Your Local Kohl's and Nordstrom Might Be Closing In 2023

More department store closures are expected in 2023, as some popular retailers struggle to adapt to the changing retail landscape and economic challenges.

Photo by(Mike Mozart/Flickr)

UBS investing experts have warned of another wave of the "retail apocalypse," citing the loss of 1,800 stores between January 2020 and March 2021, and the declining sales of mid-tier retailers such as Nordstrom and Kohl's. This article discusses the factors driving the closures and the strategies adopted by some department stores to survive and recover from the pandemic.

Macy's Leads the Way with 125 Store Closures

Macy's announced plans to close 125 locations over the next three years, as part of its ongoing transformation to a more digital and customer-centric business. The company has been facing declining sales, increased competition, and rising costs, and has closed or sold more than 200 stores since 2015. My 2nd January article, “Mass Closures of Macy's Stores - 125 Stores Closing. What Should You Expect?” is particularly relevant to this.

However, Macy's is not alone in its struggles, as other department stores have also undergone restructuring and downsizing, or have gone bankrupt.

The Shift to Online and the Pandemic's Impact

Since 2017, many department stores have been shifting from their traditional brick-and-mortar model to a fully online model, to meet the growing demand for convenience, variety, and personalized experiences. The pandemic accelerated this trend, as shoppers turned to e-commerce for safety, and as retailers closed or reduced their physical store hours.

However, this shift has also exposed the vulnerabilities of some retailers, such as their reliance on foot traffic, their high fixed costs, and their lack of differentiation or innovation.

Furthermore, the pandemic has also caused disruptions in the supply chain, disrupted consumer behavior, and increased uncertainty and volatility. It has reduced discretionary spending, accelerated the shift to value-consciousness, and intensified the competition for a share of the online market. As a result, many retailers have struggled to maintain their sales and profits, and have had to resort to discounts, promotions, and cost-cutting measures to survive.

Nordstrom and Kohl's Report Lower Third-Quarter Sales

Nordstrom and Kohl's are among the department stores that have reported lower third-quarter sales compared to last year, despite the easing of pandemic restrictions and the resumption of some normal activities. These retailers have relied on various strategies to cope with the pandemic's challenges, such as expanding their online presence, forming brand partnerships, increasing beauty sales, and opening off-price stores. However, these strategies have not been enough to offset the negative effects of the pandemic, and the uncertainty and caution among consumers.

Fears of a recession and the rising inflation have also contributed to the less-than-impressive holiday sales trends, as shoppers have turned to cheaper and more practical options, such as discount chains, grocery stores, and home improvement stores. This shift has intensified the pressure on mid-tier retailers, which have limited resources and low margins, and have struggled to offer competitive prices, quality, and service.

UBS Predicts Department Store Sales Will "Remain Under Pressure"

UBS analysts have predicted that department store sales will "remain under pressure" in the first half of 2023, based on the Commerce Department data and their own analysis. The analysts have cited the increasing competition from luxury and off-price retailers, the declining sales of department stores, and the uncertain economic and consumer environment as the main factors affecting the outlook for department stores.

The analysts have also noted that the trends are "likely not good" for department stores, and have called on them to adopt more transformative and customer-centric strategies to survive and thrive.

Conclusion

Department store closures are expected to continue in 2023, as retailers face increasing competition, changing consumer preferences, and economic challenges. Macy's has already announced plans to close 125 locations, and other major retailers such as Nordstrom and Kohl's could follow suit. The shift to online and the pandemic's impact have disrupted the retail industry and put pressure on retailers to close unprofitable locations or adapt to the new reality.

However, not all retailers have suffered equally, and some have found ways to survive and recover, such as through brand partnerships, beauty sales, and off-price stores. Despite some hopeful signs in early 2022, department store sales have remained under pressure, due to the recession fears, the rising inflation, and the preference for cheaper options.

UBS analysts have predicted that the pressure on department store sales will continue in the first half of 2023, and have advised retailers to adopt more transformative and customer-centric strategies.

What Are Your Thoughts?

What are your thoughts on the future of department stores? Have you noticed any department store closures in your area? How has the pandemic and the shift to online affected your shopping habits and preferences?

Let me know what you think in the comments below!