Retail Apocalypse: 2019 Store Closures Already Surpass 2018 

As the economy cycles down through fall, there is new, alarming data by professional services firm BDO USA LLP, first reported by The Wall Street Journal, that indicates retail bankruptcies continue to rise as store closures have already outpaced all of 2018. 

BDO warned that the recent acceleration of the retail apocalypse was primarily due to last year’s weak holiday shopping season.

The rate of bankruptcy filings and store closures this year have jumped to crisis levels, expected to continue into 2020. 

David Berliner, who leads business restructuring at BDO, said the trend is rather alarming but could slow into late 2019. “I don’t think the pace of the bankruptcy filings will be as large as it was in the first half,” he added.

BDO found many retailers are dealing with massive debt loads, over expansion due to cheap money, private equity-ownership pressures, and changing consumer behavior. It was the weak consumer in the 2018 shopping season that led to the acceleration of store closures in 2019. 

Retail sales in 1H19 were lackluster, due to smaller tax refunds for consumers, trade war uncertainties and tariffs, and inclement weather, which forced many retailers to offer significant discounts, according to BDO. 

A new BofA credit card report showed more evidence the economy continued to slow this summer. 

BofA found that retail sales ex-autos fell 0.5% MoM in August, which reversed the 0.9% gain in July, and was not only the first monthly contraction since February this year, but was also the biggest monthly drop in 2019.

Aggregated credit card data for August showed 5 out of the 14 sectors increased, led by strength in cruises and airlines. But it was home goods stores, home improvement stores, sporting goods stores, furniture stores, department stores, and clothing stores that posted YoY losses. 

In 1H19, 14 retailers with 25 or more stores filed for bankruptcy, including Payless ShoeSource Inc., Gymboree Group Inc., and Charlotte Russe Holdings Corp., BDO determined. That is up from 13 with 20 or more stores in 1H18.

In the last several months, Charming Charlie Holdings Inc., Barneys New York Inc., A’Gaci LLC, and Avenue Stores LLC have also filed for bankruptcy protection. 

BDO said 19 retailers have already announced 7,000 store closures in 1H19 – has already exceeded all of 2018. Payless, Gymboree and Charlotte Russe accounted for at least 3,700 of those closings.

In an earlier report, we detailed how Coresight Research forecasted 12,000 stores would close in 2019. 

“If the economy does stumble a little bit, things can get painful,” Berliner said.

“That can have a devastating effect on the weak retailers who can’t afford that sales dip in the holiday season.”

And with that being said, the consumer is unlikely to deliver a blockbuster holiday season for retailers this year. This would mean the retail apocalypse could continue into the 2020 election year, could have negative impacts for President Trump. 

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