Coronavirus surge and no stimulus will result in ‘empty storefronts’ nationwide
The recent spike in coronavirus cases, coupled with the government's failure to pass another stimulus package, is compounding the stress and anxiety felt by hundreds of thousands of retailers across the country.
"I'm afraid if we keep having the coronavirus cases we are having, and if we experience some kind of additional lockdown, we will have many empty storefronts in our country," said Tom McGee, CEO of the International Council of Shopping Centers. Yahoo Finance Live said, adding that the situation will continue to get worse. "I think it is crucial for the government to act."
Retailers of all sizes are turning to President-Elect Joe Biden's administration for financial aid after the Trump administration passed the US 2.2 trillion Coronavirus Aid, Aid, and Economic Security (CARES) Bill Dollar, which included $ 659 billion for small businesses, was not enough relief. Biden has pledged to improve and revise the Paycheck Protection Program (PPP) as part of a larger aid package to better help retailers cope with declining sales.
"We're at the epicenter of the crisis," said McGee. “While the CARES law was good for the employees, the government has a lot more to do. I wish they did yesterday and I sure want them to act now. There is so much pressure, especially on small businesses who are 70% of tenants in shopping malls across the country. "
Some lawmakers are pushing for targeted commercial rents easing as retailers do whatever they can to fight the pandemic. In a letter to Biden earlier this month, New York State Senator Michael Gianaris urged rent forgiveness, writing, “We need robust and targeted relief from residential and commercial rents, ideally in the form of rent cancellation and forgiveness. Access to interest free loans would also be of great help so people can stay in their homes and keep their place of business until they get back on their feet. "
A recent survey by the National Retail Federation and PJ Solomon found that 73% of stores closed at least three-quarters of their brick and mortar locations at the height of the lockdown, and more than 90% of retailers asked for rent relief. According to the NRF, the most common agreements reached between tenants and landlords included co-ownership rights and late kick-out clauses for retailers.
Widening the gap between winners and losers
While the pandemic closed small businesses and left many on the verge of bankruptcy, it has also proven to be a boon for retail giants. Amazon (AMZN) beat Wall Street estimates in the third quarter with a 37% jump in sales. Target's digital like-for-like sales (TGT) rose 155%, while Walmart (WMT) US e-commerce sales rose 79%. Home Depot and Lowes also saw sales grow as consumers adjust their buying habits and spend more money on home improvement projects.
"The winners will win big," former Toys R Us CEO Jerry Storch recently told Yahoo Finance Live. “You will have the whole stake in the hands of Walmart, Target, Dollar General…. At the end of the day, bricks and mortar get smaller and e-commerce bigger. "
The pandemic has forever changed the trading landscape, widening the gap between winners and losers. In October, sales in hardware stores and garden stores rose 0.9% from September and 19.5% year-on-year, while sales in clothing and accessories stores rose 4.2% from the previous month and 12 from the previous year , 6% decreased. The shift in consumer behavior is particularly problematic for department stores as well-known names such as Century 21, J. C. Penney, Lord & Taylor and Neiman Marcus have filed for bankruptcy in the past eight months.
NEW YORK, UNITED STATES - 9/25/2020: Century 21 Stores, a legendary New York discount department store chain, have filed for bankruptcy and planned to close. She became the youngest victim of the retail industry carnage that accelerated during the pandemic.
"Department stores are dying ... If we look at the number of retail sales in October, these are dying segments," said Storch. “Don't think for a second that anyone in this world needs a department store. They disappeared a long time ago in most countries, and that is exactly what will happen [in the US]. "
While 2020 has certainly been a difficult year for retailers, 2021 may not offer much of a relief. The rising number of coronavirus cases has led state and local governments to put more stringent restrictions in place, adding further strain to retailers already suffering from the changing retail landscape.
"In the future there will be massive store closures and major bankruptcies," said Storch. "It will lead to massive consolidation because the big boys will get bigger and eat up all the stake and the little boys will go completely out of business."
Seana Smith anchors Yahoo Finance Live's ET program at 3:00 p.m. CET. Follow her on Twitter @SeanaNSmith
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