Retailers are filing for bankruptcy at a record rate as they try to cope with the rapid acceleration of online shopping.
In a little over three months, 14 chains have announced they will seek court protection, according to an analysis by S&P Global Market Intelligence, almost surpassing all of 2016. Few retail segments have proven immune as discount shoe-sellers, outdoor goods shops, and consumer electronics retailers have all found themselves headed for reorganization.
Meanwhile, America’s retailers are closing stores faster than ever as they try to eliminate a glut of space and shift more business to the web. S&P blamed retailer financial struggles on their inability to adapt to rising pressure from e-commerce.
Urban Outfitters Chief Executive Officer Richard Hayne said as much on a conference call with analysts last month. There are just too many stores, especially those that sell clothing, he said.
“This created a bubble, and like housing, that bubble has now burst,” said Hayne. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”
Jim Elder, S&P Global Market Intelligence’s director of risk services, wrote that first quarter results suggest there’s no quick recovery in sight. Sears Holdings Corp., Bon-Ton Stores Inc., and Perfumania Holdings Inc. are among the most vulnerable in the coming year, according to an S&P analysis of public retail companies. Sears acknowledged in a March filing that there is “substantial doubt” about its future.
Fitch named retail chains including Nine West Holdings, Claire’s Stores, and children’s clothing outlet Gymboree Corp. in a study late last year.
Department stores, electronics retail, and apparel shops are at highest risk, according to S&P. The food and home improvement segments are safest.