Retail industry's bankruptcy wave due to pandemic has subsided, yet these 20 businesses remain vulnerable.
The retail sector in October 2021 was navigating a complex landscape, marked by the ongoing impacts of the COVID-19 pandemic and the resulting financial pressures on numerous companies.
While some retail giants, such as Sears Holdings and JCPenney, had already filed for bankruptcy in the previous year, others continued to struggle. One such company was Guitar Center, which faced financial challenges and undertook debt restructuring to avoid bankruptcy.
Another retailer, rue21, had filed for bankruptcy for the third time by 2024, although this was not the case in October 2021. TGI Fridays and Big Lots were also facing financial difficulties, with Big Lots involved in a debtor-in-possession term loan arrangement as of November 2024.
National Stores/Fallas Discount Stores had filed for bankruptcy in 2018 and was undergoing restructuring efforts. Meanwhile, TGI Fridays, despite facing challenges in the casual dining industry, had not filed for bankruptcy as of October 2021.
In a positive development, some retailers were showing signs of recovery. Party City, for instance, had returned to profitability after the initial pandemic months, although the delta variant's impact on social gatherings added a degree of uncertainty.
The retail landscape was also marked by a decline in Chapter 11s, defaults, and distress in the retail industry, thanks to government stimulus, cheap money, and the comeback of shopping. This trend was evident in the case of Belk, which had exited bankruptcy with its store footprint intact and its private equity sponsors, Sycamore, still in charge.
However, some retailers continued to face a high risk of bankruptcy. The FRISK score, used by Retail Dive, measures the probability of a publicly traded retail company filing for bankruptcy within 12 months. As of Oct. 1, retailers with the lowest FRISK scores had fallen to three: Party City, Rite Aid, and Digital Brands. Party City and Rite Aid each had a FRISK score of 1, indicating a 9.99% to 50% chance of filing for bankruptcy within the next 12 months.
Digital Brands Group, after an initial public offering, was added to S&P's most vulnerable retailers list due to its debt, and it had a FRISK score of 2, which comes with a 4% to 9.99% chance of bankruptcy by CreditRiskMonitor's calculations. Tuesday Morning, despite exiting bankruptcy, was still listed as a vulnerable retailer by S&P Global Market Intelligence.
Tailored Brands, owner of Men's Wearhouse and Jos. A. Bank, had made a series of executive appointments since emerging from bankruptcy. Despite this, the company faced liquidity shortfalls and needed an emergency infusion of cash from an existing lender.
Despite the challenges, there were signs of resilience in the retail industry. Party City, for instance, had plans to ramp up its Halloween pop-ups from last year's level, reflecting a degree of optimism and adaptability in the face of ongoing uncertainties.
In conclusion, the retail industry in October 2021 was a dynamic and evolving landscape, marked by both challenges and opportunities. As the world continues to navigate the COVID-19 pandemic, retailers will need to remain adaptable and resilient to weather the storm and thrive in the new normal.
- The ongoing pandemic and its financial repercussions continued to exert pressure on various retail companies in October 2021.
- Despite filing for bankruptcy later, rue21 was still striving in October 2021, unlike TGI Fridays, which was facing challenges in the casual dining industry but had not filed for bankruptcy.
- Some retailers, such as Party City, were showing signs of recovery after initial pandemic months, although the delta variant added a layer of uncertainty to the industry.
- Government stimulus, cheap money, and a rebound in shopping helped to decrease Chapter 11s, defaults, and distress in the retail industry by October 2021, as exemplified by Belk's exit from bankruptcy.
- By October 1, only three retailers, Party City, Rite Aid, and Digital Brands, had the lowest FRISK scores, indicating a potential bankruptcy risk.
- Digital Brands Group, after an initial public offering, had a FRISK score of 2 and was added to S&P's most vulnerable retailers list due to its debt.
- Tailored Brands, the owner of Men's Wearhouse and Jos. A. Bank, faced liquidity shortfalls and needed an emergency infusion of cash from an existing lender.
- Amidst the challenges, retailers like Party City demonstrated resilience, with plans to expand their Halloween pop-ups from the previous year, signaling a degree of optimism and adaptability in the face of ongoing uncertainties.
