Malls Face Ruinous Crisis

By Douglas A. McIntyre Published Feb 29, 8:20AM EST

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Malls Face Ruinous Crisis — © zhudifeng / Getty Images

A new study forecasts that a global coronavirus pandemic could chop mall traffic severely, leaving both owners and department store retailers in deep trouble. It would be another blow to companies such as J.C. Penney Co. Inc. (NYSE: JCP) and Macy’s | M Price Prediction Inc. (NYSE: M). Medium-sized retailers, including Victoria’s Secret, The Gap and Old Navy, Footlocker, Aeropostale, and American Eagle Outfitters face severe difficulties as well.

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Coresight Research tracks shopping trends in the United States. The firm said it expects consumer shopping patterns to change if the virus spreads rapidly, and it is already seeing some effect:

This report draws on a proprietary Coresight Research survey that found many already are avoiding public places.

Over a quarter of respondents say they already avoid many crowded places—and that jumps to three-quarters if the outbreak worsens.

Hardest hit are likely to be malls, shopping centers and other crowded locations.

Restaurants, theaters and other discretionary spending destinations could also be hit.

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Presumably, restaurants include fast-food chains like McDonald’s and Starbucks.

Several wounded retailers cannot weather a period of sharp sales downturns. This includes J.C. Penney and what is left of Sears. While retailers like The Gap, which owns Banana Republic and Old Navy, have stronger balance sheets, they could end up with permanently smaller store footprints after an event that could chop sales into the double digits.

The problem is not merely what happens to sales at the retailers. Several employ close to 100,000 people. Macy’s has about 120,000 and J.C. Penney over 90,000. While a virus-driven business catastrophe might cause a loss of 1 million jobs across the U.S. economy, retailers would be hit harder than most industries.

The mall business was already shrinking. The spread of the coronavirus could knock it into a position from which it cannot recover.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.