US department stores: Space glut vs productivity gap



US department stores have a tough time ahead – at least that’s according to a new report. They need to close 20% of all anchor space in US malls if they want to return to the productivity levels they had a decade ago, Green Street Advisors claims.

The research, reported in The Wall Street Journal, said around 800 department stores should close with struggling Sears alone needing to close 43% of its stores to get back to the sales per square foot of 2006.

“Department stores used to be a great catchall for different brands, but today many of the brands have stores of their own, and shoppers can also find them online,” DJ Busch, a senior Green Street analyst, told WSJ.

Sears and its rivals have already closed hundreds of stores but this research seems to suggest they haven’t gone far enough because sales per square foot have dropped 24% to $165 in the past decade while store numbers fell by just 7%. Ouch!

Green Street estimates that JC Penney needs to close 320 stores, Nordstrom 30 (that’s a quarter of its total), and Macy’s 70.

But is Green Street right? The department store firms seem to disagree.

JC Penney’s CFO told WSJ that just because a store closes, doesn’t mean the business moves online. In fact, when it closes a store, particularly in a small market, it sees its dotcom business going down. And of course, any opportunity for the increasingly popular click and collect service disappears.

Nordstrom also told the newspaper that all of its stores are profitable and closing stores isn’t “our normal practice.” In other words, “nah nah ne nah nah!”

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Nordstrom is opening new stores, not closing them

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