2020 Will Rival 2010 in Retail Bankruptcies

Most Retailers Have Now Struck Agreements with Landlords on Back Rent

This year is well on the way to keeping up with 2010 private customer bankruptcies. In 2010, after the financial crisis, 48 ​​retailers filed for bankruptcy. This was one of the most significant years for Chapter 11 retail chapters filing. 2020 could close the year exceeding that number, according to BDO United States.

As of the beginning of the year, retailers have filed 29 Chapter 11 bankruptcies, 11 of which were filed between July and mid-August. Retailers filing for bankruptcy this summer include Pier 1, J. Crew, Neiman Marcus, Stage Stores, JC Penney, Tuesday Morning, GNC, Lucky Brand, RTW Retailwinds, Brooks Brothers and Ascena (including Ann Taylor, LOFT and Lane Bryant), Justice, Catherines), Le Tote (including Lord & Taylor), Tailored Brands (including Men & # 39; s Wearhouse, Jos.A. Bank, Moores Clothing, K&G) and Stein Mart.

The bankruptcy filings have mainly been concentrated in the apparel and footwear sectors, but they are certainly not exclusive to this market. The “other” category of retailers received 11 bankruptcy filings – the largest number of any category. Clothing and footwear retailing accounted for 10 or 39% of the total retail market, and home furnishings and department stores five and three, respectively.

Bankruptcies aren't the only problem. Many retailers that have not gone bankrupt are announcing widespread store closures. Starbucks tops that list with plans to close 400 locations, and GameStop plans to close 320 locations. Inditex tops the list of store closures and plans to close 1,000 locations. In total, retailers are planning to close 4,228 stores nationwide. Combined with the closure of branches due to bankruptcy, there are 10,226 branches that will be permanently closed nationwide.

It's not surprising that brands are rolling out plans to reduce market exposure. EMarketer data predicts a 10.5% decline in retail spending this year, and in-store sales alone will increase 14%. However, ecommerce sales rose an estimated 18% during the pandemic.

Retailers have a long way to go to recover. However, the upcoming Christmas season could turn out to be an opportunity for stationary retail. For retailers willing and able to understand new shopping needs and behaviors, retailers could recover. In particular, BDO recommends retailers to prepare their e-commerce operations for a record level of online shopping traffic. Ensuring the reliability of fulfillment channels and last mile delivery; and increase contactless shopping opportunities. The holiday season could be a way for retailers to weather the storm and it could ease bankruptcy activity.

Overall, however, BDO expects 2020 to close the year with the highest bankruptcy in a single year, and retailers will likely struggle to keep up with new shopping trends and expectations.


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