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‘Year of Retail Bankruptcies’ Looms

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By Rebecca McClay

In a retail environment where consumers are increasingly shifting their shopping habits online, companies that depend on actual foot traffic are yielding an avalanche of dismal earnings reports.

This year could easily shape up to be “the year of retail bankruptcies,” Cori Lopez-Castro, partner with KozyakTropin Throckmorton, a bankruptcy firm, told TheStreet. Stores like The Limited Stores, a women’s apparel retailer that closed 250 locations, and Wet Seal, a mall-based women’s clothing chain, have already filed for Chapter 11.

Most recently, Gordmans Stores Inc. (GMAN​), a discount department store chain based in Omaha, Nebraska, has been losing sales to the internet, and filed for bankruptcy March 13 with a plan to liquidate all of its stores. Gordmans employs 5,100 people in more than 100 stores.

And HHGregg Inc. is reportedly considering following suit as early as this month, according to a Bloomberg report. HHGregg stock was quietly delisted from the New York Stock Exchange this week. Shares now trade on the OTC under “HGGG.” (See also, Bankruptcy Looms for HHGregg)

Many other retailers, with a slew of recent investment downgrades, could also be heading down the bankruptcy road. This 2017 list of troubled retailers, so far, also includes Macy’s Inc. (M), Neiman Marcus Group and Charlotte Russe Inc., all three of which received downgrades from S&P Global Ratings in the past month, according to TheStreet. The firm cut Macy’s to BBB- from BBB, a rating just above junk bonds, after the company reported sluggish holiday sales.(See also, Retails Face Rising Shutdowns as Losses Mount)

S&P Global downgraded Neiman Marcus to CCC+ from B- saying the department store’s “capital structure is unsustainable over the long term. Trends such as weak mall traffic, a highly promotional retail apparel environment and cautious consumer spending continue to weigh heavily on Neiman Marcus.”

And private mall chain Charlotte Russe’s rating was lowered to CCC+ from B- with S&P saying a “lack of prospects for a strong, sustained rebound could lead the company to pursue a potential debt restructuring.”

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