During the latter part of 2024, inflation seemed to be headed in the right direction, so much so that the Federal Reserve was finally able to start cutting its benchmark interest rate. That brought a small dose of relief for borrowers in particular.
But January’s Consumer Price Index, which was released in mid-February, painted a less rosy picture. It showed a 3% uptick in inflation on an annual basis, and a 0.5% increase from December. And in light of that, the Fed is unlikely to cut interest rates when it gathers to meet in March.
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In the absence of further rate cuts, consumers will have to be even more cautious in how they spend their money. As it is, an estimated 25% of U.S. households live paycheck to paycheck, reports Bank of America, with little room left over for non-essential spending.
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Meanwhile, earlier in 2024, TD Bank found that 30% of Americans were cutting their spending in response to economic conditions such as inflation and high interest rates. This shift has dealt a blow to retailers, many of which were struggling before inflation started soaring and interest rate hikes began.
Retailers can’t keep their doors open
U.S. store closures totaled 7,325 in 2024, according to Coresight Research. That marks the largest number of closures since 2020, when stay-at-home orders forced consumers out of stores during the pandemic.
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But even 2020, which saw almost 10,000 store closures, may not end up being a record year. Coresight projects an astounding 15,000 store closings in 2025, due in part to inflation, but also, consumers’ growing tendency to shop online.
Not surprisingly, store closures in 2025 are stemming from struggling retailers, some of which have filed for bankruptcy and some of which may be trying to stave it off.
Party City, which filed for bankruptcy for the second time in December 2024, plans to shutter all locations by the end of February. And earlier this month, crafts and fabric chain Joann announced plans to close 500 stores across the U.S.
Department stores haven’t been immune to closures either despite their wide selection of inventory. In January, Macy’s confirmed that it would be closing 66 locations in an attempt to return the company to profitable sales growth. Those 66 closings are part of a broad plan to shutter 150 underperforming locations through 2026.
An iconic Dallas department store is closing
Inflation and soaring interest rates have also had an impact on luxury retailers. In January, Bloomingdale’s announced plans to close its San Francisco Centre anchor store.
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Meanwhile, over in Dallas, Neiman Marcus is closing its flagship downtown store after more than a century. Saks Global, which owns Neiman Marcus, is blaming the closure on an inability to reach a new lease agreement with the store’s landlord.
The store will shut its doors permanently on March 31. A Saks Global spokesperson said, “This location has been a beloved institution in the community for more than a century, and we are disappointed to be losing a piece of Neiman Marcus history.”
Despite losing its flagship store, Neiman Marcus has a decent foothold in North Texas, including locations at NorthPark mall in Dallas, Willow Bend mall in Plano, and a store in Fort Worth. Saks Global is also making plans to invest $100 million to renovate its NorthPark store.
But whether that’s a smart investment is questionable.
Although the closure of Neiman Marcus’s flagship store seems to be the byproduct of a real estate negotiation gone wrong, the reality is that department stores have been losing steam in recent years. And with big-box competitors like Target upping their fashion and makeup game, it’s become harder for department stores to retain customers.
More bankruptcy:
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Furthermore, as inflation lingers and interest rates hold steady, luxury department store fans may be more apt to take their business to budget-friendly alternatives like Nordstrom Rack and Saks Off 5th, where they can load up on high-end products for less.
So while Neiman Marcus may have had no choice but to abandon its famed downtown Dallas location, it’s unclear as to how sustainable the store would’ve been had lease negotiations gone a different way.
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