Retail Bankruptcies Expected to Peak in 2017

May 20, 2017

As of April, nine major retailers have already filed for bankruptcy in 2017, which will result in hundreds of stores closing. Retailers are running out of cash and are quickly approaching recessionary levels. Those that are staying in business are shutting down a record number of stores. Over the next few months, more than 3,500 stores are expected to close.

Shopping malls across the country are struggling to stay open as stores close faster than the malls can secure new tenants. According to RBC Capital Markets, private equity firms are no longer willing to rescue dying retailers like they did during the recession. Current issues are more structural rather than quick operational fixes, and banks are less willing to save these failing retailers.

Traditional retailers with scores of physical stores have been hit the hardest. RadioShack, Gander Mountain, Payless Shoe Source, hhgregg and BCBG are among the nine retailers that have filed for bankruptcy so far this year—as many as all of last year combined.

Twenty retail companies filed bankruptcy in 2008 at the peak of the recession. CNBC predicates that the U.S. might see these same numbers by September if the current trends persist.

With the rise of e-commerce and titanic shifts in how shoppers spend their money, visits to shopping malls have been declining for years. According to real-estate research firm Cushman & Wakefield, visits declined by 50 percent during 2010 and 2013. Some retailers have not adapted to the new retail environment of changing shoppers’ habits.

American consumers are spending less money on apparel and accessories as they devote more disposable income to travel, restaurants and technology. As a result, malls across the country are struggling to stay open.

Emptied store space in malls is being taken over by entertainment spaces, restaurants and health and wellness destinations, such as fitness studios and nail/hair salons. Without a solid supply of concepts willing to take over, predications indicate that the shopping mall will become an icon of the past.

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