This is shocking.
According to Moody’s, the rating giant, 22 retailers are on the verge of bankruptcy — a number that’s greater than the 19 distressed retailers at the peak of the Great Depression in the 1930s. Also troublesome is the fact that the 22 retailers span the range from the luxury high-end (Neiman Marcus) to discount stores (99 Cents).
Kevin McCoy reports for USA Today, June 9, 2017, that senior Moody’s retail analyst Charles O’Shea calls consumers’ major shift to online shopping a “perfect storm” for brick-and-mortar stores.
A retailer’s inclusion in Moody’s list of distressed companies is based on an analysis of its financial liquidity, ability to manage maturing debt by refinancing, credit profiles, competition challenges, ownership, and management structure. Those that rank low in multiple categories were given Caa ratings, which O’Shea calls “deep junk.” He said, “When you’re down there in C-a land, bankruptcy is a real possibility.”
However, O’Shea said there are companies tagged with a Caa rating by Moody’s which come out of “deep junk” if their liquidity, debt management or other financial metrics improve. An example is J.C. Penney that, as O’Shea put it, “was down there, and is now out,” with an improved rating.
Here are the 22 retailers that are on the verge of bankruptcy, being rated Caa or lower by Moody’s:
- 99 Cents Only Stores – discount retailer
- Boardriders SA – sporting subsidiary of Quiksilver
- The Bon-Ton Stores – parent of department store chain
- Charlotte Russe – women’s clothing
- Charming Charlie – women’s jewelry and accessories
- Claire’s Stores – accessories and jewelry
- Cole Haan footwear (Calceus Acquisition)
- David’s Bridal – wedding dresses and formal wear
- Fairway Group Holdings – food retailer
- Eddie Bauer (Everest Holdings)
- Gymboree – children’s apparel
- J. Crew Group (Chinos Intermediate Holdings)
- Neiman Marcus Group – luxury department store
- Nine West Holdings – clothing, shoes and accessories
- Savers (Evergreen AcqCo 1 LP) – thrift chain
- Sears and Kmart (Sears Holdings)
- TOMS Shoes – footwear company
- Tops Holding II – supermarket operator
- Totes Isotoner (Indra Holdings)
- True Religion Apparel – men’s and women’s clothing
- Velocity Pooling Vehicle – does business as MAG, Motorsport Aftermarket Group
- Vince LLC – clothing retailer
Although the at-risk retailers comprise 16% of America’s total retailers, the worst could be yet to come. Moody’s says the ranks of distressed firms and retail sector defaults are likely to grow during the next 12 to 18 months.
No wonder a recent study found that financially-secure retirees are “hoarding” and not spending, but actually keep saving, because they fear the unknown. Reports of a retail apocalypse certainly don’t help.
UPDATE (JUNE 16):
According to BankruptcyData.com, more than 300 U.S. retailers have already filed for bankruptcy so far this year — up 31% from the same time last year. Most of those filings were for small Mom & Pop stores with a single location, but the filings also include big chain stores such as Gymboree.
A new report out this week from Credit Suisse says between 20% and 25%, or as much as a quarter of American malls will close within five years, which will be unprecedented in U.S. history and will hollow out cities and suburbs. (Source) H/t FOTM‘s CP
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