Urban Outfitter’s CEO Richard Hayne didn’t have good things to say about today’s harsh retail environment. According to the CEO, e-commerce is to blame for the landscape in retail today.
He gave this assessment after his own company delivered results for the quarter that left little to impress. Sales grew less than 2%.
The overabundance of stores out there is what he compared the housing market to. According to him, online sales are cannibalizing store sales, reducing foot traffic and eroding margins.
The US market is over-saturated with retail space, and far too much of that space is occupied by stores selling apparel.
Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce. Our industry, not unlike the housing industry, saw too much square footage capacity added in the 1990s and early 2000s.
Thousands of new doors opened and rents soared. This created a bubble, and like housing, that bubble has now burst. We are seeing the results, doors shuttering and rents retreating. This trend will continue for the foreseeable future, and may even accelerate.
Is it safe to say that the mall era is officially soon over? Retail stores may not make it.
Disclaimer: We have no position in Urban Outfitters, Inc. (NASDAQ: URBN) and have not been compensated for this article.