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The most dramatic pullback in consumer spending in decades could transform the retail landscape, as thousands of stores and whole malls close down. And analysts expect prolonged woes in the industry as the dramatic changes in shopping behavior could linger for another two or three years amid worries about the deteriorating economy and rising layoffs.
"You are going to see a substantial retrenchment in the retail industry," said Rick Chesley, partner in the global bankruptcy and restructuring group at international law firm Paul Hastings. "The downturn has been catastrophic."
The retail casualties, which were first among home furnishing stores and then many apparel stores over the past year or so, are expected to cut across all sectors as shoppers have slashed their spending on non-essentials, from TVs to jewelry.
About 160,000 stores will have closed this year and 200,000 more could close next year, said Burt P. Flickinger III, managing director of consulting firm Strategic Resource Group. That would be the industry's biggest contraction in 35 years. Flickinger expects 2,000 to 3,000 malls to close in March and April.
AlixPartners, a turnaround consulting firm, predicts that 25.8 percent of 182 major retailers it tracks are facing major financial distress or will face a significant risk of filing for bankruptcy next year or in 2010 -- the highest level in the 10 years that the firm has been compiling the figures. That compares with the 4 percent to 7 percent that it predicted would face financial woes in the previous two years.
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