100,000 Stores Closed by 2025? That's What UBS Analysts Expect

The word that Neiman Marcus was looking at bankruptcy procedures came as a huge surprise to some, and to others, virtually no surprise at all. Everybody, however, is likely to be at least a little surprised by one projection out of UBS, in which as many as 100,000 stores could be closed in the US by 2025. So for those who like their retail therapy up close and personal, better start figuring out how to get the equivalent out of online shopping, because it may be all that's left.

Retail Armageddon May Be Closer Than It Appears

While there's a full-on retail armageddon going on right now, it's clear that that particular breed is more a temporary thing than a permanent one. At least, we all hope it is. While it's clear that some stores will never make the transition from “closed by order of the government” to “open again”, it's just as clear that some stores will make the comeback.

It's obvious, though, that April will be a disaster for retailers, and March—having lost half its opening hours to “15 Days to Slow the Spread”—likely didn't fare a lot better. But March was at least only half a problem month, and in some cases, buoyed by a strong holiday shopping season and a fairly normal January / February period. There's little to support April except possibly May and June, and May's not looking all that great across a large swath of the country.

An Apocalypse Doesn't Mean What It Used To

There is some reason to take heart, though; apocalypses are not as universal as you might believe. While all retailers are expected to take at least some kind of hit, the retail apocalypse isn't going to be nearly as big a disaster in some places as it will be in others.

Clothiers and apparel retailers are likely to take the biggest hit. They're set to account for nearly one in four closures on their own, with about 24,000 expected closures over the next five years. They won't be alone, though, as electronics retailers are expected to shutter by a little over one in 10, at 12,000 closures.

Some Retailers May Not Even Notice Much Difference

Several retailers are particularly well-positioned to take this hit. Interestingly, they're also the same retailers that are managing to weather the coronavirus storm. Stock-up retailers like Walmart (NYSE: WMT), Costco (NASDAQ: COST) and Target (NYSE: TGT) are all set to come out on the other side comparatively unscathed.

Additionally, home improvement stores like Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) are looking to do well here. Dollar stores are comparatively safe from closures, and the “off-price retailers” like TJ Maxx (NYSE: TJX) and Ross Stores (NASDAQ: ROST) are well protected as well thanks to their attractive pricing structures. Our own research called TJ Maxx a buy back in late March.

The Biggest Winner? No Surprise Here

The biggest winner in all this is, unquestionably, anybody who's bulked up their online presence. This is true not only for the stores we've seen so far—Walmart and Target especially—but also for the stores we haven't. Stores like furniture retailer Wayfair (NYSE: W)  and pretty-much-everything retailer Amazon (NASDAQ: AMZN) are particularly well-positioned to accommodate these kinds of downturns and do well on the other side. Essentially, as Moody's puts it, the fittest retailers are the ones likely to come out ahead.

Basically, the winners here are companies that do well with online operations. Whether it's mainly online ventures like Amazon and Wayfair, or physical retailers that are adapting to turn their storefronts into part-time fulfillment centers, that online connection is saving businesses. That's at least part of why Neiman Marcus investors were so incensed when Neiman kept MyTheresa out of the picture during the last round of debt contention. The mall-facing retailers aren't doing well with keeping up on the online side of things, and they're losing ground accordingly.

That ability to use any computer or smartphone to shop at any time is valuable, and during a pandemic, particularly so. We knew online was changing things, but to this extent? That was much harder to see coming, and for retailers, it may mean the difference between being open and closed for good.