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Retailers filing for bankruptcies at staggering rates

Going out of business is a major undertaking. Toys ‘R’ Us has found out the hard way that by holding off on filing for Chapter 11 protections, the company lost the flexibility to better manage vendors and take other steps to work its way out of bankruptcy.

With Toys ‘R’ Us filing for liquidation on Thursday, this means it will close or sell its remaining 735 US stores, making it the first retailer to liquidate in 2018. So far this year, Bon-Ton Stores, which filed in February, and Bi-Lo, which owns the grocery store chains Winn-Dixie and Tops Friendly Markets have filed for bankruptcy.

Additionally, Claire’s, a girls jewelry and accessory chain, is reportedly preparing to declare bankruptcy soon as well. The company is currently being crushed under $2 billion of debt.

Claire’s and Toys ‘R’ Us will join a long list of retailers that have been hit hard by changes in the retail industry. Analysts point to the number of retail stores in large shopping malls that have left, causing a decline in customers. But an even bigger cause being cited is the change in how we shop today.

The store front of Winn-Dixie Store #736 in Port Charlotte  Florida. This store is located in the Pr...

The store front of Winn-Dixie Store #736 in Port Charlotte, Florida. This store is located in the Promenades Mall on Tamiami Trail.
PCHS-NJROTC (CC BY-SA 4.0)


Digital technology versus the shopping mall
Digital transformation has taken over the retail industry. As Digital Journal noted in January, “Once a sufficient number of retailers put in place a modern and efficient application of digital technology, this alters consumer expectations. For those retailers less advanced or which have yet to embark on the digital change process, they face the risk of remaining behind.”

One of the biggest changes taking place in the retail industry can be summed up by saying: “Consumer behaviors can be summarized as ‘what they want, they want it now.’ This means putting in place quick ordering and quick delivery.

And Amazon, Walmart, and a few other retailers have jumped right into using digital technology to their advantage, turning the “all-day trip to the mall shoppers” into online shoppers, where a consumer can easily go to numerous stores in the comfort of their own homes.

A JC Penny department store is shown in Escondido  California

A JC Penny department store is shown in Escondido, California
With permission by Reuters / Mike Blake


Retail bankruptcies and defaults could hit record levels this year
According to an assessment by the credit-ratings agency S&P Global Ratings, retail defaults and liquidations could match or even surpass last year’s levels.

“We believe defaults in 2018 could match or exceed last year’s record level,” S&P Global Ratings analyst Robert Shulz wrote in a recent report that identified 20 retailers at risk of defaulting.

“Despite store closures amid the turmoil, the US remains significantly oversaturated with retail stores,” he wrote. “Some retailers have made progress towards better aligning their physical footprint to the new reality of physical versus virtual sales, but there is still excess capacity.”

S&P Global Ratings has identified 19 retailers at the most risk of defaulting this year:
99 Cents Only Stores LLC
Bluestem Brands, Inc.
Everest Holdings, LLC
FULLBEAUTY Brands Holdings Corp.
J.Crew Group, Inc.
New Academy Holding Co. LLC
PetSmart Inc.
Steak ‘n Shake Inc.
SSH Holdings
David’s Bridal, Inc.
Neiman Marcus Group
Evergreen AcqCo 1 LP
HT Intermediate Holdings Corp.
Payless
BKH
The Fresh Market
Guitar Center
Claire’s Stores, Inc.
Sears Holdings

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We are deeply saddened to announce the passing of our dear friend Karen Graham, who served as Editor-at-Large at Digital Journal. She was 78 years old. Karen's view of what is happening in our world was colored by her love of history and how the past influences events taking place today. Her belief in humankind's part in the care of the planet and our environment has led her to focus on the need for action in dealing with climate change. It was said by Geoffrey C. Ward, "Journalism is merely history's first draft." Everyone who writes about what is happening today is indeed, writing a small part of our history.

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