These Eleven Retailers Will File For Bankruptcy Next, According To Fitch

One month ago, we presented a stunning fact from Credit Suisse: barely a quarter into 2017, [annualized] year-to-date retail store closings have already surpassed those of 2008.

According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

Another striking fact: on a square footage basis, approximately 49 million square feet of retail space has closed YTD. Should this pace persist by the end of the year, total square footage reductions could reach 147M square feet – or just over 5 square miles – another all time high, and surpassing the historical peak of 115M in 2001.

Furthermore, according to a recent WSJ analysis, at least 10 retailers, including Payless ShoeSource, hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gormans, Eastern Outfitters, and Gander Mountain had filed for bankruptcy protection through the end of April, which compares with nine retailers that declared bankruptcy for all of 2016. All of the companies in bankruptcy have announced plans to shutter some if not most of their stores.

Rue21’s bankruptcy filing lifted Fitch’s U.S. retail LTM institutional leveraged loan default rate to 1.7% from 0.9%. An impending bankruptcy from Gymboree would further lift the retail TTM to 2.7%, Fitch said. Unfortunately for the US retail industry, and despite such upbeat pieces as “Why the Rout in Retail Shouldn’t Be a Big Worry for U.S. Economy” written by Bloomberg’s in-house US economic cheerleader, the rating agency expects a flood of future defaults, and forecasts the retail loan default rate at 9% on roughly $6 billion of defaults, though it concedes that “the fate of Sears Holdings and the resolution of J. Crew Group’s bond exchange could materially alter the projection.”

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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