After Record Store Closures Caused by the Pandemic, Legacy Retailers Look to Open Shops

For retail, hell hath no fury like a pandemic. Nearly 15,000 stores—equal to about 52 million square feet of retail space—were permanently shuttered in the U.S. in 2020, according to real estate services provider Cushman & Wakefield. That's a new record. Closures were led by retailers such as Ann Taylor’s parent Ascena, which filed for bankruptcy in late July, and Zara’s parent Inditex, with each slashing about 1,000 locations, per a report from Cushman & Wakefield on the outlook for retail released in March. But 2021 could provide some relief to the commercial real estate sector as the economy reopens, even though experts expect more stores to shutter. Conditions are ripe for retailers looking to grow, including ample real estate options, cheaper or more flexible rents and consumers willing to spend. Conditions are ripe for growth "We’re seeing great success in stores as they open up. People want to get shopping again," said Jen Foyle, global brand president of Aerie and chief creative officer for parent AEO. Indeed, legacy brick-and-mortar apparel retailers such as American Eagle's Aerie, Express and David’s Bridal see opportunities to expand this year. American Eagle in particular is aiming to open around 60 Aerie stores in 2021 in addition to about 30 locations for its activewear business, Offline, a sub-brand of Aerie. Activewear label Offline, a sub-brand of intimates banner Aerie, plans to open about 30 stores this year. "It's a good time to not only support our mall-based friends but also grow our footprint in Aerie," Foyle said. "Physical stores are still equally as important because we have two fit-intensive businesses." In fact, customers who shop both in-store and online are American Eagle and Aerie's best customers, Foyle said. "We still have new markets to enter," she explained. "Once we open, we see a nice play on the digital side. The effort there is to open the market from an omnichannel perspective." Stores remain an important touch point Meanwhile, David's Bridal, which emerged from bankruptcy just over two years ago only to see the number of weddings fall by between 40% and 60% in 2020, is also eyeing growth via brick and mortar. “We know we’ve got markets in the U.S. where there’s an opportunity to do service,” Jim Marcum, the retailer’s CEO, said. Though ecommerce played a dominant role last year, physical stores remain important for a retailer like David’s Bridal, where in-store fittings and customer service play a crucial role in the overall business. David’s Bridal sees an opportunity this year to add physical locations, which remain central to the retailer’s provision of high-touch customer service. That's particularly true as pandemic-related restrictions ease and weddings return, with pent-up demand boosting sales. Even Gap, which was scaling back its physical presence, plans to open between 30 and 40 Old Navy stores per year in small, underserved markets, while adding 20 to 30 locations per year for its Athleta banner for a total of 100 new stores, according to the retailer. Perfect time to test new concepts With Express close to completing the closure of the 100 stores it said it would mothball at the beginning of 2019, the retailer is now turning its attention to "fleet optimization," CEO Timothy Baxter said. This includes opening seven or eight more test stores for its new Express Edit format by the end of the year as the retailer figures out how to reach customers differently in the future. The new format, which may be a harbinger of where apparel stores in general are headed, is less than half the size of an average Express location. It also has a smaller product assortment curated to local tastes, is primarily situated in non-mall locations, has a shorter term lease and is cheaper to build due to its simpler design. "It's not really about the physical store being a showstopper; it's about the product really showing up in the location," Baxter said. "The idea is to be able to reach customers where they are," targeting shoppers who don't make it to malls as often. The shorter-term leases give Express more of an ability to test and learn, he said. "I do think opportunities will present themselves very differently than they have in the past due to the amount of available real estate, particularly in cities like New York," Baxter noted. Express is currently looking for new locations in New York and the surrounding areas to reestablish the brand's presence after permanently closing its Fifth Avenue, Madison Avenue and Manhattan Mall locations. "It's understanding how our consumers want to use and interact with physical locations, but it's also very strategic for us in terms of building brand relevance, acquiring new customers and getting a greater share of wallet from our existing customers," Baxter explained. "Stores are still a great way of marketing the brand."