Data shows that stores are closing or filing for bankruptcy this year at a faster pace than in 2018.
And additional retail bankruptcy filings are expected in the second half of the year, while brick-and-mortar stores will continue to close at a higher rate, according to a report by professional services firm BDO USA LLP.
The reported noted that a subpar 2018 holiday season was a main factor, with December retail sales dropping 1.6 percent from the month prior — the weakest sales performance since December 2009. “Last year’s lackluster holiday season contributed to 10 retailers filing for bankruptcy in 2019’s first quarter alone, including Payless, Gymboree and Charlotte Russe. The bankruptcies of just these three retailers led to the closure of roughly 3,700 stores. Several retailers also filed in July and August,” noted the report, including Charming Charlie, Barneys New York, A’gaci and Avenue Stores.
“We’re going to see this trend continue,” said David Berliner, who leads the business restructuring and turnaround services practice of BDO.
Other factors that have negatively impacted the retail market, according to the report, include tax reform’s after-effects, trade tariffs, January’s historic government shutdown and inclement weather that challenged some brick-and-mortar retailers in the first half of 2019.
As a result, many retailers have decided to shut down the traditional flagship store and open smaller-size store models in prime urban areas, with Lord & Taylor, Abercrombie, GAP, Diesel, Calvin Klein and Ralph Lauren all going this route.
One silver lining: While retailers are expected to keep falling in the second half of the year, the pace should slow down.
“I don’t think the pace of the bankruptcy filings will be as large as it was in the first half,” said Berliner.
Another positive is that overall retail sales were solid through the first half of 2019 and continue to show positive signs due to a strong economy, record low unemployment and a rise in wages.