US retailers going bankrupt at record pace

American retail giant Sears acknowledged in a filing last month that there is "substantial doubt" about its future.
American retail giant Sears acknowledged in a filing last month that there is "substantial doubt" about its future.PHOTO: AGENCE FRANCE-PRESSE

NEW YORK • 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 the total for all of last year.

Few retail segments have proven immune as discount shoe-sellers, outdoor goods shops and consumer electronics retailers have all found themselves headed for reorganisation. 

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 in 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 Mr Hayne. "We are seeing the results: doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate."

Mr Jim Elder, S&P Global Market Intelligence's director of risk services, wrote that first-quarter results suggest no quick recovery is in sight.

Sears Holdings, Bon-Ton Stores and Perfumania Holdings are among the most vulnerable in the coming year, according to an S&P analysis of public retail companies.

Sears acknowledged in a filing last month that there is "substantial doubt" about its future.

Fitch Ratings named retail chains including Nine West Holdings, Claire's Stores and children's clothing outlet Gymboree Corp as bankrupty risks 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. 

Apparel retail has been particularly hard hit, with The Limited, Wet Seal, BCBG Max Azria and Vanity Shop of Grand Forks each seeking court protection so far this year.

The latest victim was shoe retailer Payless, which filed for bankruptcy on April 4 and said it would close 400 stores. Embattled teen apparel chain Rue21 could follow as soon as this month, analysts say.

Or perhaps it will be Gymboree, which Bloomberg News reported is preparing to file for bankruptcy as a June 1 debt payment looms.

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A version of this article appeared in the print edition of The Straits Times on April 26, 2017, with the headline 'US retailers going bankrupt at record pace'. Print Edition | Subscribe