Some call it the “Retail Apocalypse,” and blame the rise of the internet, while others see the growing number of retail bankruptcies as a sort of market correction for chains not built to compete in 2017.
However you view it, the number of casualties has been piling up. In fact, through the first three months of 2017 nine retailers sought bankruptcy protection, according to CNBC.
That matches the total number of retail bankruptcies in 2016, and puts the year on pace to tie 2009’s record, where 18 chains filed for bankruptcy protection, according to CNBC.
Those numbers have continued to grow in the second quarter of 2017 with Rue21, Payless, and Bebe filing in April. And, after the recent round of disappointing earnings news reported by many retailers, there’s no reason to believe the second half of they year won’t continue the trend.
How bad could this get?
Rising interest rates present further problems for distressed retailers, making it harder and more expensive to raise needed capital. That could be the tipping point that sends some of the 19 companies on Moody’s Investor’s Service March list of distressed retailers (which includes Rue21 and Payless, which have already filed for bankruptcy protection) into bankruptcy.
Those companies reportedly had over $3.7 billion in debt that matures over the next five years with about 30% of it due by the end of next year. As sales at the chains, which include well-known names like Sears Holdings, David’s Bridal, and Gymboree, continue to fall, rising interest rates could make it harder to refinance and push debt out.
Which areas could be hit hardest?
So far, apparel players, especially ones targeting younger shoppers, have been the hardest hit. In addition to Rue21, The Limited,…