JCPenney's store closures could push hundreds of dying shopping malls over the edge

A tidal wave of store closures is about to hit the US, and the result could be catastrophic for hundreds of lower-tier shopping malls.

JCPenney announced Friday that it would close up to 140 stores in the next couple months.

That follows decisions by Macy's and Sears to close a collective 218 stores in the first half of the year. Other mall-based stores including American Apparel, The Limited, Bebe, BCBG, and Payless have also recently announced that they are shutting down all or most of their stores.

The rate of closures is higher than in previous years, signaling a new reality for the retail industry that consists of far fewer stores, and ultimately fewer shopping malls.

"The signal sent by this [JCPenney] announcement – retailers are going to continue aggressively culling stores to appease Wall St," Says Ryan McCullough, senior economist for the commercial real estate firm CoStar Group.


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Most of the stores that close will likely be located in lower-tier shopping malls — those referred to in the industry as B, C, and D-level malls. These shopping malls are already struggling, and many contain storefronts that have already gone dark.

There are approximately 338 malls in the US — or roughly 31% of all malls — that are rated C-quality or lower, according to the real estate research firm Green Street Advisors.

8 retailers shrinking across America
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8 retailers shrinking across America

The Limited

The women's clothing retailer shut down all 250 of its stores in early January. 

"We're sad to say that all The Limited stores nationwide have officially closed their doors," the company said in an online statement. "But this isn't goodbye. The styles you love are still available online — we're just a quick click away 24 hours a day."


Macy's is closing 68 stores and laying off nearly 4,000 employees, beginning in early 2017. Ultimately, the retailer plans to shut down about 100 stores, or 15% of its store base, over the next couple of years.

The retailer has struggled to keep up with the rise of e-commerce. In early February, the Wall Street Journal reported that Macy's had received a takeover offer from Canadian retailer Hudson's Bay.


Sears plans to shutter 108 Kmart stores and 42 Sears stores by April.

Sears' downward spiral has analysts speculating that the company will file for bankruptcy and some of the brand's suppliers already cutting back on shipments. 

Wet Seal

The struggling teen retailer is closing all 171 of its stores, the company announced in late January. 

The closures come two years after Wet Seal closed 338 of its then-511 stores in January 2015, shortly before the company filed for bankruptcy protection. At the time, Wall Street analysts said that falling foot traffic at shopping malls played a major role in Wet Seal's death spiral.


The retailer is shuttering 120 locations, primarily in the US, the Star Tribune reported in early February. Currently, BCBG has 570 locations worldwide, and 175 in the US. 

In January, BCBG told Bloomberg that it would shift its focus away from brick-and-mortar stores, and instead double down on e-commerce and selling the BCBG brand through other retailers. 

In February, Women's Wear Daily reported that the retailer is considering filing for bankruptcy, with a source telling the publication BCBG is "shopping for bankruptcy attorneys."


The retailer announced in early February that it planned to shutter up to 25 locations in 2017.

Bebe's sales have been slumping in recent years. In the most recent quarter, the company reported that same-store sales dropped 10.5%, compared the same period a year ago, in which sales declined 2.5%.


The discount shoe retailer could close as many as 1,000 stores as part of a debt restructuring plan, sources told Bloomberg. Currently, Payless has about 4,400 locations worldwide, including 3,600 in North America.

In January, Reuters reported that Payless was working with attorneys to restructure debt worth roughly $655 million. Later in the month, Payless laid off 165 associates, including 110 employees at the Topeka corporate office, The Topeka-Capital Journal reported. 

American Apparel

The future of American Apparel's stores remains unknown, following the retailer's acquisition by Gildan Activewear Inc.

Gildan did not acquire the chain's 110 locations when it bought the American Apparel brand. If American Apparel doesn't find a buyer, then these stores will likely be shut down. 

While rumors circulated that the brand would be shuttering all locations immediately, the retailer denied these reports. Stores will not close for at least another three months, due to a 100-day license with Gildan, American Apparel spokeswoman Arielle Patrick told Business Insider in mid-January.

American Apparel declined to comment on what would happen after that point. 


The loss of department stores in particular — like JCPenney, Sears, and Macy's — will plunge many of these malls further into distress, and put some completely out of business. That's because department stores, also known as mall anchors, take up the large, multi-story buildings at shopping center entrances that are responsible for large portions of mall traffic and rental income.

"These B- and C-level malls are going to get increasingly dark and less appealing because they don't have as much to offer," says Mark Cohen, director of retail studies at Columbia Business School. "That creates a cycle of lack of investment, and eventually they will turn dark and dingy. Some mall owners will try to redevelop, and others will go into default."

Meanwhile, A-level malls, which are home to higher-end department stores like Nordstrom and Saks, are enjoying some of the highest occupancy rates and healthiest sales productivity in years.

The losses hitting lower-quality malls will have little-to-no effect on the highest tier of shopping centers.

"The polarization between good and bad centers is intensifying," McCullough says.

In rare cases where A-quality malls have been hit with closures, the mall owners are often able to find even more productive replacement tenants, like restaurants, movie theatres, or other retailers.

But the same can't be said for lower-tier malls.

"Class B and C malls have not been as successful replacing the anchors and are resorting to non-retail tenants to prop up cash flows. We expect that there will be a lot more attrition in the B/C mall segment over the coming years," McCullough says.

Cohen said the announcements from JCPenney, Sears, Macy's, and others is just the beginning of what will be an onslaught of additional closures this year.

"I think there are going to be hundreds and hundreds of stores closing that haven't been announced yet by these department stores for the rest of the year," Cohen said. "There's going to be an endless train of announcements."

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