Struggling retailers rush to file for bankruptcy as fears of a second wave of coronavirus linger

Lauren Thomas@LAURENTHOMASKEY POINTS

• Industry executives saw what happened to other retailers who filed for bankruptcy in the first few months of the coronavirus outbreak.
• They worry that could happen to them should a second wave of infections hit during the winter months as some medical experts have warned. 
• Sporting goods chain Modell’s filed for bankruptcy on March 11 — before the coronavirus put its liquidation plans on hold.

A pedestrian wearing a protective mask walks near a temporarily closed New York & Co. store in Silver Spring, Maryland, U.S., on Friday, June 5, 2020.Andrew Harrer | Bloomberg | Getty Images

Over a two-week span in early July, seven retailers, including The Paper Store, Brooks Brothers and Lucky Brand, filed for bankruptcy protection. 

J.Crew, Neiman Marcus and J.C. Penney and four other retailers had already filed in May. Lord & Taylor and the off-price shop Stein Mart led another wave that hit earlier this month. Some would say it has been a flood, but what’s coming could be a tsunami. 

For apparel companies and department store chains, which have been hit hard by the coronavirus pandemic, the turmoil doesn’t appear to be slowing down anytime soon. Instead, industry executives and analysts predict another round of retail bankruptcies and liquidations could be coming if the predicted second wave of Covid-19 infections happens. Competitive pressures ahead of the holiday season could trigger a rush to bankruptcy court, they say.

“The pipeline is as full as it has been all year,” said Bradley Snyder, an executive managing director at the liquidation firm Tiger Capital Group, referring to the potential for more retail bankruptcies. Some 44 retailers have already landed in bankruptcy court in 2020, according to a tracking by S&P Global Market Intelligence. 

“The challenge is making sure we can actually close stores in a window that is open,” he said. 

Meal-kit company Blue Apron and online furniture retailer Wayfair are high on S&P Global’s list of companies at risk of defaulting on their debt and seeking bankruptcy protection. Apparel makers J.Jill, Christopher & Banks and Destination XL Group are also at risk, S&P Global said in an analysis this month.

Firms including Tiger, Hilco, Gordon Brothers and Great American Group appear to be racing around the clock to work through what has been the busiest year for retail bankruptcies since the Great Recession. When it comes to the hundreds of going-out-of-business sales taking place simultaneously, resources are limited. Shoppers’ wallets are also somewhat strained, with millions of Americans out of a job. 

“I think there is a lot more to come,” said Tiger Chief Operating Officer Michael McGrail, who oversees the appraisal and disposition practices of Tiger’s retail, wholesale, and commercial and industrial divisions. “It’s just like anything else. We’ve seen the first wave, where those in critical condition are getting in trouble.” …….more here

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