The streak of major retailers shutting down hundreds of stores did not end in 2024. There is an anticipation that widespread retail closures will continue in 2025. Some potential causes of such store closures and scaling back on expenditure are economic impact and shifts in consumer shopping trends.
Nonetheless, the biggest names in the retail industry clutch on tightly to their position as head of the pack. For example, Walmart (WMT) raised its sales expectations for the 2025 financial year. After the hefty profits amassed during the last holiday shopping season, the retail giant is anticipating an increase in earnings per head this year.
Likewise, Target (TGT) went public with its fiscal projections in mid-January. The retail chain is expecting a 1.5% increase in store sales by Q4. In the face of these latest in retail news, some retail companies are struggling to stay afloat. Some of these struggling businesses are undergoing store closures and business downsizing.
In the long list of businesses that have filed for bankruptcy this year, some popular names are popping up. Examples are Bowflex, Body Shop, Party City, Red Lobster and Joann Fabrics. In the case of Joann, the craft and textile retailer has filed for a Chapter 11 bankruptcy twice in January alone. Interestingly, Joann has held its ground in the retail industry for the past 80 years. In the bankruptcy filing, Joann Fabrics cited untenable debt and unexpected inventory as responsible for its sudden insolvency.
A year on year comparison of bankruptcy filings from 2024 reveals that there has been a 14% spike so far. Consumers’ shift to online shopping is partly responsible for the downsizing of brick and mortar stores.
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Common Denominators Among Major Retailers Shutting Down Hundreds of Stores
The recent string of business downsizing and inventory liquidation cuts across almost all facets of retailers. However, careful analysis of the distress conditions of some of these retailers unravels some hidden commonalities.
For example, customer traffic at The Body Shop and Express largely consists of window shoppers. This customer behavior is forcing these retailers to place their inventory on a near-constant sale. What this means is that against keeping stock for about six months in advance, stores remain on their toes with inventory enough for a maximum of two months. Sales in these retail stores have gotten slow, as they operate out of shopping malls. Meanwhile, consumer shopping trends show a significant shift to online shopping.
Another popular pair having a common factor driving their inventory liquidation are Joann Fabrics and Party City. This duo has a reputation for specialty products. However, the big-time retailers whose brand allows for diversification of inventory are beating this duo at their games. The big-timers offer newer, improved, and tech-advanced products that may not fit into the mold of traditional products peddled by Party City and Joann Fabrics.
In addition, most of the big-time retailers even offer cheaper prices. So, it’s naturally a losing battle engaging in a market competition with high-end retailers like CostCo, Target or Walmart. In addition, these big names have cozied up to consumers’ shift to online shopping.
Auto Part Dealer Also a Major Retailer Shutting Down Hundreds of Stores
Retailers of consumer items are not the only ones heaving under the economic impact of changing customer behavior. For example, in the autos supplies industry, Advance Auto Parts (AAP) is really having it rough. The automotive parts retailer has almost 5,000 stores spread across North America.
At the tail end of 2024, this giant automotive parts dealer announced the closure of hundreds of its existing outlets, largely in the West Coast. Some of the AAP facilities that were shuttered are four distribution centers, 204 independent locations and 523 locations directly owned by the retailer. We can imagine the employment effect this would have on AAP’s workforce.
In November 2024, Advance Auto Parts signed the dotted line to cede the ownership of its Worldpac wholesaler business to an investment firm for $1.5 billion. While going public with this sale, AAP tagged it a major step in its whittling down process.
Why Is a AAP Shutting Down Hundreds of Stores?
In 2025, Advance Auto Parts put up 24 of its privately owned locations and 200 leased outlets up for sale. It probably seemed like a good metric on the books, having over 4,900 locations across the United States. However, such robust systems are often put to the test during economic whirlwinds, like the one presently sweeping through the retail industry.
According to the 2024 record, even the most sturdy and resilient retail chains in the US, Walmart, has just a little over 4,000 outlets. So, for a specialized retailer which deals in parts for trucks and cars, 4,900 outlets is a pretty adventurous risk. The odds that the average American will spend their last buck on groceries than a carburetor that needs changing is very high. So, struggling businesses may want to look at the playbook of the major retailer shutting down hundreds of stores. They could glean a lesson, or two.
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Economic realities are causing many consumers to cut back on their purchases. Similarly, those that shop at all are using comparison sites and making a shift to online shopping services for their few purchases. This change in consumer shopping trends is taking market competition to new turfs and retailers that are unable to catch up are often forced to file for Chapter 11 bankruptcy. In the long run, the economic implications come full cycle by having negative employment effects on the working populace.