Home goods retailer Pier 1 this week announced plans to liquidate its business after failing to find a buyer. Modell's announced plans to shutter its business in March. Earth Fare, which filed for bankruptcy in February, only found a buyer for parts of it.
Contrast their fortunes with retailers likeand Mattress Firm, which have utilized court protection to get out of bad leases and downsize to their most profitable stores. Some, like Gymboree and Payless ShoeSource, emerged from bankruptcy only to fall back in. But at least they had a shot to come back.
"Given the fact that unemployment on its way to 20% and social distancing is an unpleasant reality – it's difficult for me to envision a world where a bankrupt company trying to emerge from a Chapter 11 proceeding is going to be able to put financial projections that lenders have confidence in," said Eric Danner, a partner with CohnReznick Advisory's Restructuring & Dispute Resolution Practice.
The full impact of the pandemic on retail has only begun to be felt. Neiman Marcus, J. Crew, Stage Stores, J.C. Penney and Centric Brands have filed for bankruptcy. Many more are expected to come as the coronavirus' fallout strains the economy, restructuring advisors say. More bankruptcies and liquidations would put further pressure on many of the remaining retailers instead of letting them benefit from reduced competition. As malls lose their anchor stores, shoppers have even less reason to visit there.
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