Darwinism Taking Effect in the Retail Industry

The US brick-and-mortar retail industry is going through a process of natural selection.

A report from S&P Global Market Intelligence released in early August showed that 43 retailers had filed for bankruptcy this year. 

That’s more than the 2018 and 2019 numbers already.

The industry is also on track for the highest number of retail bankruptcies since 2010.

As of early September, retailers have closed almost 8,000 stores, compared with just 3,300 new store openings, according to Coresight Research. That’s a negative number of over 4,000 stores.

Since Covid-19 was declared a national emergency in mid-March, fillings for bankruptcy have piled up.

Among the retail names are J. C Penney, Lord & Taylor, Neiman Marcus, Brooks Brothers, GNC, Aldo, and Modell’s.

 

This downturn is not totally a surprise, and it would not be fair simply to paint the pandemic as the only villain. Nor is it Amazon’s fault.

There is a near consensus among experts that the problem started years ago, especially for apparel companies and traditional department stores. 

Their sales were shrinking and their debts were booming long before the Covid-19 crisis.

They were also having trouble navigating through the transformation from offline to online business and struggling to attract new customers. Plus, some have inefficient operations.

Some argue that the pandemic just accelerated Darwinism, and some say it will probably keep happening over the next few months.

For the retailers dealing with these problems, not even the end of the pandemic means things will get much better.

The fate of the companies that filed for Chapter 11 isn’t always clear.

Century 21, one of the latest to join the club (on September 10) announced that it will close all of its 13 stores.

Lord & Taylor, the oldest department store operator in the US, is also in the process of liquidating. 

On the other hand, the 118-year old J. C. Penney, which filed for Chapter 11 in May, is close to being rescued. It will be sold to mall owners Simon Property Group and Brookfield Property Partners.

The deal is an example of mall owners some of them public companies trying to buy their own big tenants to avoid a domino effect of vacancies.

Simon Property will also join a deal to buy Brooks Brothers, which filed for bankruptcy in July.

Other retailers are still seeking buyers for at least part of their business, or they’re hoping for mergers or new investors.

The silver lining in all this transformation is that in the end, the retail industry may turn out healthier, with companies bette- prepared to offer what consumers really want.

Some public US retailers that have filed for bankruptcy in 2020

  • Ascena (ASNAQ) – owns brands like Ann Taylor and Loft 
  • Centric Brands (CTRC) – owns brands like Zac Posen and Hudson and licenses over 100 brands like Kate Spade and Timberland)
  • GNC Holdings (GNC)
  • J.C. Penney (JCPNQ)
  • Pier 1 Imports (PIR)
  • RTW Retailwinds (RTWIQ) – New York & Company parent company
  • Stage Stores (SSINQ)
  • Stein Mart (SMRTQ)
  • Tailored Brand (TLRDQ) – owns brands like Men’s Wearhouse and Jos. A Bank 
  • Tuesday Morning (TUESQ)