Whether you're at Vintage Faire Mall or in a storefront in Oakdale, there are literal signs that retailers across the Northern San Joaquin Valley are in the midst of tough times.
At Vintage Faire in Modesto, Wilsons Leather used large signs in black, red and yellow to announce its demise. Elsewhere in the mall, Styles clothing store boasted discounts of as much as 50 percent off.
The clothing store Demo could top that with discounts of as much as 70 percent — it's closing, too. Even jewelry stores advertised clearance sales.
Nationwide, mall centers and other retailers are starting to feel the recoil from a rapid expansion in recent years that allowed retailers to aim stores at almost every niche, from shoppers who wanted Talbots clothes for their children to design centers for people wanting to give their home a new look.
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Now, consumers who are closing their wallets amid rising gasoline prices and a housing slump are forcing specialty retailers to pare their brands. While still healthy overall, mall centers in areas hardest hit by the housing downturn are suffering the most store shutdowns.
Retailers such as AnnTaylor Stores Corp., Talbots Inc. and Pacific Sunwear of California Inc. have closed hundreds of stores this year. Gadget-seller Sharper Image Corp. filed for bankruptcy protection last month and plans to shutter nearly half of its 184 stores.
That retrenchment, along with the Chapter 11 bankruptcy of catalog retailer Lillian Vernon Corp., marks the beginning of a wave of retail bankruptcies that's expected to go well beyond the home furnishing stores hurt by the housing malaise.
"This is economic Darwinism," said Dan Ansell, a partner at Greenberg Traurig LLP and chairman of its real estate operations division. "Those retailers and businesses that have a product that is desired by consumers will survive, and those who do not will not."
Unless the economy dramatically improves, Ansell said he believes retail bankruptcies this year could reach the highest level since the 1991 recession. More closings could leave gaping holes in the nation's retail centers, which have seen average vacancy rates creep to 7 percent or 8 percent from 5 percent over the past six months, according to data from NAI Global, a commercial real estate services firm.
The slowdown doesn't discriminate between large chains and locally owned stores.
In the valley in recent months, owners of stores such as Barker's Music, Youngdale's and Hammett's Women's Wear have announced plans to close. All cited the economy's downturn as at least a partial reason for closing.
In Oakdale, J. Haidlen Design Center closed one of its two stores, and is focusing less on retail, said manager and interior designer Gretchen Haidlen-Poncabare.
"It is a little unsettling," Haidlen-Poncabare said, adding that she's laid off five staff members, and eliminated Saturday hours at the remaining store. "You have the make the best of it and look for new opportunities."
David Solomon, president and chief executive officer of ReStore, NAI Global's retail division, expects the vacancy rate could hit 10 percent by the end of the year. Suzanne Mulvee, senior economist at Property & Portfolio Research, figures that vacancies could rise as high as 12.5 percent this year. Her figure includes retail spaces where tenants have defaulted on their rents.
Part of the problem, according to Mulvee, is that more retail space is coming to the market just as consumer demand is falling.
An additional 130 million square feet of retail space will become available this year, she predicted, on top of last year's 143 million. That is much higher than the average 100 million square feet added per year earlier in the decade.
Solomon said he doesn't think the situation will be as dire as in 1991, when the savings and loan crisis hurt the entire country.
Experts also say merchants are weathering downturns better because of new systems to control inventory and costs.
Nevertheless, consumers are seeing fewer stores that focus on specific niches, such as apparel for female baby boomers or clothing for surfing fans. That would differ from 17 years ago, when department stores felt the major shakeup as leveraged buyouts and fierce competition led to the demise of names such as Carter Hawley Hale Stores and Woodward & Lothrop.
But there's one common theme: the power of national discounters such as Wal-Mart Stores Inc., which helped seal the demise of regional discount chains last time around. Now, the discounters' clout is hurting consumer electronics stores such as CompUSA, which is closing most of its stores, and Circuit City Stores Inc., which posted dismal holiday sales.
Christina Avila, shopping at the Oak Park Mall in Kansas City, Mo. — which had more than half a dozen store vacancies — said she's cutting back because of the economy and spending more at Wal-Mart and Target.
"I'm more interested if they have clearance items," she said.
The industry pullback follows several years of rapid expansion and experimentation with a range of store formats as retailers enjoyed robust consumer spending fueled by rising home values. But the sharp spending drop has made stores rethink how to expand their businesses.
Jewelry retailer Zale Corp. announced more closings last month, meaning it plans to shutter almost 5 percent of its stores by the end of July. In January, Pacific Sunwear said it will close all 154 remaining Demo stores, which sell urban fashions. AnnTaylor is shutting down 13 percent of its stores and is delaying a new store concept aimed at female boomers, while Talbots is closing its 78 children's and men's apparel stores to focus on its core middle-aged female customer. Macy's also has said it will close nine stores.
And Wilsons The Leather Expert is closing a majority of its 260 mall locations, including the one in Modesto.
Analysts say they're watching to see if Circuit City closes any stores after posting a third-quarter loss and cutting its full-year profit outlook. Analysts also expect more store cutbacks at Sears Holdings Corp., which operates Kmart and Sears stores.
Some shoppers won't miss the casualties.
"They have nice clothes, nice urban wear, but their prices (are) a little high," said Tasha Burts, 35, of Demo at the Dolphin Mall west of downtown Miami. She walked out empty-handed.
Mall operators Taubman Group and Simon Property Group say their top tenants — the department stores and other big chains that anchor most shopping centers — are in good financial shape.
Bill Taubman, chief operating officer of Taubman Group, which owns malls in the United States, predicts more store closings and bankruptcies than last year, but doesn't think they will reach historic highs.
Recent home furnishings casualties included Bombay, and Levitz Furniture, which filed for bankruptcy in November and has been liquidating its inventory. Clothing stores, hurting because consumers see fashion spending as discretionary, could see widespread closures this year.
While the industry overall is experimenting less with new formats, Janet Hoffman, managing partner of the North American retail division of Accenture, expects the mood to be temporary.
"There is this undying belief in the retail industry that they have an idea that will work," Hoffman said, citing Abercrombie & Fitch Co.'s new lingerie chain Gilly Hicks. "A year or 18 months from now you will see new ones at play."
Bee staff writer Ben van der Meer can be reached at email@example.com or 578-2331.