Retailers Going Bankrupt at Staggering Rate on Flood of Store Closures
By F McGuire
Retailers reportedly are filing for bankruptcy protection at a disturbing rate that’s flirting with recessionary levels.
Meanwhile, a steady stream of store closures continues to haunt the battered American retail industry.
“It’s only April, and nine retailers have already filed for bankruptcy since the start of the year — as many as all of last year,” Business Insider explained.
“2017 will be the year of retail bankruptcies,” Corali Lopez-Castro, a bankruptcy lawyer, told Business Insider. “Retailers are running out of cash, and the dominoes are starting to fall.”
More than 3,500 stores are expected to close over the next several months, BI reported.
Annual retail bankruptcies peaked at a total of 20 in 2008. The U.S. could hit that dismal milestone by September if the rate is sustained, CNBC has reported.
The pace of store closings this year is already ahead of 2008, that measurement’s most recent peak, according to Credit Suisse Group AG.
In the past year, companies including American Apparel and Limited Stores have begun shutting down retail operations, while dressmaker BCBG Max Azria, discount shoe seller Payless Inc., and department store operator Gordmans Stores have filed for bankruptcy.
The rapid descent of so many retailers has left shopping malls with hundreds of slots to fill, and the pain could be just beginning, Bloomberg reported.
More than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed, converted to other uses or renegotiated for lower rent in coming years, according to data provided to Bloomberg by CoStar Group.
“It’s an industry that’s still in search for answers,” said Noel Hebert, an analyst at Bloomberg Intelligence. “I don’t know how many malls can reinvent themselves.”
With retail rents on the rise due to record-low vacancies, and e-commerce continuing to generate more sales, more stores going dark is inevitable, said Marshal Cohen, chief industry analyst at NPD Group. Now that so many retailers have announced closings, investors may be less skittish when a company does the same, he said.
“This is now a commonplace opportunity for retailers to evaluate and cleanse, looking at every single store and determining whether or not they need that,” Cohen told Bloomberg. “When so many are doing it, they don’t look so bad. It’s almost wrong if you don’t close a store.”
Steve Beaman, chairman the Society to Advance Financial Education, recently told Newsmax TV that mass store closures and layoffs by Sears, Macy’s and Kmart only prove that the retail industry continues to undergo a sea change because of online shopping.
And this seismic shift may soon extinguish a cultural landmark of the recent past – the American shopping mall.
JD Hayworth asked Beaman on Newsmax TV’s “America Talks Live” if malls are a relic of a bygone era.
“My personal opinion is they are,” he said. He cited many many requiring adults to chaperone those under the ages of 21 or 18.
“So we’re already going to see the demise of it being the hang out for kids and I think that will change the retailing habits of it. The overall security concerns of the brick-and-mortar retailers is going to become a draining cost on them. So, they’re going to think more and more let’s go to the internet,” he said.
To be sure, Newsmax Finance Insider Jeff Snyder said the retail malaise just may be indicative of a deeper economic malady.
“When analyzing the shift in consumer preferences it is usually presented as “all or nothing,” meaning that shoppers leaving brick-and-mortar stores are bestowed with a convenience option that they are exercising,” Snyder wrote for Newsmax Finance.
Instead, the shift toward online may not be separable from the “weak demand environment” at all. In other words, if consumers have become fickle about bargains and finding the lowest price, that may be just as much macro-economic as micro-economic.
It may be that online retailers are best positioned in a downward economic transition because they can offer better prices without having the burden of the huge sales distribution costs that come with operating physical stores.
That seems to be the judgment of the world’s producers as this “manufacturing recession” continues on and on.
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