The previous CEO of Macy expects the retail shutdown to proceed via 2021 as Covid persists
Terry Lundgren, former CEO of Macy, told CNBC Monday that he expected the coronavirus disruption in retail outlets caused by the pandemic to persist well into next year, potentially leading to further store closings.
“We’re not done yet. … We’ll learn more when we get through the holiday season,” Lundgren said at the Power Lunch. “Retailers who have a weak balance sheet today will get no relief in January. It will get tougher. If the volume of purchases drops dramatically after Christmas, spending will remain.”
More than 11,000 retail location closings were announced in 2020, according to a report from real estate company CoStar Group. The closure came as the Covid-19 pandemic accelerated online shopping that was evident during the holiday season. For example, on Black Friday last month, online spending increased 22% year over year, according to Adobe Analytics.
“This film is not finished yet. I suspect we will see more closings in the course of 2021,” said Lundgren, who was Macy’s managing director from 2003 to 2017. He resigned from the Board of Directors in 2018.
This could be bad news for both small independent retailers and larger businesses in an economically fragile position, Lundgren said. However, he said that ultimately those companies with stationary locations that survive the pandemic will benefit.
“You will actually have the opportunity to grow back. That is the benefit of the green shoots, from this store closings perspective,” Lundgren said, predicting that it “probably won’t be too much more than in six months.”
While the pandemic and its economic aftermath were the top drivers for retail store closures this year, Lundgren claimed that another reason the high number was because the US had too many stores initially.
“We have been an overlaid country for more than a decade. We have tried to correct slowly and gradually, but honestly we have too many physical deals,” Lundgren said. “There had to be a contraction in physical deals,” he added. “It only accelerated aggressively here last year.”