Retail Bankruptcies Could Hit Record Highs In 2020: What Does It Mean For Consumers?

The first half of 2020 has been an economic killer for most retailers. Several have closed stores in order to gain a foothold during the pandemic, while others have filed for bankruptcy at a record pace.

Retailers such as Neiman Marcus, J. Crew, JC Penney, Stage Stores, Tuesday Morning, and GNC filed for Chapter 11 in the first half of the year, citing the pandemic as part of their financial failings.

Into July and August, retailers such as Lucky Brand Dungarees, Brooks Brothers, Ascena Retail Group, Stein Mart, RTW Retailwinds, and Tailored Brands initiated their own bankruptcy filings also amid the ongoing coronavirus pandemic.

According to a report by BDO USA obtained by The Wall Street Journal, the retail industry is on pace to beat 2010 as a record year for bankruptcies. The report indicated that 48 retailers filed for Chapter 11 following the 2007 to 2009 recession.

The number of 2020 retail bankruptcy filings have already surpassed 2019 – a year when retail was starting to see a decline, BDO said. As many as 9,500 stores closed in 2019, The Wall Street Journal reported.

As stores temporarily closed because of the coronavirus in March, many retailers were left with sagging sales that couldn’t be recouped online. Now with added costs to reopen stores due to increased coronavirus safety measures, many retailers are facing even more challenges.

“This is almost certainly the worst year in recent history for retail,” Kyle Sturgeon, a managing partner at turnaround advisory firm Meru LLC told the Journal.

Retailers are looking to negotiate rent payments with landlords to get through the pandemic while others are looking to reinvent themselves as consumers shift to online shopping and more casual wear. This is only further complicated by increased unemployment rates among consumers and high rent payments that retailers can no longer afford, the Journal said.

As many as 25,000 stores could close in 2020 in the U.S. alone, Coresight Research indicated (via The Wall Street Journal). Macy’s, Bed Bath & Beyond, and Gap Inc. have already announced a series of store closures for the year.

The numbers only get more grim as a report obtained by the Journal from Green Street Advisors said that more than half of all mall-based department stores will close by the end of 2021 in the U.S. Add to this a questionable holiday shopping season because of the coronavirus, and retailers are faced with even more struggles.

Walmart has said the holidays will look a lot different this year, and other retailers such as Target and Best Buy are advising consumers to shop early to avoid crowds during the pandemic. The Centers for Disease Control and Prevention issued guidelines on Monday for holiday shopping, deeming it high risk for spreading the coronavirus.