Retailers seen closing stores, paring growth

By Nicole Maestri

NEW YORK (Reuters) - U.S. retailers will close stores and reduce square-footage growth plans this year to offset slowing sales, slumping stock prices, a saturated market and a penny conscious shopper, analysts said on Sunday.

"We've seen about 25,000 new stores open in our universe -- publicly traded specialty retailers -- between 2000 and 2007," said Brian Tunick, a J.P. Morgan analyst who covers specialty retailers, speaking at the National Retail Federation's annual conference.

"There's a lot of (retailers) out there that are over-stored right now," he said.

The NRF conference is taking place as economists debate whether the economy is in or near a recession. Retailers' stock prices have taken a hit as investors fret that consumer spending will falter amid the uncertain environment.

While the year has barely begun, some retailers have already announced plans to close stores.

Earlier this month, apparel retailer Talbots Inc (TLB.N) said it would exit its Talbots Kids and Mens lines, while Pacific Sunwear of California Inc (PSUN.O) said it would close its struggling chain of 154 demo stores, which sell urban inspired clothing.

The announcement came after Pacific Sunwear said last year that it would close its trendy One Thousand Steps shoe boutiques.

Tunick said that excluding its demo and One Thousand Steps stores, Pacific Sunwear will have about 800 stores, which will give it a chance to focus on improving its operating margins.

The "PacSun division used to be a 15 percent operating margin business three years ago. It's now about six," he said. "So the market hopes ... that they will get their margins up from six to 12 or 13."

Deborah Weinswig, a retail analyst at Citigroup, said at the conference that she expects J.C. Penney Co Inc (JCP.N) and Home Depot Inc (HD.N) to rein in square-footage growth plans.

"In terms of closings, we'll see Home Depot with closings; we'll see Macy's (M.N) with additional closings," she said.

Tunick said he expects Gap Inc (GPS.N) could pull back on its expansion plans.

"If we're not getting paid for growth, maybe we'll be paid for contraction," he said, describing the mentality of a retailer looking at closing stores as a means to boost its stock price.

Tunick said one worrisome trend that may lead to more store closings is the decline customers heading to malls, which has been taking place for the past few years.

"It's very scary to think that if we're at negative mall traffic right now ... what's going to happen if the consumer really slows down?" he said.