The coronavirus pandemic is forcing thousands of retail stores to close for weeks on end, which is kicking off a downward spiral for department stores and other mall-based retailers that could result in a surge of bankruptcies and permanent store closings.

"There's never been a fall of this level of retail traffic, and these retailers have very little ability to offset that level of sales decline," said Margaret Reid, senior portfolio manager with The Private Bank at Union Bank.

PVH Corp. CEO Manny Chirico said he expects 20% to 25% of all US stores to close in the next two to three years.

Even when stay-at-home orders are lifted, customers may continue to avoid mall-based stores. Cowen analysts are projecting holiday retail sales to decline by as much as 30%, and possibly even more.

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Retail experts and analysts are expecting a surge in bankruptcies and store closures as the coronavirus pandemic traps consumers at home for weeks on end and forces them to adopt new shopping habits that could alter the retail landscape for years to come.

Forced store closures and widespread job losses are driving sharp declines in customer traffic and spending, particularly at retailers deemed "nonessential." Foot traffic at all US retailers dropped as much as 98% in the last week of March, according to a Cowen analysis.

"In no other crisis have retail stores had to close overnight," said Margaret Reid, senior portfolio manager with The Private Bank at Union Bank. "There's never been a fall of this level of retail traffic, and these retailers have very little ability to offset that level of sales decline."

The shifts happening in the retail industry right now are boosting sales for some grocers, big-box retailers such as Walmart and Costco, and other stores deemed "essential."

But they are nothing short of a nightmare for department stores, apparel companies, and other mall-based retailers, analysts said.

"Retail companies are not built to have their stores closed for extended periods of time, and unfortunately we need to really plan for the worst and hope for the best," Manny Chirico, the CEO of PVH Corp., the owner of brands including Calvin Klein and Tommy Hilfiger, told CNBC this week.

He said he expects 20% to 25% of all US stores to close in the next two to three years. Before the pandemic, he said he was expecting that level of closures to take place over six years.

Department stores and apparel companies have for years battled weak demand stemming largely from the 2008 recession and evolving shopper habits, which triggered a period known as the retail apocalypse for its high level of retail bankruptcies and mass store closures.

Now, these retailers are facing traffic declines that are steeper than anything they saw during or after the recession, and it's unclear how some will survive.

"There's already an incredible amount of pain that's been felt in brick-and-mortar retail," Reid said. "This is absolutely another pivot point in the industry that will cause another round of considerable pain for the traditional store base here in the United States."

Some retailers are short on cash and canceling orders

Department stores are in "survival mode," Cowen analysts said. AP

Some retailers are taking cost-cutting measures such as furloughing workers and cutting executive pay to address severe liquidity challenges. Gap Inc. recently announced it would cancel its summer and fall orders to cut costs, and experts expect other brands to take similar measures.

"Department stores are in 'survival mode' as managements work to reduce all possible expenses and cash outflows given uncertainty of the duration of store closures and likely double digit [ecommerce] declines," Cowen analysts wrote in a recent note. "We believe all department stores are aggressively working with lenders on covenant terms and additional financing."

A number of mall-based stores, including JCPenney, Macy's, and Gap, are now ranked in the bottom quintile of retailers most likely to default, according to The StarMine Combine Credit Risk model, which ranks companies by default probability.

"The longer the epidemic persists, the worse the financial health of [these] retailers could get, and their probability of default," said Jharonne Martis, director of consumer research for Refinitiv.

Retailers are also struggling to get rid of excess inventory, which Cowen analysts say has reached multi-year highs.

Chirico, the PVH CEO, highlighted this issue in his remarks this week to CNBC.

"The biggest issue we have is: given the seasonality of most retail businesses, inventory is coming in today, it's sitting in our warehouses, it's sitting in our stores, and there's no place to sell it," he said. He said 85% of PVH's sales are transacted in stores, compared to 15% online.

Some sales have shifted online for department stores and apparel retailers. But overall spending is weak as customers brace for a recession and find fewer reasons to buy new clothing, accessories, or other discretionary goods while they are bound to their homes.

"E-commerce will see some gains as sales transfer from closed stores — but with depressed demand, we do not anticipate online sales to be anywhere close to the value of in-store sales and that most store-based discretionary sales will be lost or postponed," Coresight Research CEO Deborah Weinswig wrote in a recent note on the state of the retail industry.

As these pressures mount, retail bankruptcies and store closures are expected to pile up.

These actions will likely be postponed until most stores have reopened, however, to enable liquidation sales to proceed. Retailers that filed for bankruptcy shortly before the coronavirus pandemic, such as Pier 1 Imports, have paused liquidation sales until stores can reopen.

Shoppers may be cautious of stores and shopping malls even after they reopen

Shoppers aren't expected to rush back into brick-and-mortar stores and shopping malls when stay-at-home orders lift. REUTERS/Lawrence Bryant

Even when stay-at-home orders are lifted, experts say it's unlikely that customers will rush back into mall-based stores to buy nonessential goods. Cowen analysts are projecting holiday sales to decline by as much as 30%, and possibly even more.

"It's really hard to see how mall traffic in particular can recover to even two-thirds of what it once was," Reid said.

Worries over illness will likely linger, and consumers who shifted more of their spending online during social distancing may continue to use that channel instead of visiting stores.

"First, immediately after the retail shutdown ends, we could see initial shopper caution — over both the risk of contagion when visiting physical stores, and in terms of spending big after such a profound economic and cultural shock," Weinswig wrote. "While there may be pent-up demand post-crisis, much of the spending from the shutdown period will be lost permanently."

Shoppers may also start devoting a smaller fraction of their budgets to discretionary goods after weeks of suspending those purchases during quarantine.

These shifts in consumer behavior could last 12 months to several years, Reid said.

While stuck at home, she said, shoppers are realizing: "I don't need to actually spend as much money of my budget on apparel, and I don't need to spend my time perusing the mall."