U.S. retailers are hoping this year's holiday season is better than last year's to help slow the increase in bankruptcies and store closures across the country, a new BDO report shows.
BDO said retailers closed 7,282 stores in the first half, which is already beyond the just under 6,000 in all of 2018. A lackluster 2018 holiday season is partly to blame.
"The 2018 holiday season failed to meet expectations, with December retail sales dropping 1.6% from the month prior -- the weakest sales performance since December 2009," the report states.
Ten retailers filed for bankruptcy in the first quarter of 2019, BDO says, including Payless, Gymboree and Charlotte Russe, which together led to the closure of roughly 3,700 stores. Retailers that filed in July and August include Charming Charlie, Barney's, A'gaci and Avenue Stores.
Challenges for retailers so far this year include the government shutdown in January, bad weather across the country and higher cost of goods due to trade tariffs — all of which had consumers closing their wallets.
"U.S. tariffs on goods from China have forced some retailers to hike prices to maintain profit margins, which had an impact on retail sales," the report states.
What's more, BDO notes that the average taxpayer saw a 2.7% decline in his or her tax refund in 2019, which meant less money to spend in the spring.
More than 12,000 stores are expected to be closed this year, BDO says, citing Coresight Research. This stems from a combination of retailers going out of business or reducing their physical footprints.
Despite the gloomy outlook, BDO says overall retail sales remained solid through first-half 2019 "and continue to show positive signs, thanks to a strong economy, record low unemployment (currently 3.7%), and rising wages."
And while BDO describes the risk of a significant downturn in the retail sector as "slim" for the rest of this year, "retailers should remain cautious heading into 2020."
It says risks include the impact of the U.S.-China trade dispute and record consumer debt, which could cause consumers to spend less.
"Looking ahead through the end of 2019, we expect to see additional bankruptcy filings -- but at a slower pace than the first half of the year -- and for the heightened rate of store closures to continue," the report concludes.