PYMNTS-MonitorEdge-May-2024

Retailers Hit With Sticker Shock Amid Mass Liquidation Sales

Retailers Face Mass Liquidation Sales

Reeling from the impact of the coronavirus, department store chains and other retailers are scrambling to offload mountains of now-unwanted clothing and other products.

But retailers are apparently rebelling against the old adage that “beggars can’t be choosers,” and are pushing back against the rock-bottom prices being quoted by professional liquidation firms, the Financial Times reports.

Professional liquidation firms help run the now-ubiquitous everything-must-go sales when stores close, while also buying up excess inventory.

But the prospect of only getting back pennies on the dollar after forking over hundreds of millions for everything from dresses and pants to shoes and designer bags is a hard pill to swallow, even for retailers that are staring bankruptcy in the face.

“Nobody wants to get 10 cents on the cost dollar,” Michael McGrail, chief operating officer of liquidation firm Tiger Group, told the FT.  “When I tell them [retailers] the price that they’re probably going to get, they go back to the drawing board. They say, ‘that’s terrible’.”

The scramble to unload now hard-to-sell inventories of clothes and other products comes as some of the nation’s largest retailers seek protection from their creditors in federal bankruptcy court.

Among the big chains that have filed for bankruptcy include Sears, JCPenney, Nieman Marcus and Pier 1. Many other chains have dramatically reduced their footprints with massive store closings, including Party City, The Children’s Place, Starbucks, Zara and Victoria’s Secret.

Still, retailers may feel they are not quite out of options, with a big rebound in consumer spending in May providing hope for a rebound in business after the shock of the initial coronavirus shutdowns.

But with a rising tide of new coronavirus infections in several Sunbelt states, hopes for a speedy and uncomplicated economic recovery are starting to recede.