The retail sector has been deteriorating over the last two years after recovering from the Covid-19 pandemic when retailers were forced in 2020 to close their doors at the beginning of the pandemic and later reduce customer occupancy in stores once they reopened.
After the pandemic's impact hit retailers, almost 9,700 retail stores closed in 2020, according to Coresight Research. But the sector quickly improved in 2021, as about 5,230 stores closed that year.
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Then, the retail sector improved even more in 2022 as only 1,680 retailer locations closed, according to the National Retail Federation.
Related: Popular bankrupt retail chain to close 500 stores
But by 2022, higher interest rates and rising inflation increased retailers' costs of doing business causing financial distress. Businesses began to restructure their debts out of court or in bankruptcy filings and shut down store locations.
Store closings spiked in 2023, as retailers shut down about 4,070 locations, the National Retail Federation reported.
The retail sector worsened in 2024 as retail businesses closed 7,325 stores, the highest amount since 2020, according to a Coresight statement. Even more startling, the data firm expects closings to escalate to about 15,000 by the end of 2025.
Retailers have already announced massive store closings in 2025, with Party City planning to shut down all of its stores by Feb. 28 after filing for bankruptcy in December 2024. It seeks to dispose of 700 store leases in 45 states.
Crafts and fabrics retail chain Joann on Feb. 12 also announced a major shutdown of 500 stores across the U.S.
More closings can be expected from the retail sector this year due to financial distress and a need to eliminate underperforming stores.
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Kirkland's will close unprofitable stores
And now, specialty home décor and housewares retailer Kirkland's (KIRK) said on Feb. 18 that it plans to close or turn around about 6% of its 317 store locations in 35 states that are unprofitable as part of its strategic initiatives to improve profitability.
Related: Popular discount retailer files bankruptcy, closes all stores
Kirkland's updated its plans to convert struggling store locations to profitability and announced its fourth quarter 2024 preliminary results, in a company statement.
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Kirkland's expansion of its retail brands to include Kirkland's Home, Bed Bath & Beyond, buybuy Baby and Overstock prompted it to set new benchmarks and raise the bar of its expectations, it said.
The company identified a list of 6% of its stores that don't meet its profitability standards in its current format, to either turn around the locations to profitability through the term of the leases or close the unprofitable locations that don't make economic sense.
"Over the past year we delivered significant improvement in key operating metrics while driving consistent positive comparable brick-and-mortar store sales growth as we worked to stabilize the core Kirkland's Home business during the first phase of our transformation," said Kirkland's CEO Amy Sullivan.
"As we enter our next chapter with new assets through our partnership with Beyond, Inc., we are positioned to leverage our collective family of brands as we drive towards our path to profitability," Sullivan added.
Kirkland's will enhance its e-commerce site
The retailer said that it is not satisfied with its e-commerce performance and will collaborate with its retail partner Beyond to tap its expertise to enhance its e-commerce site experience and improve conversion, while Kirkland's internal team prioritizes profitability.
The company will address issues with inventory by eliminating SKU's that don't meet its margin standards after shipping, handling, and returns, the statement said.
Kirkland's will also expand its Kirkland Home private label distribution across its omnichannel brands. The expansion will include providing its exclusive private-label assortment of everyday basics and home décor in new Bed Bath & Beyond stores.
The retailer also plans to expand its e-commerce distribution in furniture, patio, and rugs, driving average order value through Kirkland's, Overstock, and other marketplaces.
Kirkland's expects its fourth quarter 2024 net sales to decline 0.6% to $148 million year-over-year, with a net income of $7.9 million, according to its preliminary financial results.
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