Making predictions is a popular pastime as the year draws to a close. Financial analysts who follow the retail and apparel industry are no exceptions. Moody’s put together a list for USAToday of the retail and apparel companies most likely to file bankruptcy petitions in 2018. Many of the companies are headquartered in New York City, and virtually all have stores in the city or its suburbs.
As noted on our last post, retailers are facing intense competition from on-line sellers such as Amazon and Wal-Mart. Among retailers who are seen as most vulnerable to these market conditions are Sears, K-mart, J. Crew, Claire’s Stores and nearly two dozen other retailers. One analyst speculated that throwing a dart at a list of prominent retailers is likely to strike the name of a company who will be filing a bankruptcy petition this year. Current data accumulated by Moody’s shows that 18.6% of the companies that Moody’s rates, or about 26 firms in all, have credit ratings that qualify for a speculative and high risk ratings.
One of Moody’s competitors, S&P Global Ratings, has issued similarly discouraging news in late November that described the retail and restaurants sectors of the economy as the most distressed in the country. Most analysts believe that heaving borrowing and the proximity of repayment deadlines has limited the ability of many retailers to move quickly into on-line retailing in response to the abandonment by consumers of traditional bricks-and-mortar stores.
The financial problems of the retail sector are not limited to big box stores such as Toys ‘R’ Us. Smaller stores in malls with large anchor tenants in danger of closing will also be affected in 2018. Any business that sees its customer base as threatened by these trends may wish to consult a bankruptcy attorney for an analysis of various strategies, such as a Chapter 11 bankruptcy, that will protect its assets and buy time to solve any severe financial problems.
Source: USA Today, “Here are the 26 retailers and apparel companies most at risk in 2018,” Kevin McCoy, Dec. 20, 2017