Challenges for brick-and-mortar retailers, such as underperforming stores and chronic retail theft, has led retail operators to close stores to ease financial distress.
In 2023 and early 2024, several retailers revealed plans to close underperforming stores in their portfolios or those stores with leases that don’t make economic sense.
Athletic shoe retailer Foot Locker (FL) – Get Free Report in March 2023 said that it would close 400 of its stores in North America, including 275 Foot Locker and 125 Champs Sports stores, by 2026. The retailer will likely close stores with expiring leases, stores in less-successful malls and underperforming units.
Several retailers closed stores
Retailers have also begun to close stores because of theft and organized retail crime. Walgreens in 2021 and early 2022 closed seven stores in San Francisco because of crime. In October 2023, Target (TGT) – Get Free Report closed nine stores in four states because of theft and organized retail crime.
Walmart (WMT) – Get Free Report in 2023 closed 24 stores in 14 states and Washington, D.C., blaming underperformance and theft as central reasons for the closures. The retail giant also revealed that it will close a Walmart and a Walmart Neighborhood Market in the San Diego area on Feb. 9 after failed lease negotiations.
CVS (CVS) – Get Free Report in late 2021 said it would close as many as 900 stores by the end of 2024 — about 300 stores a year. The closures are part of its initiative to evaluate changes in population, consumer buying patterns and future health needs to determine if it has the right kinds of stores in the right locations for consumers and for the business.
A Rite Aid store on a city block.
Image source: Shutterstock
Rite Aid closing more stores in bankruptcy
Rite Aid had a much larger store closure story to tell after it filed for Chapter 11 bankruptcy on Oct. 15 as the pharmacy chain had faced tough competition from CVS CVS, Walgreens Boots Alliance WBA, Walmart and Costco COST for prescription business. It was also seeing more competition from a new venture, Mark Cuban’s CostPlus Drug Company, which offers discount prescriptions under the name CostPlus Drugs
Rite Aid’s problems grew significantly after the Department of Justice filed a civil lawsuit against the company in March 2023 alleging that its pharmacists inappropriately filled opioid prescriptions, contributing to the opioid epidemic after “repeatedly filled prescriptions for controlled substances with obvious red flags.” The lawsuit also alleged the company’s workers “intentionally deleted internal notes about suspicious prescribers.”
The company filed for bankruptcy protection to seek an automatic stay of any further legal action in the lawsuit. (The shares now trade under the ticker RADCQ.)
The company planned to negotiate a less expensive settlement that could be over $1 billion without the bankruptcy filing.
As part of its reorganization, Rite Aid filed a motion on Oct. 17 to reject store leases with plans to initially close 154 of its 2,100 stores. The company expanded that number to 209 on Nov. 2 as it filed a motion to reject another 24 store leases. In early December, it rejected 31 more leases.
Rite Aid wasn’t finished there. It entered 2024 with plans to close another 45 stores after filing motions and obtaining orders from Dec. 26 to Jan. 16 to reject store leases for a total of 254 closures.