2020 Will Rival 2010 in Retail Bankruptcies

This year is on track to rival 2010 in retail bankruptcies. In 2010 following the Financial Crisis, 48 retailers filed for bankruptcy, marking one of the most significant years for retail chapter 11 filings. 2020 could close the year exceeding that number, according to data from BDO United States.

Year to date, retailers have filed 29 chapter 11 bankruptcies, with 11 of these filings occurring in July through mid-August. Retailers to file a bankruptcy during the summer include Pier 1, J. Crew, Neiman Marcus, Stage Stores, J.C. Penney, Tuesday Morning, GNC, Lucky Brand, RTW Retailwinds, Brooks Brothers, Ascena (which includes Ann Taylor, LOFT, Lane Bryant, Justice, Catherines), Le Tote (which includes Lord & Taylor), Tailored Brands (which includes Men’s Wearhouse, Jos. A. Bank, Moores Clothing, K&G) and Stein Mart.

The bankruptcy filings have been largely focused in the apparel and footwear sectors, but they certainly aren’t exclusive to that market. The “other” category of retailers accounted for 11 bankruptcy claims—the largest number of any category. Apparel and footwear retailers accounted for 10—or 39% of the total retail market—while home furnishings and department stores accounted for five and three, respectively.

Store bankruptcies isn’t the only concern. Many retailers that haven’t been pushed to bankruptcy are announcing widespread store closures. Starbucks is near the top of that list with plans to close 400 locations, and GameStop plans to close 320 locations. Inditex is at the top of the list for store closures with plans to shutter 1,000 locations. In total, retailers plan to close 4,228 store locations nationwide. When combined with stores closing due to bankruptcy, there are 10,226 store locations that will permanently close nationwide.

It isn’t surprising to see brands role out plans to shrink market exposure. Data from eMarketer predicts a 10.5% decline in retail spending this year, and brick-and-mortar sales alone will increase 14%. However, e-commerce sales have grown during the pandemic, up an estimated 18% for the year.

Retailers are facing a long road ahead to recovery; however, the upcoming holiday season could prove to be an opportunity for brick-and-mortar retailers. For retailers that are prepared and able to understand new consumer shopping needs and behaviors, retailers could see some recovery. In particular, BDO recommends that retailers prepare e-commerce operations for record levels of online shopping traffic; ensure the reliability of fulfillment channels and last-mile delivery; and increase contactless shopping options. The holiday season could be a way for retailers to weather the storm, and it could temper bankruptcy activity.

Overall, however, BDO expects 2020 to close the year with the highest level of bankruptcies on record in a single year, and retailers will likely to struggle to keep pace with new shopping trends and expectations.