Retailers are Going Bankrupt at a Record Pace

by Kim Bhasin

Retailers are filing for bankruptcy at a record rate as they try to cope with the rapid acceleration of online shopping.

Retailers Going Bankrupt at Record Pace | BullionBuzzIn a little over three months, 14 chains have announced they will seek court protection. Few retail segments have proven immune as discount shoe stores, outdoor goods shops and consumer electronics retailers have all found themselves headed for reorganization.

Meanwhile, America’s retailers are closing stores faster than ever as they try to eliminate a glut of space and shift more business to the web. S&P blamed retailer financial struggles on their inability to adapt to rising pressure from e-commerce.

Urban Outfitters CEO Richard Hayne said as much on a conference call with analysts last month. There are just too many stores, especially those that sell clothing, he said.

“This created a bubble, and like housing, that bubble has now burst,” said Hayne. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”

First quarter results suggest there’s no recovery in sight. Sears Holdings Corp., Bon-Ton Stores Inc. and Perfumania Holdings Inc. are among the most vulnerable in the coming year. Sears acknowledged in a March filing that there is “substantial doubt” about its future.

Apparel retail has been particularly hard hit, with The Limited, Wet Seal, BCBG Max Azria and Vanity Shop of Grand Forks each seeking court protection in 2017. The latest victim was Payless Inc., which filed for bankruptcy April 4 and said it would shutter 400 stores.

Rue21 may be next. The embattled teen apparel chain is said to be filing for bankruptcy as soon as this month. Or perhaps it will be Gymboree, which is preparing to file for bankruptcy as a June 1 debt payment looms.

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