FROM THE DESK OF DEBORAH WEINSWIG Why Didn’t 25,000 US Stores Close in 2020? Amid the depths of the first wave of the Covid-19 crisis in 2020, we estimated that up to 20,000–25,000 stores could permanently close in the US during the year. Our estimate was based on our analysts’ experience in tracking store closures and our substantial historical data sets, but we admit: Our estimate was proven wrong. In fact, we tracked 8,721 US store closures (gross) falling in 2020, versus 9,832 gross in 2019. However, we were not alone in approaching the crisis impacts with undue pessimism: In an unprecedented context, retailers, vendors and research firms found themselves scrabbling to work out the impacts of lockdowns on businesses and consumer behavior. Discretionary retailers slashed orders including for the holiday peak, and some commentators (not us) predicted that US retail sales would decline by a double-digit percentage in 2020. However, US retail demand proved more resilient than many expected. Through November 2020 (latest), total US retail sales were up 6.8% year over year and discretionary retail sales were up 6.0% (discretionary covering all retail ex. food, health and personal care, and supercenters and warehouse clubs due to the substantial food component), according to our analysis of US Census Bureau data. So, here’s why 20,000–25,000 US retail stores didn’t close in 2020:

• Radical solutions: In some cases, retailers simply refused to pay rents and/or applied a haircut after lockdowns ended. For instance, in June, Nordstrom notified landlords that the company would only pay half of the occupancy cost for its full-price and off-price locations, for the remainder of 2020. Coupled with staff furloughs, these kinds of moves slashed the fixed costs associated with brick-and-mortar retail, counterbalancing the severe loss of store-based sales. The rescue of some retailers from bankruptcy, including by Real Estate Investment Trusts (REITs), also saved some stores from closure: JCPenney was acquired by Simon Property Group and Brookfield Property Partners, and Brooks Brothers was acquired by Authentic Brands Group and Sparc Group, a venture backed by Simon Property.
• Consumers kept shopping, despite the obstacles to purchasing and likely reduced need for discretionary items. For example, amid lockdown in April 2020, consumer spending on clothing fell by “just” 47%, according to data from the Bureau of Economic Analysis (BEA): Most consumers were going nowhere that would require new clothes and they certainly weren’t going to apparel stores—yet over half of category spending was retained. This spending was helped by economic stimulus payments in the US as part of the CARES (Coronavirus Aid, Relief and Economic Security) Act.
• Redirected spending supported that continued spending at retail. Many consumers faced reduced everyday spending in areas such as commuting or food service, and all faced restrictions on where they could spend their discretionary dollars—with little or no travel, limited personal-care services and reduced dining out. Consumers didn’t just save billions of dollars—they saved hundreds of billions of dollars: From BEA data, we estimate that across three major service categories—cultural and leisure services, foreign travel, and food service and accommodation—US consumers spent around $462 billion less in the first 11 months of 2020 than they did in the comparable period of 2019. Shoppers poured some of that back into retail, spending on their homes amid a nesting trend and a booming housing market, snapping up at-home fitness equipment as gym substitutes, spending on entertainment goods in lieu of services and switching spending from food service to food retail.

Reflecting the unprecedented context, total bankruptcies fell to a 35-year low in 2020, according to data firm Epiq AACER; this covers all types of bankruptcies, including personal bankruptcies. However, Coresight Research tracked 33 major US retail bankruptcies in 2020 versus 17 in 2019; similarly, Epiq AACER recorded an uptick in Chapter 11 filings, used by large firms for reorganization. Moreover, we anticipate that some store closures have been deferred rather than prevented. We expect the impact of 2020’s difficulties to roll over into the year ahead of us, not least because the early part of 2021 looks set to see a health crisis as severe as later 2020. In addition, some retailers may have been banking on solid holiday season sales performances before taking a call on their store portfolios—and a number of retailers in structurally challenged sectors may find that holiday sales fell short of what was needed. We will provide an outlook for 2021 and review closures in 2020 in a forthcoming report.

US RETAIL AND TECH HEADLINES

Amazon Purchases First Aircraft from Delta and WestJet To Speed Up Deliveries (January 5) Company press release

• Amazon announced plans to buy 11 used Boeing jets from Delta and WestJet airlines to expand its air cargo operations. This is the first time that Amazon has purchased, rather than leased, aircraft to meet the increasing demand for faster deliveries amid the pandemic.
• Amazon is buying four planes from WestJet and seven from Delta, which are being converted from passenger to cargo use. The aircraft from WestJet are expected to join the Amazon Air network by the end of 2021, while the planes from Delta are expected to join Amazon’s fleet in 2022. Amazon emphasized that it “will continue to rely on third-party carriers to operate these new aircraft.”

Coty Completes Acquisition of 20% Stake in Kim Kardashian West’s Beauty Business (January 5) Company press release 

• Beauty company Coty has completed an acquisition of a 20% stake in Kim Kardashian West’s beauty business for $200 million. The acquisition was announced in June 2020.
• Through this alliance, Coty and Kim Kardashian West plan to enter new beauty categories and expand globally beyond existing product lines, including the development of a skincare line that is expected to launch in fiscal 2022. The products will be sold through owned digital channels and via major luxury beauty retailers.

Save A Lot Sells Its 51 Stores to Fresh Encounter (January 5) GroceryDive.com

• Discount grocery chain Save A Lot has sold its 51 Florida-based stores to grocery retailer Fresh Encounter. The retailer will continue to operate the locations under the Save A Lot banner.
• Through the sale, Save A Lot continues on its wholesale model transition program, under which the company plans to boost its finances by selling over 300 stores to other retailers on the basis that they continue using the Save A Lot banner.

Tuesday Morning Exits Bankruptcy with Reduced Store Footprint (January 4) Company press release

• Off-price home-goods retailer Tuesday Morning has exited Chapter 11 bankruptcy protection with 200 fewer stores, leaving its total store count at 490 in 40 states. The retailer filed for bankruptcy in May 2020.
• CEO Steve Becker said, “We have emerged with a streamlined operating model, and are well-positioned to execute on our strategy. We are especially pleased that our plan of reorganization has attracted significant new institutional ownership while allowing our shareholders to participate in the upcoming $40 million rights offering.”

Venmo Rolls Out Check-Cashing Feature for Selected US Customers (January 4) Techcrunch.com

• PayPal-owned mobile payment service provider Venmo has launched a “Cash a Check” feature in its mobile apps, which lets customers deposit money without using banking apps or visiting a physical location—users simply have to click a photo of the check and send it to the Venmo app for review. Once approved, the amount will be credited to the customer’s Venmo account.
• The “Cash a Check” feature is only available to eligible Venmo customers in the US, who have either a Venmo debit card or a direct deposit function enabled on their account, as well as a verified email address and location services enabled.

EUROPE RETAIL AND TECH HEADLINES 

M&S Expands Goodmove Range to Menswear and Kidswear  (January 5) Retailgazette.co.uk

• British retailer Marks & Spencer (M&S) has expanded its activewear range Goodmove to include menswear and kidswear as consumers increasingly turn toward athleisure apparel.
• The company remarked that sportswear and casual clothing have been highly sought-after categories since the pandemic began and consumers largely switched to working from home. Between March and September 2020, M&S.com reported a 200% increase in activewear sales.

Primark Expects Greater Sales Hit for 2021 (December 31) Company press release

• Associated British Foods, parent company of apparel retailer Primark, expects to incur a greater loss of sales due to Covid-19 in 2021 than previously expected. The company expects to see a negative sales impact of up to £650 million ($885.9 million) in light of new store closures and lockdowns announced in the UK.
• In December 2020, the company had estimated total lost sales for 2021 to be around £430 million ($586.1 million). As of January 1, 2021, Primark has temporarily closed 253 stores, representing 64% of its selling space.

Frasers Group Completes Acquisition of Psyche (January 4) Retailgazette.co.uk

• Frasers Group, the owner of Sports Direct, House of Fraser and Flannels, has acquired the stores and online business owned by fashion retailer Psyche. Psyche’s luxury fashion boutique in Middlesbrough, England features more than 200 luxury brands for children, men and women.
• Steve Cochrane, Psyche’s owner, will continue as the retailer’s CEO following the takeover by Frasers Group.

Aldi UK Reports Spike in Christmas Sales (January 4) Company press release

• Supermarket group Aldi UK reported year-over-year sales growth of 10.6% in the four weeks ended December 24, 2020. Aldi noted that demand for premium products drove sales growth during the holiday season.
• The company highlighted significant growth in two categories: online wine and “Specialbuys.” The supermarket continues to open new stores amidst the coronavirus pandemic, with the aim of reaching 1,200 stores by 2025. The retailer currently operates 900 stores in the UK.

Carrefour Acquires 224 Convenience Stores in Taiwan (January 4) Retaildetail.eu

• French grocery retail group Carrefour has completed the acquisition of 224 convenience stores in Taiwan from Asian retail group Dairy Farm. The deal includes 199 Wellcome stores, 25 Jason outlets and a distribution center.
• Carrefour announced that it plans to convert existing Wellcome stores in line with its Market store concept over the next 12 months and develop existing Jason branches into a premium retail brand.

ASIA RETAIL AND TECH HEADLINES 

Alibaba Announces Plans To Close Music Streaming App Xiami  (January 5) Pandaily.com

• Alibaba Group has announced that it will shut its music streaming app Xiami Music on February 5, scaling down its presence in China’s music industry. Alibaba cited operational adjustments as the reason for the closure.
• This move does not mark the end of the group’s participation in China’s online music streaming market—in September 2019 Alibaba picked up a minority stake in NetEase Cloud Music for $700 million.

Nykaa Plans $3 Billion IPO in 2021  (January 5) ETRetail.com

• Beauty startup Nykaa is reportedly planning to file an Initial Public Offering (IPO) in 2021 that could value the retailer at a minimum of $3 billion. Nykaa is backed by private equity firm TPG Group, Hero Enterprises (owned by Indian business tycoon Sunil Munjal), and Fidelity Management and Research.
• Nykaa’s platform lists more than 1,200 brands, including beauty, health supplements and electronics, and logs around 55 million visits each month. The company has six warehouses in India and processes approximately 13 million orders each month.

Sephora Set To Open Third Store in Hong Kong  (January 5) Insideretail.asia

• Sephora is on course to launch its third outlet in Hong Kong at the K11 Art Mall in Kowloon later in January. The store spans 265 square meters and will house a comprehensive mix of 65 brands, including third-party exclusives such as Drunk Elephant, Fenty Beauty, First Aid Beauty, Fresh, SUNDAY RILEY and Supergoop!, as well as Sephora’s private-label collection.
• The new store will include a “Beauty Shout-Out” kiosk, which is currently not available in the retailer’s existing outlets. The kiosk will feature a screen displaying Sephora’s best-selling products and will play videos submitted by the brand’s community members.

Pomelo Partners with Grab To Launch Grab Fashion Apparel (January 5) Wartasaya.com

• Multichannel fashion retailer Pomelo has partnered with Singapore-based ride-hailing company Grab to launch a new limited-edition apparel range. The collection, including accessories, leather jackets and t-shirts, will be designed in-house and will feature six streetwear designs.
• The launch is designed to pay tribute to Grab’s drivers and employees who have continued to serve the community throughout the pandemic. The collection will be available at Pomelo’s online store and app in Thailand, Malaysia and Singapore.

Maison Margiela Launches a New Fashion Store in Shanghai (January 5) Insideretail.asia

• Luxury fashion chain Maison Margiela has opened a new concept store in Shanghai. The store concept is designed by Dutch architecture studio Anne Holtrop and is the retailer’s first outlet in China featuring the new design concept.
• The store design claims to embody minimalist concepts and includes elements such as artisan-made furnishings and natural shades of plaster. The store features the complete range of Maison Margiela’s ready-to-wear apparel for women and men, as well as eyewear, footwear, fragrances, jewelry and small leather goods.