U.S. Retail: Earnings and Closures Reflect a Changing Industry

January 26, 2025

The U.S. retail sector is undergoing significant transformation as companies face a complex mix of opportunities and challenges. While earnings reports highlight success stories in value-oriented chains and e-commerce advancements, a wave of store closures underscores the difficulties traditional retailers face in adapting to shifting consumer behaviors, inflation, and rising competition.

Earnings: Mixed Results Reflect Diverging Strategies

Walmart: Leading the Pack

Walmart continues to outperform expectations, showcasing the resilience of value-driven retail. For its latest quarter ending October 31, 2024, Walmart reported adjusted earnings per share of $0.58, exceeding forecasts. The company raised its full-year profit outlook, reflecting its ability to attract higher-income shoppers looking for deals amid inflationary pressures. Its growing e-commerce presence has further solidified its market position.

Target: Facing Headwinds

Target reported a disappointing quarter, with adjusted earnings of $1.85 per share falling short of the expected $2.30. Revenue came in at $25.7 billion, slightly below forecasts. Comparable store sales declined by 1.9%, though digital sales grew by 10.8%. Target cited consumer budget constraints and adverse weather conditions as key challenges, prompting the company to lower its full-year earnings guidance.

Costco: Reliable, Yet Mixed

Costco reported year-over-year growth, with earnings of $3.92 per share and total sales of $57.33 billion. While the results marked an improvement, they fell short of analysts’ expectations. Despite this, Costco remains a leader in value retail, driven by its membership model and investments in e-commerce.

Macy’s: Struggling to Stay Relevant

Macy’s earnings reflected the challenges of traditional department stores. Comparable store sales fell 3.6% at Macy’s locations and 1.4% at Bloomingdale’s, though its cosmetics chain, Bluemercury, continued to grow. The company is focusing on profitability and streamlining operations as it grapples with cautious consumer spending.

Closures: Retail Shake-Up Intensifies

The earnings season is accompanied by announcements of widespread store closures. Analysts predict a record 15,000 closures in 2025, nearly double the 7,325 closures in 2024. These closures highlight the structural shifts occurring in retail as companies adapt to a changing landscape.

Big Lots: Bankruptcy Fallout

Big Lots, after filing for bankruptcy in late 2024, is closing approximately 500 stores. Efforts are being made to transfer up to 400 locations to Variety Wholesalers, with the remainder liquidated, signaling the retailer’s retreat from key markets.

Macy’s: Strategic Downsizing

Macy’s plans to shutter 66 underperforming stores by the end of 2025, reducing its store count to around 350. This is part of its broader strategy to focus on profitable locations and navigate a challenging retail environment.

Walgreens: Streamlining Operations

Walgreens is closing 1,200 stores over the next three years, with 500 closures planned in 2025. The pharmacy chain is addressing financial challenges while optimizing its store footprint.

Advance Auto Parts: Restructuring for Profitability

Advance Auto Parts will close 500 stores and 200 independent locations by mid-2025, as part of a restructuring plan to improve profitability amid sales pressures.

Kohl’s: Closing Underperformers

Kohl’s plans to shutter 27 underperforming stores by April 2025, representing about 3% of its portfolio. Additionally, its San Bernardino e-commerce fulfillment center will close by May 2025.

Party City: Complete Shutdown

Party City, after filing for bankruptcy, has announced plans to close all of its 700+ locations in 2025. Mounting debt and inflationary pressures have made it impossible for the retailer to remain viable.

Emerging Themes: A Retail Sector in Transition

1. **Value-Driven Retail**: Chains like Walmart and Costco are thriving as inflation-conscious consumers prioritize affordability. Their investments in e-commerce have further strengthened their appeal.
2. **E-Commerce and Omnichannel Growth**: Retailers investing in digital platforms are better positioned to capture shifting consumer behaviors. Walmart and Costco exemplify this trend, while others, like Target, are catching up.
3. **Traditional Retail Under Pressure**: Department stores and specialty retailers are grappling with declining foot traffic and a rise in online competitors like Shein and Temu. Macy’s and Kohl’s are scaling back physical locations to focus on profitability.
4. **The Rise of Closures**: The wave of closures, led by Big Lots, Macy’s, and Party City, reflects the broader disruption in the sector. Retailers unable to adapt to changing consumer preferences and economic pressures are being forced to retreat or restructure.

The Road Ahead

As the retail industry navigates this period of disruption, the focus will remain on adaptability. Retailers that can blend value, convenience, and digital transformation are poised to succeed, while those tied to outdated models face an uphill battle. The 2025 retail landscape is set to be defined by both opportunity and consolidation, reshaping how and where Americans shop.

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U.S. Retail

• Store Closures 2025

• Retail Earnings

• Walmart Performance

• Target Challenges

• Costco Growth

• Macy’s Downsizing

• Party City Bankruptcy

• E-commerce Advancements

Inflation and Retail

Value-Driven Retailers

Online Shopping Trends

Retail Industry Transformation

Retail Consolidation

Consumer Spending Shifts