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Thousands of Major Retailer Locations Could Close This Year

Douglas A. McIntyre

As Sears Holdings Corp. (SHLD) and Best Buy Co. Inc. (BBY) posted poor earnings, and analysts said Sears may close ever more stores, the possibility that major retailers will eliminate thousands of locations in total has increased.

Some announcements about "downsizing" have already been made. Office Depot Inc. (ODP) repeated it would shutter about 400 locations now that its merger with OfficeMax is complete. Rival Staples Inc. (NASDAQ:SLPS) announced it would shut down 140 locations. RadioShack Corp. (RSH) wanted to close 1,100 stores, but large lenders forced it to cut that number to about 200.

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And the year is not half over.

Most experts believe that Amazon.com Inc.'s (AMZN) success has caused much the problems for retailers. With its annual sales approaching $100 billion, it may be 20% the size of Wal-Mart Stores Inc. (WMT) this year, by the revenue measure. However, brick-and-mortar retailers may have damaged themselves just as much. Staples, OfficeMax and Office Depot opened thousands of stores over several decades. As they pushed for growth, those numbers grew higher and higher. These three were not the only ones in the office supply market. Walmart's Sam's Club and Costco Wholesale Corp. (COST) both took significant market share as well. Even without Amazon, the competition simply may have been too much.

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Consumer electronics retailers also may have overbuilt. Many major retailers have consumer electronics sections in their stores. Best Buy and RadioShack had other hurdles as well. The prices of many consumer electronics have plunged over the past few years, as competition among companies like Samsung and LG has sharpened, and the actual costs to make many products has plunged.

The list of retail segments with problems would not be complete without apparel. Gap Inc. (GPS) announced more bad numbers. In 2011, it disclosed it would close 21% of its stores. Since then, competition from smaller retailers, led by Abercrombie & Fitch Co. (ANF), has sharped. Gap many need to consider its store count again.

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The number of stores that major retailers will close this year may stretch further into the thousands, as plans for many are already in place.

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