J.C. Penney

Analyst David Swartz says department stores such as J.C. Penney should close some locations.

After a bruising year, U.S. department stores and apparel retailers will seek to bounce back in 2020 by closing more locations, shrinking their shops and adding more experiences to attract customers — like old-fashioned tailoring and trendy in-store cafes.

In 2019 the stores lost ground as consumers continued their steady migration to Amazon.com and other competitors. While Macy’s and Gap have invested in a better in-store experience, it’s in doubt whether that will be enough to restore their former stature.

Department stores were the worst sector on the S&P 500 in 2019, and Macy’s and Gap, along with Kohl’s, L Brands and Nordstrom, were among the poorest-performing individual stocks in the index. Revenue has flattened for many companies, with department stores and apparel chains losing market share to online and discount retailers like Ross Stores Inc. and TJX Cos., which owns Marshalls and T.J. Maxx.

Meanwhile the retail apocalypse has dragged on. More than 7,600 stores closed last year through October, a record for that point in the year, according to Credit Suisse.

David Swartz, an analyst for Morningstar Investment Service, said department stores have to scale down their store fleets. He named Macy’s and J.C. Penney Co.

“I think we’re going to see some major changes next year,” he said in late December.

Gap plans to shut about 230 stores as it focuses on its Old Navy and Athleta brands. Preppy apparel retailer Abercrombie & Fitch Co. is also closing flagship stores.

Even if stores don’t close, they may shrink because there’s less need for massive selling spaces when shoppers buy so much online.

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