With the rise of e-commerce and rapidly shifting consumer habits, retail has faced its share of challenges over the past decade — but most pale in comparison to the damage done by the coronavirus pandemic.
According to a new report from BDO USA, 18 retailers filed for Chapter 11 protection within the first six months of the year alone as the COVID-19 health crisis took hold in the United States. In the year to date, the professional services firm shared that there have been a total of 29 retail bankruptcy filings — meaning that 2020 is on pace to rival the post-Great Recession 2010, which recorded 48 filings.
“In short, 2020 is on track to set the record for the highest number of retail bankruptcies and store closings in a single year,” BDO USA researchers wrote in the report. “Based on the trends set through mid-August, our expectation is that more retailers will struggle to navigate the effects of the pandemic — particularly those that are highly levered and mall-based.”
The majority of those bankruptcies were concentrated in the apparel and footwear spaces, but also counted home furnishings and grocery stores. The first quarter saw Chapter 11 filings from Pier 1 Imports and Modell’s Sporting Goods, while the most prominent names to go bankrupt in the second quarter were J.Crew, Neiman Marcus, Stage Stores and JCPenney.
From July through mid-August, another 11 retailers filed for bankruptcy, including Lucky Brand, Brooks Brothers, New York & Company parent RTW Retailwinds, Ascena Retail Group, Lord + Taylor owner Le Tote, Men’s Wearhouse parent Tailored Brands and Stein Mart.
Along with an uptick in Chapter 11 filings, the industry has also seen a significant rise in the number of store closures. BDO USA reported that those 29 retailers have announced a collective 5,998 shutdowns so far this year. Apparel and footwear firms accounted for 39%, or 2,368 of those shuttered stores, while home furnishings represented 24%, or 1,433, and department stores were 15%, or 907.
But these shutterings are not just affecting retailers that have filed for Chapter 11: The firm added that 18 companies — counting Macy’s, H&M, Tommy Hilfiger parent PVH Corp., Express, The Children’s Place, Guess and Chico’s — have not gone bankrupt, however, they have announced a combined 4,228 permanent store closings. Altogether, that’s a total of 10,226 store closures in a matter of eight months.
“To stay competitive, brick-and-mortar stores should assume touchless shopping options such as curbside pick-up and self-checkouts are here to stay, and apparel retailers should be reimagining what the fitting room experience will look like post pandemic,” the researchers suggested. “While there’s no precedent to predict how the end of 2020 will shake out, we expect that retailers that remain agile, leverage data to understand their customers and plan carefully will be better prepared to weather this year and beyond.”