Article Image
News Link • Business/ Commerce

Retail Defaults at All-Time High

• By Peter Schiff SchiffGold.com

There were more signs of a retail apocalypse in the first quarter of this year.

Defaults by retail companies rated by Moody's hit an all-time high in Q1. There were a total of nine defaults among Moody's-rated retail corporates. According to Wolf Street, total corporate defaults in Q1 were up 22% from last year, and the nine retailer defaults accounted for nearly 1/3 of them.

As Wolf Street put it, these are not mom-and-pop stores.  These are retailers large enough to be rated by Moody's –  "corporations that make up the core of the Brick-and-Mortar Meltdown."

Here are some of the retail companies that defaulted during the first quarter.

Sears Holdings

Claire's

Bon-Ton Stores

The holding companies that hold Tops Markets, a grocery chain in New York, Pennsylvania and Vermont

Charlotte Russe, a women's clothing retailer

Of course, default doesn't necessarily mean bankruptcy. Some of these companies may be able to restructure their debt and prosper. But several of these corporations have already declared bankruptcy, including Sears, Clarie's and Bon-Ton stores. More significantly, the high number of defaults reveals serious problems in the retail sector – and the broader economy.

The second quarter didn't start off any better. Last week, Nine West Holdings declared bankruptcy with $1.6 billion in loans. The company owns a number of well-known brands, including Nine West, Anne Klein, Gloria Vanderbilt and Bandolino.

Fitch Ratings' trailing 12-month institutional loan default rate of retailers rose to 8.6%, with $5.9 billion in loans now in default. Fitch paints a gloomy picture.

Our retail sector institutional term loan default rate forecast is 10%, equating to $7 billion of volume, which would surpass the 8.2% rate the sector set in 2017. Fitch anticipates more large retail chains to file bankruptcy this year. Ten percent of the retailers in Fitch's market index are listed on Fitch's Top Loans of Concern list, indicating a material default risk. These retail chains include: Neiman Marcus Group, Sears Holdings, FULLBEAUTY Brands, David's Bridal, TOMS Shoes, Indra Holdings, Everest Holdings, Things Remembered, NYDJ Apparel and Vince."

As Wolf Street put it:

So this process of the brick-and-mortar meltdown that has already caused so much pain among employees, pension beneficiaries, creditors of all kinds, shareholders, mall owners, shoppers, and other stakeholders is far from over."

Moody's echoed the typical mainstream theme, blaming the woes of brick-and-mortar retailers on a shift toward online shopping. The rating agency said the rising level of retail defaults is "reflecting the fallout of changing consumer behavior and advancing e-commerce for traditional brick-and-mortar retail."

But while it is certainly a factor, we can't blame Amazon for the retail meltdown. The big story is debt.

Join us on our Social Networks:

 

Share this page with your friends on your favorite social network:


thelibertyadvisor.com/declare