It's that time of year again: Finish Line just announced it's closing up to a quarter of its stores in the next four years, a day after Macy's said it's shuttering 36 of its locations this spring.
The plan encompasses 150 Finish Line locations and will improve profitability, the athletic-wear retailer said in a statement. On average, the stores set to close make $1 million in sales a year, half of what a typical Finish Line makes.
Lots of major mall chains are announcing store closures after a dismal holiday season turned the dagger in what was already a lackluster year of sales. But it doesn't mean that physical retail is totally dying or that the chains you grew up with are doomed. Rather, it's more evidence of the ongoing exodus of national retailers from America's average and below-average malls, where the amount they're spending on operating stores can no longer be justified by slow sales.
Finish Line executives said on a call today that while it will close underperforming stores, it will "selectively open new stores in the best-of-class malls and invest in our top stores to strengthen customer experience."
Macy's, while it closes stores and cuts thousands of jobs, said it will open five new Macy's and Bloomingdale's locations at high-end shopping centers in places like Los Angeles and Norwalk, Conn.
The retail industry ranks malls by letter grade, from A malls — the best ones — down to D malls, which are fighting to survive. In between come B malls, which are stable and often considered the "third-best malls in five-mall towns," and C malls, which are troubled but hanging on.
Macy's is redoing a store at Century City in Los Angeles, which is considered an A++ mall by real estate research firm Green Street Advisors. The firm, in a report last year, said Century City brings in more than $1,100 in sales per square foot with an occupancy rate of 98%. Its website lists tenants like Tesla, Apple and Burberry. Elsewhere in the state, Buena Park Downtown is rated as a C mall, with $245 in sales per square foot and a 72% occupancy rate. Its website lists a number of chains that aren't well-known nationally. It also has a Sears, Walmart and two Auntie Anne's.
Retailers are angling to prune out their presence in lower-tier malls and win space in better malls, where they can make more money off a more affluent customer base.
At the same time, many experts say that America simply has too much retail space, pointing to last winter's wave of bankruptcies out of companies like Caché, Delia's and C. Wonder.
Many of the chains that have announced store closures in the past year believe they can redirect customers to nearby locations or win sales from them online. Gap Inc., which is closing 26% of the Gap brand stores in North America, said last year that the the 175 locations it's shuttering account for about $300 million in sales.
The company "made a very large concerted effort this time to really, really go after the customer with some e-mail pieces, direct-mail pieces, signage in stores to try and recapture to the next closest Gap store as well as online," CFO Sabrina Simmons said on a call in August.
At Finish Line, the closing stores represent $150 million in sales or 8%, of the company's $1.8 billion annual total.
"We fully expect to recapture a portion of the approximately $150 million in annual sales these stores generate through increased traffic and volumes at nearby locations and on our digital sites," Finish Line CFO Edward Wilhelm said on today's call.
And there's a chance that some recapture could also come from new stores in A malls, if the chain can get the space.