Retail chains on the edge continues to grow as number jumps from 11 to 22 in just a week
Last week we wrote about the most recent retail/restaurant chain to announce they were preparing to file for bankruptcy protection, making the managers of Joe’s Crab Shack the third store conglomerate in the past 30 days to publicly cede to default or insolvency. ¬†And now on June 9, the list of retail chains residing very close to the edge of needing their own bankruptcy protection has doubled in just a week as the number of chains designated by Moody’s has increased from 11 to 22.
The US retail sector continues to sink at an alarming rate, and according to the¬†latest iteration of Moody‘s list of retailers who are in danger of filing for bankruptcy, there are now 22 distressed retailers whose troubled financials the rating agency believes could make them potential bankruptcy candidates in the near future, up substantially¬†from just two months ago,¬†and topping the 19 recorded at the peak of the Great Recession.
According to Moody’s analyst Charles O’Shea, legacy retailers such as Sears, Neiman Marcus and others on the rating agency’s retail distress list, face a “perfect storm” and warned that “you’re on the Andrea Gail right now, and the water’s starting to get very choppy.”¬†The worst could be yet to come as¬†the Moody’s analyst writes that¬†“the ranks of distressed retailers is set to keep growing over the next 12 to 18 months amid a secular shift in the industry.”
Moody’s list consists of all retailers which have ratings of Caa or lower. That number has grown to 22, or approximately 15%, of the firm’s retail and apparel universe.¬†“When you’re down there in C-a land, bankruptcy is a real possibility,”¬†O’Shea said.
“The majority of retailers remain fundamentally healthy,” said O’Shea, “But as select groups of retailers continue to deteriorate — in particular department stores and specialty retailers — we believe the distressed ranks will keep growing, fueled in part by distinct vulnerabilities within the B2/B3 retail population.” – ¬†Zerohedge
Moody’s list of retail chains that have strong potential for default:
- Boardriders SA¬† – sporting subsidiary of Quiksilver
- The Bon-Ton Stores – parent of department store chain
- Fairway Group Holdings – food retailer
- Tops Holding II – supermarket operator
- 99 Cents Only Stores – discount retailer
- TOMS Shoes – footwear company
- David’s Bridal – wedding dresses and formalwear seller
- Evergreen AcqCo 1 LP – parent of thrift chain Savers
- Charming Charlie – women’s jewelry and accessories
- Vince LLC – clothing retailer
- Calceus Acquisition – owner of Cole Haan footwear firm
- Charlotte Russe – women’s clothing
- Neiman Marcus Group – luxury department store
- Sears Holdings – owner of Sears and Kmart. (Closed numerous stores already this year)
- Indra Holdings – holding company owner of Totes Isotoner
- Velocity Pooling Vehicle – does business as MAG, Motorsport Aftermarket Group
- Chinos Intermediate Holdings – parent of J. Crew Group
- Everest Holdings – manages Eddie Bauer brand
- Nine West Holdings – clothing, shoes and accessories
- Claire’s Stores – accessories and jewelry
- True Religion Apparel – men’s and women’s clothing
- Gymboree – children’s apparel (already preparing to file for bankruptcy protection)
When you add in the fact that major durable good retailers like the auto industry are also seeing an immense slowdown in consumer purchases, and consumers are now maxed out on revolving credit to the point that credit card defaults are on the rise, then many of these fringe retail chains will inevitably follow in the footsteps of Gymboree, Rue 21, and Ignite Restaurant Group on the path towards filing for their own bankruptcy protection.
Kenneth Schortgen Jr¬†is¬†a writer for The Daily Economist, Secretsofthefed.com,¬†Roguemoney.net, and Viral Liberty, and hosts¬†the popular youtube podcast on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.