With COVID-19 receding and more consumers going back to brick-and-mortar shopping, the retail sector saw store openings well exceed closings in 2022, with mass and grocery retailers among chains driving space additions.
Major U.S.-based retailers unveiled plans to open approximately 7,860 stores in 2022, down 3.1% from roughly 8,115 announced openings in 2021, National Retail Federation contributor Patrick McKeever wrote in a recent NRF blog post. Meanwhile, retailers said they planned to shut about 1,680 stores, a 57.4% drop from approximately 3,945 announced closings in 2021. The data comes from analysis by The Daily on Retail, an investor-oriented research report founded by McKeever.
The improved store openings/closings ratio reflected a solid retail industry performance in 2022, as a 7% sales gain built on robust growth in 2021 and came amid elevated inflation, higher interest rates and the lapsing of pandemic-related government stimulus, he noted.
“Not surprisingly, consumers returned to many of their pre-pandemic shopping patterns throughout 2022, including a return to in-store shopping,” McKeever said in the blog.
In its “U.S. Retail Outlook Q4 2022” report, released earlier this month, commercial real estate and property investment firm Jones Lang LaSalle (JLL) said retail tenants absorbed almost 76 million square feet of space last year, the highest level since 2017 and more than double 38 million square feet space absorbed in 2019 before the pandemic. Restaurants, discounters, grocery stores and clothing stores were among the top retail segments opening new locations.
Ongoing high inflation had a heavy impact on consumers and discouraged some spending on non-essential items, namely in the latter part of 2022, according to JLL.
“Consumers chose to focus instead on necessities like groceries and gas, as well as services and experiences in a bid to return to a post-COVID normalcy,” the outlook report said. “Notwithstanding this strain on retail sales, retail real estate fundamentals were strong, as retailers and service tenants pushed to expand their footprints in anticipation of a return to spending.”
Retailer openings and closings
Dollar General led the retail field in 2022 in terms of announced store openings, McKeever reported in the NRF blog. The dollar store chain announced in December that it aimed to add approximately 1,050 new stores in fiscal 2023 to its base of 18,800-plus stores, as well as open 35 stores in Mexico by the close of 2023. Other store-opening leaders include rival Dollar Tree and its Family Dollar banner, Five Below, TJX Cos., Burlington Stores, Ross Stores, O’Reilly Automotive, AutoZone and Advance Auto Parts. In January, Dollar General reported opening its 19,000th location.
“As has been the case for some time, opening announcements were concentrated in the discount/dollar and off-price sectors, which have historically done well in good and bad economic times and have been less affected by online competition than other areas of retail,” McKeever explained.
Store opening plans among these retail segments included the following, according to McKeever:
• With over 8,000 locations, Dollar Tree aimed to open 190 stores under its namesake banner, while subsidiary Family Dollar was slated to add 400 new stores to its base of 8,000-plus outlets.
• Discount chain Five Below reported early last year that it plans to triple its store base to more than 3,500 locations by the fiscal 2030 year-end, with 925 to 1,000 new stores due to open over the next four years. The chain now has roughly 1,200 stores.
• In the off-price retail arena, TJX aimed to open 150 new stores in fiscal 2022 across its banners, encompassing some 4,700 stores. Burlington’s planned more than 115 net new stores for its base of approximately 840 stores. McKeever said Ross Stores met its 2022 store growth plans, opening 99 units for the year and lifting its total count to 2,019.
• Store opening plans for auto parts chains included O’Reilly Automotive at 360-370 net new stores (base of 5,780-plus stores), AutoZone with about 200 new stores (base of over 6,900 stores) and Advance Auto Parts at 125 to 150 new stores (base of about 5,000 stores).
Announcements for store closings “were down sharply” in 2022, noted McKeever. Sally Beauty led in announced closings, disclosing plans to shut roughly 350 locations of its more than 4,790-plus total stores. Sears Hometown announced that the banner would close all of its approximately 200 stores, while Foot Locker expected a net reduction of 90 stores for its base of over 2,850 stores with plans for 190 closures and 100 openings in fiscal 2022.
Chains also planning sizable store closings included Bed Bath & Beyond (150 of about 770 stores), Skechers (over 100 stores) and Rite Aid (145 of 2,400-plus stores). The latter reflected 63 closures Rite Aid announced in late 2021.
“On a combined basis, and including a few others not mentioned above, discount/dollar and off-price retailers announced plans to open about 3,230 stores, or more than 40% of all announced new stores for 2022,” McKeever stated.
Real estate activity perks up
JLL called 2022 a “banner year for retail real-estate performance” as the nation exited the pandemic. “Closing announcements and bankruptcies slowed significantly in 2022, while opening announcements were plentiful,” its outlook report said.
Retail segments that “aggressively pushed to expand their footprints” with new openings during the year, JLL reported, included discounters, home improvement and home goods retailers (medium and large retail spaces); quick-service restaurants, mobile retailers and local service providers (smaller spaces) and experiential retailers (accounting for 15% of leasing activity in 2022).
Neighborhood shopping centers—primarily anchored by supermarkets and local services—and general retail are “dominating demand,” while malls generally turned in an “uneven performance” in 2022, JLL said.
Of 23 retailer categories, the top 10 in terms of 2022 store-opening announcements were restaurants (3,376 stores), discount/variety (1,864), apparel (454), grocery (296), off-price (247), auto parts/supplies (200), home improvement (198), health and beauty (166), convenience (125) and discount department stores (120). Other store openings in the food/drug/mass retail channel included wholesale clubs (33) and mass merchants (27).
“Among the top retail categories announcing openings were restaurants, particularly QSRs and fast-casual concepts like Starbucks (2,000 new locations by 2025) and Chipotle (250 new locations). Oregon-based Dutch Bros. coffee concept is also expanding, with 125 locations planned,” JLL stated in the report. “Discount and dollar stores continue aggressive expansion, with nearly 2,000 new locations announced.
Dollar General led the group, announcing 1,100 new stores. Athleisure apparel stores, particularly clicks-to-bricks powerhouses like Lululemon, Athleta and Fabletics, all have new stores in the works in coming months.
“Grocers Aldi and Publix top the list of supermarkets with planned openings Aldi continues to aggressively expand, with 150 new stores announced,” JLL added. “Off-price retailers like TJ Maxx and Ross are also planning new stores in the next year.”
A notable trend for 2023 will be smaller store formats as retailers explore new concepts, according to JLL. The real estate firm noted that the average size of new leases declined to 3,185 square feet in the 2022 fourth quarter. JLL cited such small-footprint formats as Bloomie’s and Market by Macy’s; “shop-in-shop” concepts like Toys R Us in Macy’s, Ulta in Target and Petco in Lowe’s; and a smaller “digital-first” concept piloted by Best Buy.
“Given rising costs, many retailers will look to make every square foot of store space count. There are exceptions to this trend, however,” JLL said in its report. “Some retailers, like Target and H-E-B, are doubling down on larger store formats as a bid towards amplifying the shopper experience and allowing space for omnichannel fulfillment.”
Grocery retailers push ahead with expansion
Of 29 grand openings reported by Winsight Grocery Business in January, discount grocer Aldi accounted for over a third. Publix Super Markets, Meijer and hybrid retailer Foxtrot each opened two stores during the month.
Other retailers opening stores include H-E-B, Hmart, Natural Grocers, Mitsuwa Marketplace, Chef’Store, GoGrocer, Sprouts Farmers Market, Plum Market, Giant Food, Lidl, Whole Foods Market, Addie’s Grocery (pickup-only) and Market Basket.
In its “Grocers Grow Formats Big and Small” report, released last month, JLL said grocery retailers in 2022 generally upheld their brick-and-mortar expansion momentum from 2021. Smaller-format operators added more new units, whereas larger-box grocers added more square footage.
Aldi led the grocery retail segment with 49 new stores, well ahead of No. 2 Grocery Outlet at 28 new units and Publix at 25 new units. No other chains opened at least 20 stores in 2022. Next were Sprouts with 16 new openings, H-E-B with 12 and Whole Foods with 11.
H-E-B finished first in total new retail space among grocery retailers, adding 1.2 million square feet in 2022 versus the 1.175 million square feet added by Publix, according to the JLL report. They were followed by Aldi with 803,600 square feet of space, Grocery Outlet with 700,000 square feet, Whole Foods with 418,000 and Sprouts with 384,000 square feet.