Fitch Says These 8 Retailers Will Go Bankrupt

Recent earnings trends suggests that brick-and-mortar stores are struggling to stay profitable, even leading to weaker numbers from previously strong household names like JC Penney, Sears, Macy’s and Kmart. One of the biggest reasons for this is the rise in e-commerce as consumers have shown an increasing inclination for online shopping due to its convenience and ease of use. At the same time, consumers are also shifting their spending habits to spend more on other non-physical purchases like travel and fitness.

To top it off, the recent dip in US stock markets owing to disappointment over the Trump administration’s inability to pass healthcare reform, financial deregulation, and tax cuts immediately is also about to take a bigger toll on retailers. In fact, this particular sector has been lagging behind previous equity rallies as several bankruptcies have dragged industry sentiment down.

Earlier this month, it was reported that nine smaller retailers filed for bankruptcy in the first quarter of 2017. This is equal to the total amount of retailer bankruptcies filed in the whole of 2016, putting the sector on track towards reaching the same number of Chapter 11 filings since 2009 when the financial recession was in play.

Among these are companies that were acquired by private equity firms or aggressively leveraged companies such as Gordmans Stores, Gander Mountain, General Wireless, HHGregg, BCBG Max Azaria, Wet Seal, and Limited Stores. Payless Shoes just recently filed for bankruptcy in order to facilitate balance sheet debt restructuring and operational overhaul. In its Chapter 11 filing, Payless had a $385 million debtor-in-possession loan comprised of a $305 million asset-backed loan and an $80 million term loan that has already been extended by existing lenders to refinance debt. With this, the company is planning to hold liquidation sales in 400 underperforming branches that will be closed soon and will renegotiate leases or close more stores in the near future.

Analysts expect Bebe and a number of other retailers to file bankruptcies in the not so distant future as well. Morgan Stanley also recently reported that there were more than 2,000 physical store closures in the first quarter of this year, almost twice as much as the number in Q1 2016. According to rating agency Fitch, the TTM loan default rate rose to 1% and they project it will reach 9% or roughly $6 billion in defaults over the next 12 months.

In addition to this, Fitch also predicts that bigger-name retailers have a slightly higher risk of default in the next 12 months, particularly those with term loan debt at nearly $6 billion. This includes Sears, 99 Cents Only Stores, Charming Charlie, Gymboree Corp, Nine West, NYDJ Apparel, rue21, and True Religion Apparel.

“Fitch’s expectation of increasing retail defaults stems from increased discounter (including off-price and fast-fashion apparel) and online penetration, and shifts in consumer spending toward services and experiences,” it said in a statement.


“All of these factors have created a highly competitive retail environment and accelerated mall traffic declines. Retailers have also suffered from the ebb and flow of brand popularity. Negative comparable store sales and fixed-cost deleverage have led to negative cash flow, tight liquidity and unsustainable capital structures.”

Meanwhile, credit rating agency Moody’s also noted in February that it has 19 names in its retail and apparel portfolio that are trading in junk territory. This is close to the 16% in distressed firms during the height of the 2008 financial crisis, reflecting that troubled firms in the retail industry are overtaking those in the energy and oil sectors as potentially the worst-performing ones.


6 Comments on "Fitch Says These 8 Retailers Will Go Bankrupt"

  1. Tedra Williams DeSue | April 21, 2017 at 7:59 am | Reply

    And Bebe announced today it is closing all of its stores…good piece

  2. You should take part in a contest for one of the best blogs on the web. I will recommend this site!

  3. Skype has opened its web-structured buyer beta for the entire world, after introducing it largely within the Usa
    and U.K. before this 30 days. Skype for Online also now supports Linux and Chromebook for immediate
    messaging communication (no voice and video but, these demand a plug-in set up).

    The expansion from the beta brings help for an extended selection of different languages to aid reinforce that
    overseas user friendliness

  4. QjiSCx Pretty! This has been an extremely wonderful post. Thank you for providing this information.

  5. Enjoyed looking at this, very good stuff, appreciate it. “Be not careless in deeds, nor confused in words, nor rambling in thought.” by Marcus Aurelius Antoninus.

  6. Muchos Gracias for your article post.Much thanks again. Cool.

Leave a comment

Your email address will not be published.