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

Tyler Durden's picture

The situation is rapidly deteriorating for America's "bricks and mortar" retailers. As discussed earlier this week, some 9 retail outlets have already filed for bankruptcy protection in 1Q 2017 alone according to Alix Partners.  That volume of filings matches the total number of retail bankruptcies for all of 2016 and puts the industry on pace to exceed even the 'great recession' highs.

Retail

Confirming that even more retail defaults are imminent was the following chart from Morgan Stanley according to which in just the first quarter there were nearly 2,100 store closures, nearly double the number from Q1 of last year.

 

Appropriately, one day after our Monday report, Payless ShoeSource filed for bankruptcy. Payless filed Chapter 11 on April 4 to facilitate a balance sheet debt restructuring and operational overhaul. The company became highly leveraged in a 2012 buyout and debt became unsustainable as sales and cash flows decreased. The company plans to have liquidation sales for 400 out of 4,400 underperforming stores that are earmarked for permanent closure and intends to try to re-negotiate leases or close other stores and to emerge as a smaller concern. Some more details: a $385 million DIP facility, which consists of a $305 million asset-backed loan (ABL) and an $80 million term loan, has been negotiated with existing lenders to refinance certain prepetition debt and provide $120 million of incremental liquidity during the bankruptcy.

Rating agency Fitch also noticed, saying that with this latest default, the TTM loan default rate rose to 1%. The rate fell to 0% in March and was 0.5% at the end of February.

It's about to get worse, however, because in its report on the latest retail default, Fitch said it expects the rate to climb to 9%, equating to roughly $6 billion in defaults, over the next 12 months, fueled by continued challenges in the retail sector.

Fitch’s expectation of increasing retail defaults stems from increased discounter (including off-price and fast-fashion apparel) and online penetration, and shifts in consumer spending toward services and experiences. All of these factors have created a highly competitive retail environment and accelerated mall traffic declines. Retailers have also suffered from the ebb and flow of brand popularity. Negative comparable store sales and fixed-cost deleverage have led to negative cash flow, tight liquidity and unsustainable capital structures.

Going back to Payless, the company was listed on Fitch’s Loans of Concern list, which is a compilation of issuers with a significant risk of default within the next 12 months. And, just to make the tracking of future defaults easier, Fitch also provided the list of eight other retailers with term loan debt totaling nearly $6 billion, which are also its concern list, and are most likely to be in default in the not too distant future. They are as follows:

  • Sears Holdings Corp (roughly $2.5 billion);
  • 99 Cents Only Stores LLC;
  • Charming Charlie LLC;
  • Gymboree Corp.;
  • Nine West Holdings Inc.;
  • NYDJ Apparel LLC;
  • rue21, Inc.; and
  • True Religion Apparel Inc.

Meanwhile, Jeff Bezos is this close to being the world's richest man.

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peippe's picture

as long as skynet eventually delivers my pizza in 30 minutes or less, 

I'm willing to live with the invasion of my privacy.

God I'm pathetic.

Shocker's picture

Still many companies that are not financially stable

Layoff List: http://www.dailyjobcuts.com

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fx's picture

Fvck Jeff Bozo and the WaPo.

The_Juggernaut's picture

lmfao @ Fitch.  Remember how they saw 2008 coming?

 

Yeah, neither do I.

Stroke's picture
  • Sears Holdings Corp (roughly $2.5 billion);
  • 99 Cents Only Stores LLC;
  • Charming Charlie LLC;
  • Gymboree Corp.;
  • Nine West Holdings Inc.;
  • NYDJ Apparel LLC;
  • rue21, Inc.; and
  • True Religion Apparel Inc.

Really......except for underpaid employes who's gonna miss 'em ?

gatorengineer's picture

The people who are paying the mortgage and taxes on the empty mall slot they used to occupy?

surprised Penny's didnt make the list.

Lore's picture

Will be interesting to see what fills those empty store spaces.  Something must be planned, because various funds -- including the Canada Pension Plan -- are filling their boots with U.S. retail space.  I've heard it suggested that some of the biggest mall buildings might be converted into multi-storey residential apartments with public markets, community centers and recreational facilities (future ghettos, in other words). Considering the soaring level of consumer debt, any alternative that requires discretionary spending seems like a non-starter. For my part, I wouldn't touch retail space for investing with a 10 foot pole.  The outlook for at least the next couple of decades seems incredibly bleak. 

Jon Bong Jovi's picture

Good real estate is always a strong investment.  If you know what to look for you'll do fine. Patience is also key. Some of my properties I bought within the past five years are returning 20%/year...and I carry zero debt. I'll refi and pull out the equity when the market crashes again and repeat.

DirkDiggler11's picture

I miss the old Sears, the one where you could buy a Craftsman tool that was made in the USA when you did not want to mess up your Snap-On tools...

Bigly's picture

And a kenmore fridge that never needed a service call yet in 22 years....

I am angry they wrecked their brands and stores.  Asshole mgmt.

CoolClo's picture

I gave away a 40 year old Kenmore cloth washer, still in perfect working order, that never needed a repair..

i poop pink ice cream's picture

99 Cent Only Stores sell many food items. In fact, probably 50% of what they sell is food. If they close their doors, a lot of people are going to have a very difficult time getting enough food to eat. 

1980XLS's picture

Make sure you don't order any "unhealthy Toppings" on Your Skynet Pizza.

 

They will tell your Heath & Life insurer, and take a commision on your rate hike.

Chuck Walla's picture

Any price for a decent and HOT pizza.

Kprime's picture

the mushrooms have cameras hidden in them, don't order the mushrooms

Cognitive Dissonance's picture

I love a good going out of business sale.

PTR's picture

Yeah, but the equipment used in government offices are for the most part REALLY outdated.

Never One Roach's picture

I am tempted to buy a Turkish carpet. Ozmal has been "Going out of Business' for the past 22 years. These American stroes need to learn how the middle easterners do that.

ToSoft4Truth's picture

How do Chinese families decide a newborn's name?

 

Throw their pots and pans down a stairwell.

TuesdayBen's picture

Buy one on craigslist and get 'er cleaned.  Save a ton.

Kprime's picture

The long and winding road

That leads to your closed door

I've seen that door befor orr orr

 

blueberry100's picture

I think i heard some where 300 Family Dollars stores are going o of bis

ToSoft4Truth's picture

20% off firearms at MC Sports.

 

Crossbows are 50% off plus a bonus 10% off entire purchase.

 

Kmart had all black clothing on sale for 90% off.

wmbz's picture

"Kmart had all black clothing on sale for 90% off".

Was it for clothing that was the color black, or clothing for blacks only?

Chuck Walla's picture

"Kmart had all black clothing on sale for 90% off".

COOGI?

Jon Bong Jovi's picture

Hey man, Coogi made me millions in the 90's and the early 2000's. Samsung owned them and banked. The Shark Tank guy was just a figurehead the Koreans used to tap into the Urban market. He was selling trinkets on the street in Manhattan, one of the guys who carried shit around in a black garbage bag and spread their crap out when their was no po-po.

I ran into him at a social function once, and he tried to act all big willie. I told him, yeah, I know the real story not the BS mythology you have on your website. Of course he doesn't want the truth to get out, it'll undermine his "blackness" and this idea he's a successful black businessman. He just lucked out.

Kprime's picture

Black Clothing Matters Too. 

Don't Shoot Me, I'm Wearing Black

UdderContempt's picture

Kmart blue light special. Buy one get one free.

 

"Hey, if they really want to fuck you they will give you two of these things. That's all I need is two lime green leasure suits shaped like a fucking hang glider."

 

Dennis Miller

Food Loaf Junkie's picture

The sign said all you can eat for a $1.99, but $1.00's worth was all I could stand.

blueberry100's picture

True Religion Apparel Inc.

Does anyone know how their sandals hold out?

Jlasoon's picture

The clothing is garbage - come to think of it most clothing today is garbage.

Wife took me to an 'Armani' store in Tampa just a few days ago. Couldn't believe my eyes. A $350 polo made in fucking Sri Lanka - WTF

TuesdayBen's picture

No, but if you want flip-flops that last a bit, try Okabashi

Big Brother's picture

Olukais are also good (personal experience).

peippe's picture

really?

even for True Religion jeans? $369 pair?

I've got 17 year old Levi's that look like that, $29-36 I paid for them back in the 90's.

You can pay me $99 a pop. I 'distressed' them for you, too.

These douches make me laugh, i'll cry when Heineken closes a brewery. God forbid.

christiangustafson's picture

Heineken?!  Fuck that shit!!

PABST BLUE RIBBON!!!

Kprime's picture

tell her to walk a little slower, I can't see the blue ribbon up her ass as she walks Pabst

katchum's picture

When you look at the price of True Religion jeans, I'm surprised they aren't bankrupt already.

That's what you get when you manufacture and produce in the USA.

Jlasoon's picture

No, that's what happens when you manufacture in California and pay $185/hr with benefits and Obamacare!

Kprime's picture

$185 per hour in CA?  I heard that was minimum wage now.

silverer's picture

Malls, the new use: An indoor paint gun while you roller blade park. Scheduled concerts by regional bands. Beer. Big screen video. Gun stores. Hookers. And last of all, tax revenue for the jurisdiction. Can't give that up.

ToSoft4Truth's picture

You illustrate why we know it's a conspiracy.

 

We can all think of three things to use a vacant mall for.

 

ZeroHedge showed us the bankers are buying the malls back from BK courts for $100.00.

 

Hmmmm.....

Pittsburgh Mall Once Worth $190 Million Sells For $100

http://www.zerohedge.com/news/2017-01-18/pittsburgh-mall-once-worth-190-...

codecode's picture

Empty retail space turned into a large, indoor, very nice, trampoline park nearby us..

Jlasoon's picture

$400 for a pair of jeans - you would think 'True Religion' would adapt and maybe focus on affordability.

ToSoft4Truth's picture

'$400 for a pair of jeans'

 

"Jesus Chrsit!"

 

'True Religion'

Jlasoon's picture

Maybe they consider it 'Tithing'

corporatewhore's picture

There's big money in Jesus.  LOL.

Ms. Erable's picture

That much for a pair of jeans? Consider me an atheist.