U.S. retail companies with brick-and-mortar stores will see more of their number go under in 2020 as the wave of bankruptcies sweeping through the battered retail industry shows no signs of abating.
More than 80 retail stores, including big names such as Barneys New York, Forever 21, Radio Shack and Sears, have gone under since 2015. Overall, the number of retail bankruptcies is rising, according to CB Insights. This New York-based firm aggregates and analyzes massive amounts of data and uses machine learning, algorithms and data visualization to help corporations answer strategic questions using probability.
There were 22 retail bankruptcies in 2019 compared to 17 in 2018, said analysis from CB Insights. Many of these stores are now seeking or have been granted Chapter 11 bankruptcy protection. Among these are Payless ShoeSource, Destination Maternity and Shopko.
Payless shut all its U.S. stores, effectively eliminating itself entirely from the retail landscape. Payless, however, still has more than 710 stores abroad that remain operational (including franchises) in more than 30 countries.
Others retailers, however, resorted to the so-called Chapter 22 scenario, which means they've had to go to bankruptcy court for a second time. Retailers forced into this option included Radio Shack, Z Gallerie and Charming Charlie. And a few others like Fred's finally closed shop forever after being forced to liquidate under Chapter 7.
Amazon.com and other online retailers are the major source of the immense pain inflicted on real-world retail stores. Especially hard hit by the retail retrenchment are mall-based retail stores that rely heavily on foot traffic in malls. Consumer buying has changed significantly from the foot traffic prevalent decades ago to busy fingers ordering items online from mobile phones.
The apparel category is the hardest hit retail category, said Vince Tibone, lead retail analyst at commercial real estate services firm Green Street Advisors. Tibone said a large number of clothing retailers such as Charlotte Russe, Diesel, A'Gaci and Forever 21 filed for bankruptcy in 2019. This new wave follows the department store bankruptcies of Sears and Bon-Ton in 2018.
Tibone pointed out 2017 was a big year for retail bankruptcies with closures in 2018 slowing a bit. But 2019 turned out to be another big year for bankruptcies. The outlook for 2020 remains bleak with no end in sight to more bankruptcies.
"Retail is a tough business," said Stephen Selbst, chair of the restructuring and bankruptcy group at New York law firm Herrick Feinstein."If you lose that connection with shoppers, it is really hard to get them back."
