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Coronavirus surge and no stimulus will result in ‘empty storefronts’ nationwide

Seana Smith
·4 min read

The latest surge in coronavirus cases, coupled with the government’s failure to pass another stimulus package, is exacerbating the stress and anxiety felt by hundreds of thousands of retailers nationwide.

“I fear if we continue to have the coronavirus cases we're having right now, and that we experience some type of additional lockdown, we will have a lot of empty storefronts across our country,” Tom McGee, International Council of Shopping Centers CEO, told Yahoo Finance Live, adding that the situation is about to go from bad to worse. “I think it's critical for the government to act.”

Retailers of all sizes are looking to President-elect Joe Biden’s administration for financial help after the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by the Trump administration, which included $659 billion for small businesses, failed to provide enough relief. Biden has pledged to improve and revamp the Paycheck Protection Program (PPP) as part of a larger relief package to better assist retailers as they cope with declining sales.

“We're at the epicenter of the crisis,” said McGee. “While the CARES Act was good for staff, the government needs to do a whole lot more. I wish they would have done it yesterday and certainly would like them to act now. There's so much pressure, particularly on small businesses, which are 70% of the tenants in shopping centers around the country. “

Some lawmakers are pushing for targeted commercial rent relief as retailers do all they can to combat the pandemic. In a letter to Biden earlier this month, New York state Senator Michael Gianaris pushed for rent forgiveness, writing “We need robust and targeted residential and commercial rent relief, ideally in the form of rent cancellation and forgiveness. Access to no/low interest loans would also be a great help, so that people can remain in their homes and maintain their places of business until they can get back on their feet.”

A recent survey by the National Retail Federation and PJ Solomon found that at the peak of the lockdown, 73% of stores closed at least three-quarters of their brick-and-mortar locations and more than 90% of retailers asked for some rent relief. According to the NRF, the most common agreement reached between tenants and landlords included co-tenancy rights and delayed kick-out clauses for retailers.

Widening gap between winners and losers

While the pandemic has shuttered small businesses and left many on the brink of bankruptcy, it has also proven to be a boon for retail giants. Amazon (AMZN) topped Wall Street estimates in the third quarter with revenue jumping 37%. Target’s (TGT) digital comparable sales grew 155%, while Walmart’s (WMT) U.S. e-commerce sales soared 79%. Home Depot and Lowe’s have also seen a boost in sales as consumers adjust their purchasing habits and spend more money on home improvement projects.

“The winners are going to win big,” former Toys R Us CEO Jerry Storch recently told Yahoo Finance Live. “You're going to have all the share in the hands of Walmart, Target, Dollar General…. At the end of the day, bricks and mortar will be smaller, and e-commerce will be bigger.”

The pandemic has forever altered the retail landscape, widening the gap between the winners and losers. During the month of October, sales at home improvement and gardening stores increased 0.9% from September and 19.5% from a year ago, while clothing and accessories store sales was down 4.2% from a month ago and down 12.6% from a year ago. The shift in consumer behavior is especially troublesome for department stores, with well-known names like Century 21, J.C. Penney, Lord & Taylor, and Neiman Marcus filing for bankruptcy over the past eight months.

NEW YORK, UNITED STATES - 2020/09/25: A view of a Century 21 department store in Lower Manhattan. Century 21 Stores, an iconic New York discount department store chain, filed for bankruptcy with plans to shutdown, becoming the latest victim of the retail industry carnage that's accelerated during the pandemic. (Photo by John Nacion/SOPA Images/LightRocket via Getty Images)
NEW YORK, UNITED STATES - 2020/09/25: Century 21 Stores, an iconic New York discount department store chain, filed for bankruptcy with plans to shutdown, becoming the latest victim of the retail industry carnage that's accelerated during the pandemic.

“Department stores are dying… When we look at the October [retail sales] number, these are dying segments,” said Storch. “Don't think for a second that anybody needs a department store in this world. They disappeared a long time ago in most countries, and that's what's going to happen [in the U.S.].”

While 2020 has certainly been a tough year for retailers, 2021 might not offer much relief. The rising coronavirus case count has prompted state and local governments to implement tighter restrictions, placing further strain on those retailers already suffering from the changing retail landscape.

“There is going to be massive store closures and huge bankruptcies in the future,” said Storch. “It's going to lead to massive consolidation, because the big guys are going to get bigger and eat up all the share, and the little guys are going totally out of business.”

Seana Smith anchors Yahoo Finance Live’s 3-5 pm ET program. Follow her on Twitter @SeanaNSmith