The coronavirus accelerates the retail crisis

Bankruptcies and store closures among US retailers hit a record in the first half of the year due to the pandemic

Bankruptcies and store closures among US retailers hit a record in the first half of the year due to the pandemic.

At the beginning of 2020, the coronavirus pandemic completely altered the landscape of the US retail sector, which was already facing its particular “apocalypse” in recent years. Lockdowns, social distancing measures, supply chain issues, and increases in e-commerce sales have only intensified already existing vulnerabilities among traditional retailers, thus accelerating the pace of suspension payments.

In the first half of 2020, a total of 18 retailers filed for Chapter 11 of the US Bankruptcy Law, which allows suspension of payments and the restructuring of operations, and another 11 did so between July and mid-August, according to the data collected by BDO.

This year is on track to surpass the previous milestone set in 2010, when 48 retailers filed for bankruptcy in the wake of the 2008 financial crisis. So far, to date, the number of companies in the industry that have suspended payments in 2020 It already exceeds the 22 requests of this type registered last year and set a record in the first six months of the year.

This situation has been particularly concentrated among retailers of clothing and footwear, home furnishings, food and department stores. Some of the biggest names include Pier 1, J. Crew, Neiman Marcus, Stage Stores, JC Penney, Brooks Brothers, Ascena (Ann Taylor, LOFT, Lane Bryant, Justice, Catherines), Le Tote (Lord & Taylor), Tailored Brands (Men’s Wearhouse, Jos. A. Bank, Moores Clothing, K&G) and Stein Mart.

Along with the rebound in suspension of payments and liquidations so far in 2020, the industry has also seen a substantial increase in the number of store closures.

From January to mid-August the closure of 10,226 stores has been confirmed, of which almost 6,000 correspond to bankrupt retailers, thus surpassing the record of 9,500 stores registered throughout last year. Most of the closures have taken place at shopping centers, which have experienced much less traffic due to the pandemic.

The sights are on the holiday shopping season, a crucial period for retailers

However, retailers on the brink of bankruptcy are not the only ones looking to ditch their physical locations. In fact, there are more than 15 retailers, including Macy’s, Bed Bath & Beyond or Gap, that have announced 50 or more stores closing, for a combined total of more than 4,200.

Now the sights are directed to the final stretch of the year. The Christmas shopping season in the US, a crucial period for retailers, is now preparing to throw some of its best-known traditions out the window.

The coronavirus pandemic will prevent establishments from opening their doors on Thanksgiving night while the gross of the sales and discounts will be online. A dynamic that the national consumer has been used to for years, but which strengthened its routine during the confinements of last April.

Against all odds, the ordinary American is poised to put on muscle. Deloitte forecasts a year-on-year increase in holiday sales of between 1% and 1.5% for 2020, reaching up to a total of 1.15 trillion dollars between November 2020 and January 2021. As regards Online shopping, which has been a crucial bastion during the pandemic, is expected to grow between 25% and 35%, reaching $ 196 billion.

Contrary to the behavior registered during the financial crisis of 2008, when summer sales fell 4.7% and a year later they only managed to grow 0.2% according to data from the National Retail Federation (NRF, for its acronym in English), the K-shaped recovery seen by economists will lead to two consumption trends in the coming months.

If consumers remain concerned about the directions their employment situation may take while Congress does not approve a new stimulus package and the vaccine takes hold, Christmas sales will likely remain flat or grow 1%, according to Deloitte. However, if Americans gain confidence and use some of the money saved these months for travel and other social activities, sales could increase between 2.5% and 3.5%.

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