed mid-sized chains like Family Dollar and Big Lots. Bigger chains can buy larger quantities of goods at a steeper discount than smaller players, and they can put vast sums of money into technology and store improvements that even medium-sized retailers can’t afford.
Brutal year for the middle
The rise in store closures this year harkens back to the days before the pandemic when retailers were closing thousands of stores a year as online shopping grew rapidly. Online sales grew from roughly 6% of all retail sales in 2014 to 12% by the beginning of 2020. This year, online retail made up around 16% of total sales.
In 2017 and 2018, retailers closed a combined 13,400 stores, according to Coresight. In 2019 alone, retailers closed a record 9,800 stores. Payless, Gymboree, Charlotte Russe ,and Shopko all filed for bankruptcy that year.
The beginning of the pandemic in 2020 flushed out some of the remaining weakest chains like Sears, JCPenney, Pier 1 and others that filed for bankruptcy and closed stores. Around 9,700 stores closed in 2020, according to Coresight.
Retailers that made it through got a boost in 2021 and 2022 from extra federal stimulus payments and “revenge spending” among consumers eager to shop after being stuck at home.
But this turned out to be a blip, rather than a permanent improvement.
The Container Store is a prime example of a company falling back to earth after surging post-pandemic. It boomed in 2021, when consumers stuck inside their homes at the peak of the pandemic drove record sales and profit at the company.
However the Container Store proved vulnerable to changes in the housing market. Mortgage rates hit two-decade highs near 8% last year and are still hovering close to 7%. High interest rates have kept many people from buying or selling their homes, and the frozen housing market has spilled over to hurt the Container Store.
Consumers hunting for bargains and dialing back discretionary purchases after years of companies raising prices also pressured the Container Store. It’s core middle-income shoppers are looking for discounts and turned their backs on the store’s big profit engines, including consultations and premium services. Even more affluent shoppers are curtailing their spending and switching to chains that offer lower-priced products.
The Container Store filed for bankruptcy days before Christmas.
Discount chains and drug stores struggling
Smaller discount retailers that cater to lower and middle-income shoppers were also squeezed out.
Family Dollar hit trouble as its core low-income customers struggled to afford necessities and dialed back their spending or switched to Walmart — where they were already buying all the rest of their stuff, including groceries (Walmart is America’s largest food seller).
Other discount chains faced similar challenges: Big Lots filed for bankruptcy in September and has closed hundreds of stores. The company reached a last-minute agreement to keep its remaining 900 stores open. 99 Cents Only went out of business permanently and closed 371 stores.
Drug store chains are also shrinking. CVS, Walgreens, and Rite Aid have announced more than closures this year combined, according to Coresight.
These chains overexpanded during the 1990s and 2000s to drive out competitors and draw more customers, but they weren’t able to foresee vastly lower reimbursement rates for prescription drugs on the horizon; nor that Amazon, Walmart, and others would chip away at the snacks and household staple sales that the front end of their stores relied on.
“Retailers who were either financially flawed, undifferentiated or who forgot how to serve customers struggled,” said Greg Portell, a senior partner at consulting firm Kearney.
Retail isn’t dead
Many of these trends will continue in 2025, especially if President-elect Donald Trump implements sweeping tariffs.
Trump has threatened to impose 25% tariffs on products from Mexico and Canada and an additional 10% tariffs on goods coming from China. Tariffs are taxes placed on imported goods designed to protect domestic manufacturers. Companies that import products pay taxes and typically pass on the extra cost to customers in the form of higher prices.
“Retailers should expect continued degradation of the middle market,” said Portell.
It’s not the end of retail as we know it, however. Successful chains will be suitors for vacant retail and restaurant space.
Major chains announced nearly 6,000 store openings last year, a 6.5% increase from 2023. Many companies opening stores are targeting bargain hunters.
German discount grocer Aldi announced plans last year to open 126 new stores nationwide in a larger $9 billion expansion strategy to reach shoppers looking for cheap groceries.
Discount clothing stores like TJ Maxx, Burlington and Ross Stores are growing. These chains have pressured department stores like Macy’s and Kohl’s in recent years by offering designer brands for lower prices.
TJX, the parent company of TJ Maxx, Marshalls and HomeGoods, announced 99 store openings last year. Burlington announced 140 openings. And Ross opened 89.
Companies and economists warn that President-elect Donald Trump’s plans to slap tariffs on all US imports will cause havoc in supply chains and raise prices for customers. But TJX has said it believes that Trump’s planned tariffs will create more opportunities for the company to scoop up cheap designer goods as companies race to bring in products early to avoid tariffs. TJX said that the “chaos” Trump’s tariffs may bring to the retail industry plays right into its business model.
“Manufacturers could bring in goods early,” TJX CEO Ernie Herrman said on an earnings call with analysts in November. “That could create even additional availability of goods at advantageous prices for us.”
Other retailers have also made unlikely comebacks and are opening stores again.
Barnes & Noble opened 60 stores last year as consumers showed an affinity for buying books from physical bookstores.
J.Crew, which filed for bankruptcy in 2020, opened 34 stores last year and brought back its catalog. J. Crew has tapped into Millennials’ nostalgia for the brand and attracted younger Gen Z shoppers.
So the retail apocalypse may be back on — but smart brands have figured out how to make brick-and-mortar cool again.
About The Author
