Retail Bankruptcies Stacking Up, And For Some That Might Not Be Enough

Retailers sprinted for bankruptcy at a torrid pace so far in 2020, already reaching a level not seen since the Great Recession. Now, as pressures mount for retailers, some are eyeing the exit altogether, according to a new report.

S&P Global Market Intelligence analysts Alexander Bitter and Chris Hudgins write that 44 of the retailers they track have filed for bankruptcy this year. Full-year totals in 2010 and 2011, as recovery from the final crisis began, hit 48 and 45, respectively. For another comparison, 2019 saw 32 total bankruptcy filings.

The S&P Global analysts say bankruptcy alone might not be enough to save some retailers, sending them toward liquidation. One prominent example is Stein Mart. The discount retailer is closing most or all of its nearly 300 stores and could axe its e-commerce operation too, according to USA Today.

“Even retailers that have already gone through a restructuring this year, such as J.C. Penney Co. Inc., are not necessarily out of the woods yet,” the analysts write.

J.C. Penney, which filed for bankruptcy in May, says it has not considered liquidation.

Other retailers liquidating assets, according to Retail Dive, include Lord & Taylor and Stage Stores, which owns department stores.

On the watch list of struggling retailers is Destination XL Group Inc., which sells big and tall men’s clothing at dozens of stores throughout the U.S., Canada and London.

Destination XL Group is among the top 10 publicly traded consumer companies as ranked for probability of defaulting on a debt within a year. S&P Global puts that probability at 38.2% for Destination XL Group. Also tagged with a high probability of default is Sequential Brands Group, also an apparel retailer. Its one-year probability of default is 32.2%.

For comparison, apparel retailers as a group have a probability of default of 5.9%. It is 6% for department stores.

Black Friday and Christmas sales, often the make-or-break time for retailers, might not be enough to keep stores open. Many cut orders for goods so drastically during the pandemic that they might lack the full line of sizes or colors for particular items.

Retail’s brick-and-mortar woes in 2020 are well documented. Buzzards are all but circling malls as the pandemic crushes in-person shopping and online shopping soars in sales and popularity.

As the economic recovery gains a foothold, though, retail rent collections rose in July compared with the initial months of the pandemic earlier this year. What ultimately happens to retail rent rates is up for debate.