Retail layoffs are far from over as more store closures loom

The retail industry's pain is being felt by its massive workforce.

Barely a quarter into 2017, year-to-date store closings have already topped the historical high of 2008, a Credit Suisse report said Thursday. About 2,880 stores have closed year to date, compared with 1,153 at the same time last year.

Since 60 percent of store closures are typically announced in the first five months of the year, Credit Suisse estimates there could be more than 8,640 store closings this year.

The impact of these closures — a mixture of shrinking store fleets and Chapter 11 filings — is already trickling into the industry's nearly 16 million jobs. Almost 30,000 retail workers lost their jobs in March, and more than 60,000 jobs have been eliminated since January.

March's report marked the worst two months for job creation in the retail industry since December 2009, according to the Bespoke Investment Group. The industry's shortfall contributed to the US creating only 98,000 jobs in March, compared with the 180,000 expected.

Some 58,500 retail jobs were added from March 2016.

"It's an industry that's in real flux," John Challenger, CEO of the Challenger, Gray & Christmas outplacement firm, told CNBC. "I do think that there are more cuts to come here, particularly in the department store group."

Indeed, the repercussions are far from over.

With less than one-third of properties generating 70 percent of total mall value, Cowen predicts some 20 percent of malls will need to close or be repurposed over the next decade. That's even as occupancy rates in the country's malls stood just below a multidecade high at the end of 2016, according to Cowen.

While many of the industry's struggles are the result of a shift to online shopping, massive overbuilding has also played a role. The number of U.S. malls has roughly quadrupled to 1,220 since 1970, while, the country's population has grown by less than half that amount over a comparable period. And as parts of that population flee towns with high unemployment or other economic or social shifts, the lowest-tier malls have become less relevant.

Whatever the reason, retailers will need to respond to the steady decline in mall traffic, which has fallen every quarter except one since January 2014, according to Cowen. While stores are still a crucial piece of retail — accounting for some 90 percent of the industry's sales — Chen analyzed how many stores several major chains should close over five years' time. Here's what he concluded.

Current U.S. store base: 1,013

Cowen estimated right-sized store range: 700 to 800

Percent of stores Cowen estimates could close: 26 percent

Penney's said earlier this year that it would exit nearly 140 stores this spring. While Chen said he was encouraged by that action, he expects more closures will be necessary.

Current U.S. store base: 666

Cowen estimated right-sized store range: 550 to 600

Percent of stores Cowen estimates could close: 14 percent

Like J.C. Penney, Macy's has already taken steps to dramatically reduce its square footage. However, Chen expects the department store will need to close more locations. At the same time, Macy's has runway to grow the footprint of its off-price Backstage concept from seven standalone stores to at least 250, Chen said.

Current U.S. store base: 118

Cowen estimated right-sized store range: 118

Percent of stores Cowen estimates could close: None

Nordstrom did not succumb to the same overbuilding as many of its lower-price competitors. As a result, Chen expects the chain's store count to remain relatively steady. Meanwhile, he said the company could add another 90 or so stores for its off-price Rack concept.

Current U.S. store base: 1,154

Cowen estimated right-sized store range: 1,000 to 1,100

Percent of stores Cowen estimates could close: 9 percent

Although Kohl's has more than 1,000 shops, its low presence in malls means it needs to close a smaller percentage of them than some of its competitors, Chen said. CEO Kevin Mansell has said that instead of closing stores, his goal is to shrink Kohl's locations so it stays relevant in the markets where it operates.

Current U.S. store base: 4,672

Cowen estimated right-sized store range: 4,850 to 5,050

Percent of stores Cowen estimates could open: 6 percent

Wal-Mart has said that it will slow its physical store expansion to invest in digital. However, as it adds smaller stores to its fleet, Chen sees an opportunity for the world's largest retailer to continue growing.

Current U.S. store base: 1,802

Cowen estimated right-sized store range: 1,875 to 1,975

Percent of stores Cowen estimates could open: 7 percent

Target is opening smaller stores in an effort to reach more urban shoppers. While Chen said that could lead to the closure of some of its larger locations, he expects the chain's overall store count to tick higher.

Current U.S. store base: 737

Cowen estimated right-sized store range: 600 to 650

Percent of stores Cowen estimates could close: 15 percent

Gap's store closures are already underway. In addition to the contraction Chen expects to continue at the Gap brand, he said its struggling Banana Republic label could stand to lose 35 percent of its store base. Meanwhile, he sees more opportunity for Gap's Old Navy and Athleta brands.

Current U.S. store base: 311

Cowen estimated right-sized store range: 175 to 225

Percent of stores Cowen estimates could close: 36 percent

Abercrombie will close 60 U.S. stores this year and more will be on the chopping block as its leases expire. Between both its namesake and Hollister brands, Chen said the company could close 180 stores.

Current U.S. store base: 812

Cowen estimated right-sized store range: 695 to 745

Percent of stores Cowen estimates could close: 11 percent

Chen says fellow teen retailer American Eagle would benefit by shaving its store count. However, the company's intimates label, Aerie, could open some 200 more stores.

Current U.S. store base: 324

Cowen estimated right-sized store range: 265 to 315

Percent of stores Cowen estimates could close: 10 percent

Moderately priced women's apparel has been a tough spot in retail. In addition to the closures Chen predicts at Ann Taylor, he expects its sister Loft brand to shrink.