Home goods retailer Pier 1 this week announced plans to liquidate its business after failing to find a buyer. Modell's announced plans to shutter its business in March. Earth Fare, which filed for bankruptcy in February, only found a buyer for parts of it.
Contrast their fortunes with retailers likeand Mattress Firm, which have utilized court protection to get out of bad leases and downsize to their most profitable stores. Some, like Gymboree and Payless ShoeSource, emerged from bankruptcy only to fall back in.
But at least they had a shot to come back. Those shots are likely to be fewer in the aftermath of the coronavirus outbreak, according to retail and restructuring experts. Retail was already facing broader challenges as shoppers increasingly abandoned malls for online commerce. Now, the financing for retail isn't there as banks tighten their purse strings. It's not clear that shoppers are going to be there, either. A second wave of the coronavirus could be on the way later this year as states relax social-distancing guidelines and reopen their economies under the guidance of the Trump administration. "Given the fact that unemployment on its way to 20% and social distancing is an unpleasant reality – it's difficult for me to envision a world where a bankrupt company trying to emerge from a Chapter 11 proceeding is going to be able to put financial projections that lenders have confidence in," said Eric Danner, a partner with CohnReznick Advisory's Restructuring & Dispute Resolution Practice. So far this year, the number of liquidation plans by bankrupt retailers has not outpaced previous years. Five of the 15 retailers that have filed for bankruptcy to date have announced plans to shutter their businesses, according to data provider Debtwire, though some of those retailers could still turn into a liquidation. Last year, 16 of the 25 retailers that filed for bankruptcy liquidated. The year prior, 11 of 23 bankrupt retailers shuttered their doors.Michael Brochstein | SOPA Images | LightRocket via Getty Images The full impact of the pandemic on retail has only begun to be felt. Neiman Marcus, J. Crew, Stage Stores, J.C. Penney and Centric Brands have filed for bankruptcy. Many more are expected to come as the coronavirus' fallout strains the economy, restructuring advisors say. Stage Stores, which has 700 department stores predominately in mid-sized markets and rural communities, has warned it may need to liquidate if it cannot find a buyer. It said in a court hearing Thursday it is in talks with 21 parties, eight of whom are interested in buying a large subset of its current store footprint, some distribution centers, and, in certain cases, its headquarters. More bankruptcies and liquidations would put further pressure on many of the remaining retailers instead of letting them benefit from reduced competition. As malls lose their anchor stores, shoppers have even less reason to visit there. "When those stores disappear, volume almost disappears from the market – and it's not replicated in other channels easily," said Michael Dart, a partner at A.T. Kearney and author of "Retail's Seismic Shift." That means even more job losses in an industry that is one of the country's largest drivers of employment. The retail industry
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