Sandeep Mathrani, General Growth Properties (NYSE:GGP) CEO, strongly believes that high-end retailers such as Abercrombie & Fitch Co. (NYSE:ANF) and Gap, Inc. (NYSE:GPS) will close down stores since they are too big to maintain a profit. In order to achieve maximum profitability and productivity, Mathrani suggests that retailers downsize to a maximum of 500 stores.
According to Mathrani, the US is “over-retailed” and this causes pain to the entire retail industry. He wonders, “Who needs 800 Gap stores in one country?” Mathrani said that the ideal store number is around 500 to 600 for the likes of H&M. For the likes of Abercrombie & Fitch, the ideal size is just about 250 to 300 retail stores.
Abercrombie & Fitch and Gap
Since the post-recession period, both Abercrombie & Fitch and Gap have already closed down hundreds of stores to improve their respective posts in the retail industry. Gap, for example, has shut down about 500 North American stores since 2009. Last year, Gap’s total location square feet slid to 9.10 million from 11.50 million in 2009. The retail giant ended 2015 with less than 900 retail stores.
Abercrombie & Fitch, on the other hand, has shut down 235 stores in the US since the post-recession period. The company now has a total of 2.60 million square feet of location, which is well below the 4.10 million square feet recorded in 2009.
Brick-and-Mortar Stores In The Age of E-Commerce
Since 2006, department stores sales per square foot dropped 24% last year according to Green Street Advisers. According to the firm, huge brick-and-mortar retailers such as Macy’s, Inc. (NYSE:M) needs to shut down nearly 800 stores in the US. The decline in sales per square foot is highly attributed to expensive rent rates.
Moreover, J C Penney Co., Inc. (NYSE:JCP) needs to close 31% of its current retail stores, equivalent to 320 locations. Sears Holding Corporation (NASDAQ:SHLD), on the other hand, needs to shut down 43% of its current locations, also equivalent to about 300 stores, all this according to Mathrani.