Major retailers closing doors amid inflation, lower consumer demand
Major retailers closing doors amid inflation
Major retail chains are being forced to close thousands of their brick and mortar stores across the U.S.
Major U.S. retail chains like CVS and Macy's are being forced to close thousands of brick-and-mortar stores across the country.
Researchers say well over 3,400 retail stores are closing this year, which is about a 22% increase compared to last year at this time.
One of the main causing factors cited is inflation. According to the owners of Hollywood's iconic Arby's, California's $20 minimum wage law led them to shutter their business after 55 years.
"This is not a small matter. This is going to change communities," said John Taffer, executive producer and host of reality TV show Bar Rescue.
The top closures include Family Dollar at over 600 stores, followed by rue21, 99 Cents Only Stores, 7-11 and more.
RELATED: Here are the major retailers closing US stores in 2024
"Drugstores are not going to be there anymore. Restaurants are not going to be there anymore. So this is consequential not only financially from a real estate standpoint, but it's consequential in quality of life, availability of services," Taffer said.
Another reason driving these shutdowns is poor strategy, as several companies are carrying a lot of debt.
"Retail demand itself. I mean, it was flat this past month. Consumer sentiment, it's at a seven-month low right now. Inflation is having a big impact on consumer's purchases," said Gene Marks, president and CEO of Marks Group.
Retailers say they're also dealing with theft, and when coupled with the rise of online shopping, it's preventing customers from even entering stores in the first place.
RELATED: Target CEO: Retail theft may cost company over $1.2B this year
However, the former U.S. CEO of Toys "R" Us says the biggest issue is the sales-to-cost ratio.
"Retailers have to generate same store sales increases of three to four percent a year to be healthy. And, if they don’t do that, they can't pay the wage increases for their people, rent increases, cost of living, cost of doing business goes up by three or four percent a year," said Jerry Storch.
Overall, retail sales only grew 2.3% over the last year, and inflation sits at 3.3%. This means sales aren't keeping up with inflation, and consumers aren't buying as much.
While there isn't one reason across the board for these closures, inflation and weakening consumer demand will likely continue to cause problems for these struggling retailers.
Kelly O'Grady from FOX Business contributed to this report.
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