Troubled retailers that stayed alive thanks to heady consumer spending during the pandemic are now showing signs of distress, filing for bankruptcy at the highest rate since 2020, and closing hundreds of stores.
The Wall Street Journal reports that a dozen large retailers with shrinking revenue or high debt have filed for bankruptcy so far this year. That’s as many did in the entirety of 2021, and more than double the total for 2022, making this the most active year since the onset of the pandemic, according to BDO, which keeps track of retail bankruptcies for its semiannual reports.
Discount home-goods chain Christmas Tree Shops, its former parent Bed Bath & Beyond and wedding-gown supplier David’s Bridal have filed for chapter 11 over the past several weeks, hurt by wage and price pressures and changing consumer preferences.
Read more: Bed Bath & Beyond Liquidates Business
More bankruptcy filings or rescue deals are expected among retailers on weak financial footing, especially companies that rely on discretionary spending.
Retail earnings have broadly fallen amid a change in attitude among consumers who had to cut back spending on discretionary items to cover the rising costs for essential items such as food, gas and housing. A glut of inventory also forced companies to resort to big markdowns.
Strong consumer spending and readily available financing during the pandemic years helped struggling retailers to stay afloat, but high inflation and the tightening lending market are now pushing them into bankruptcy, said Ivan Friedman, president and chief executive of retail consulting firm RCS Real Estate Advisors.
“These companies that are filing now for chapter 11 should have filed a year ago, except business got better for a little while. But that didn’t save them,” Friedman said.
Timely, incisive articles delivered directly to your inbox.