Many more retailers could be joining the likes of J.C. Penney, J.Crew, The Paper Store, and others that filed for bankruptcy this summer.
The pandemic put the nail in the coffin for several retailers that were just hanging on. Around 44 retailers have found themselves in bankruptcy court in 2020, according to a tracking by S&P Global Market Intelligence. However, that may just be a drop in the bucket compared to what could be coming.
With some medical professionals predicting a second wave of coronavirus during this fall and winter, retailers could be rushing to bankruptcy court sooner rather than later.
The reason is pretty simple: retailers that permanently closed right before the pandemic found themselves unable to move forward with liquidation plans thanks to stay-at-home orders and a lack of shoppers. While many had drafted restructuring plans as part of bankruptcy, which can keep some stores open and help the business get back on its feet, they fell through in the face of COVID.
Pier 1 imports, for example, got caught right in the midst of the coronavirus after it filed for bankruptcy prior to the pandemic. While it was trying to find a buyer as part of a restructuring plan, COVID-19 put all those plans on hold, and financially affected potential buyers, forcing Pier 1 to shut down all stores permanently.
As we head into the extremely competitive holiday shopping season, more retailers may just cut their losses and file for bankruptcy this fall. If too many going-out-of-business sales happen all at once, the closing companies may find less shoppers are interested. In addition, with unemployment up, it's a safe bet that consumers won't have the money to spend on top of holiday shopping.
The first wave of retail bankruptcies hit the businesses that were already weighed down with too much debt and limping along. The next wave could affect many more notable names.
"Meal-kit company Blue Apron and online furniture retailer Wayfair are high on S&P Global’s list of companies at risk of defaulting on their debt and seeking bankruptcy protection. Apparel makers J.Jill, Christopher & Banks, and Destination XL Group are also at risk, S&P Global said in an analysis this month," said CNBC.com.
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