CVS, Target and Others Set to Close Stores Due to Shifting Consumer Preferences and Shoplifting Concerns
Key Takeaways:
- Target plans to shut down nine stores across several states, citing a rise in shoplifting and organized retail crime.
- CVS is moving forward with its plans to close down many of its locations, with 900 closures expected by 2024.
- Other retailers, including Walgreens and Rite Aid, are also suffering and planning closures, indicating that the retail sector as a whole is facing challenges.
Target is the newest name being added to the list of retailers that are planning to close stores in the near future. On Tuesday, the retailer announced that rising crime and increased shoplifting were creating an unsafe environment for team members and customers, making the closures a necessary safety measure.
In the announcement, Target said “we cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance.”
The company noted that before making this decision, it invested in improving safety measures, and continues to do so, but “[d]espite our efforts, unfortunately, we continue to face fundamental challenges to operating these stores safely and successfully.”
The news comes just two weeks after a CVS manager was killed by a suspected shoplifter in Arizona, indicating that the problem is widespread and dangerous.
A changing consumer landscape poses challenges for brick-and-mortar retailers
The increase in shoplifting is only one of the growth obstacles that retailers have faced since the start of the pandemic. COVID-19 led to increased demand for online ordering, curbside pickup, and drive-throughs, all of which can put a dent in the foot traffic that brick-and-mortar retailers depend on for non-prescription purchases.
CVS announced a plan in 2021 to close 900 stores by 2024, citing “local market dynamics, population shifts, [and] a community’s store density” as some of the factors that led to the decision.
Walgreens also announced plans to shutter 150 stores, and Rite Aid proposed a plan to close 400 to 500.
However, not all retailers are feeling the heat — Costco earnings beat Wall Street’s expectations on Tuesday.
The issue for the major drugstore chains is largely a lack of identity: many consumers prefer local drugstores that offer personalized care, and stores like CVS and Walgreens don’t have enough unique product offerings to entice customers to choose them over a grocery store or a Costco.
Investor outlook
Target stock (NYSE: TGT) is down roughly 27% over the past year, and CVS stock (NYSE: CVS) is down about 25%. The recent wave of store closures and increasing safety threats isn’t helping to bolster investor confidence and serves as an indication that the sector is in trouble.
Indeed, a recent survey conducted by Deloitte indicated that the retail sector is expected to slow due to lowered consumer purchasing power and a preference to spend on services instead of items.
However, it’s also possible that CVS and Target have bottomed out and will resume an upward trajectory now that they’ve offloaded some of their deadweight.
The bottom line
Retailers like CVS and Target are struggling to deal with shifting consumer demand and increased shoplifting, and it’s not doing their stocks any favors. Investors should tread carefully.
