Press "Enter" to skip to content

Can these 10 retailers avoid bankruptcy?


CLOSE

Retailers report a 50% revenue impact amid coronavirus.

Buzz60

Get ready for what could be the biggest slate of store closures and retail bankruptcies in recent memory.

For every day that retailers are closed during the coronavirus crisis, the chances that they won’t survive this pandemic grow larger.

While some retailers are flourishing – namely chains with major grocery sales like Walmart, Target, Kroger and Costco – others are trying to stave off doom. In many cases, these retailers were already in trouble already as Americans shopped increasingly online.

Forever 21 and J.C. Penny were hanging by a thread, while Sears and Kmart have been waiting for the final shoe to drop for years. Now these and other chains, including Neiman Marcus, David’s Bridal and Ascena Retail Group, are losing cash rapidly while they await the chance to reopen their doors. But there’s no guarantee that customers will come flocking back to shop amid serious concerns about their finances and getting exposed to the still lingering virus.

When are stimulus checks coming?: Money could roll out to Americans next week

Looking for Lysol spray, Clorox wipes? COVID-19 wiped out disinfectants, but here’s when you can buy again

U.S. retailers have already announced 2,184 permanent closures this year, most of which were announced before the pandemic began, according to retail analytics firm Coresight Research. 

Papyrus, Modell’s Sporting Goods and Art Van Furniture announced plans to liquidate all of 635 of their locations.That follows a year in which more than 9,700 stores closed, according to updated data released Friday by Coresight.

Will these retailers reopen amid COVID-19?

Now, chains like GNC, J. Crew and Rite Aid are fighting for their lives, according to analysts.

Camilla Yanushevsky, a retail stock analyst for CFRA Research, said the fallout for retail will be “pretty striking” after several years of mass closures.

“It’s a battle of who’s going to survive, who’s just going to close and who’s going to need to file for bankruptcy,” she said. “The companies that are most at risk at the ones that were already distressed before the crisis.”

While the federal government’s $2.2 trillion stimulus package includes funds to ease the financial impact of the coronavirus on consumers, airlines and small businesses, Yanushevsky said it’s not likely to help large physical retailers much in the long run.

“I think a lot of people are going to be more hesitant to go into stores, specifically malls or more closed areas, until a vaccine comes out,” Yanushevsky said. “We’ve already seen a big shift to e-commerce and that’s just going to proliferate more for safety reasons.”

CLOSE

Grocery stores across the country are implementing new measures like rations, layout changes and social distancing to respond to the novel coronavirus.

USA TODAY

Jim Van Horn, a bankruptcy attorney at Barnes & Thornburg who has handled retail restructuring cases, also predicted a wave of bankruptcies. But he said they won’t happen until the pandemic has somewhat ebbed, if only because retailers and their creditors wouldn’t want to risk a liquidation until going-out-of-business sales could occur.

“Once we turn the corner on COVID-19 or when there is some general consensus of when things are going to get back to normal, there will be a tremendous amount of bankruptcy activity,” he said.

Sarah Wyeth, retail and restaurant sector lead for S&P Global Ratings, said about a quarter of retailers and restaurants tracked by S&P are now rating as having a 50% chance of defaulting on their debts. Failing to pay on time is often a precursor to restructuring or bankruptcy.

In 2019, which included the liquidation of chains like Payless ShoeSource, Gymboree and Charlotte Russe, more than 9,700 stores closed.

Here’s a list of retailers that are trying to avoid the same fate, based on USA TODAY research, public data and analyst reports:

CLOSE

Many millennials are starting to turn away from the fast fashion sold at retailers like Forever 21, which may have been a factor in its demise.

Video Elephant

Forever 21

Forever 21 filed for Chapter 11 bankruptcy in September with plans to close roughly 100 struggling stores and save the rest of the business. The company then finished a deal on Feb. 19 to sell most of its remaining assets to a group of investors led by Authentic Brands and mall owner Simon Property Group, which had previously used a similar model to rescue fashion retailer Aéropostale.

Talk about tough timing.

Exactly a month later, while still deciding which stores to liquidate, the buyer temporarily closed all Forever 21 locations due to the pandemic.

Now, the investment group has requested court permission for an extension on the deadline to decide which stores to close, according to a bankruptcy court filing.

The pandemic disruption threatens to derail Forever 21’s comeback before it even gets underway.

CLOSE

Pier 1 will close nearly half of its stores. Macy’s will close about a fifth of its locations over three years. J.C. Penney will close six stores.

Wochit

J.C. Penney

The department store chain’s stock, which was already trading below 70 cents when March began, closed Thursday at 34 cents. With a total market value of about $108 million, J.C. Penney is running out of time to pull off its turnaround plan.

“Before the coronavirus, I thought there was going to be some hope for J.C. Penney,” Yanushevsky said. “It did look like they had some good ideas brewing, but … this could be the final straw for them.”

In 2019, the Texas-based chain closed 27 stores, ended sales of appliances and furniture and placed the company’s focus back on its bread and butter: compelling apparel and related merchandise. In 2020, the chain has already announced six additional permanent closures.

With a junk credit rating of CCC from S&P Global Ratings and an outlook of negative, J.C. Penney is scrambling to get traction.

Autoplay

Show Thumbnails

Show Captions

Sears and Kmart

These sibling chains have been out of bankruptcy for about 14 months, but it was hard to envision a return to greatness before the pandemic, let alone after it.

Sears and Kmart have closed more than 3,500 stores and cut about 250,000 jobs over the last 15 years. After tumbling into Chapter 11 bankruptcy in October 2018, the chains narrowly escaped total liquidation after a last-minute sale in February 2019 to their parent company’s longtime investor and former CEO Eddie Lampert.

But time is running out for Sears and Kmart to stabilize their businesses. In February 2020, another 51 Sears and 45 Kmart locations were set to close, leaving some 182 surviving stores.

Neiman Marcus Group

The luxury department store chain completed a debt restructuring plan in 2019 that included what S&P Global Ratings considered to be a “distressed” exchange.

After the move, S&P rated the company as a “continued risk of restructuring.”

That may come to fruition. Reuters reported April 2 that Neiman Marcus, whose stores include the Bergdorf Goodman chain, was preparing a potential bankruptcy filing.

Neiman Marcus already announced in March that it would close the majority of its 22 Last Call stores. Now, the company is hoping to avoid the fate of luxury rival Barney’s, which liquidated in 2019.

Autoplay

Show Thumbnails

Show Captions

David’s Bridal

David’s Bridal survived Chapter 11 bankruptcy, emerging from the process in January 2019 and charting plans to cut prices, improve its digital operations and add additional selections.

Now, weddings and receptions have been disrupted throughout the country, with many governments limiting the number of people who can attend.

While normal weddings will likely resume after the crisis subsides, the economic effects of the pandemic could lead couples to delay plans or spend less on their big day.

David’s Bridal has already announced plans for “a substantial reduction in expenses, capital expenditures and inventory commitments,” as well as pay cuts and furloughs for most store employees and more than half of its corporate workers.

Ascena Retail Group

Like other apparel retailers with a heavy commitment to shopping malls, Ascena’s stores were grappling with declining foot traffic long before the pandemic. The company’s brands include Lane Bryant, Justice, Loft and Ann Taylor.

Now, hopes of a sudden influx of business in the wake of the pandemic seem especially dim.

In 2019, 62% of store closure announcements came in the apparel sector, according to global marketing research firm Coresight Research.

Rite Aid 

Rite Aid was already stuck in an uncomfortable netherworld: not big enough to present a threat to drugstore rivals Walgreens and CVS but not agile or rich enough to reinvent itself.

Rite Aid also faces the additional threat of disappointing health care insurance reimbursement rates and generic drug costs, according to CFRA Research.

A few bad breaks haven’t helped: A merger deal with grocery chain Albertsons collapsed in 2018, leaving the company’s path to reinvention unclear.

Now, with $3.3 billion in liabilities, Rite Aid has the third most debt of any retailer rated as distressed by Moody’s Investor Service, behind only J.C. Penney and Neiman Marcus.

GNC Holdings

Listed by Moody’s as among the most distressed retailers, GNC has already announced 304 store closures this year, according to Coresight Research.

On March 20, S&P Global Ratings downgraded the nutrition products retailer’s credit rating to CC due to the company’s “likely inability to repay debt.”

“We believe conditions for GNC are deteriorating substantially due to the coronavirus pandemic, the anticipated macroeconomic downturn and the limited access to capital markets,” S&P reported.

J. Crew

With $1.4 billion in debt, J. Crew has the sixth-most debt among distressed retailers, according to Moody’s.

The long-distressed retailer announced on Dec. 2 that it had agreed to terms to separate its J. Crew stores and Madewell women’s apparel business into independent companies.

The profitable Madewell brand was in solid shape and was set to be spun out in an initial public offering that will lead to “sustainable capital structures” for both companies, interim CEO Michael Nicholson said in statement Dec. 2.

But Bloomberg reported March 20 that the plan has been delayed indefinitely as “J. Crew is no longer considering taking its most profitable brand public in the near future.”

With J. Crew stores closed indefinitely due to the pandemic like many other retailers, the chain’s future is becoming cloudier by the day.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

Read or Share this story: https://www.usatoday.com/story/money/2020/04/14/coronavirus-store-closures-bankruptcy-covid-19-pandemic-retail/5124326002/





Source link

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *