The impact of the epidemic and economic blockade have increased the operating pressure on the U.S. retail industry. According to analysts at UBS, 100,000 retail stores will be closed by 2025.
Retail bankruptcies
Data from the American Bankruptcy Institute shows that the number of companies filing for bankruptcy protection in the United States increased by 18% in March this year compared with the same period last year.
UBS analysts predict that 100,000 retail stores will close by 2025, among which clothing retailers will be affected. The biggest hit, 24,000 stores will be closed. UBS said that most industries will be affected, with 12,000 consumer electronics retail stores expected to be closed, and 11,000 home furnishing and grocery retail stores each expected to be closed.
Data released by the U.S. Department of Commerce on April 15 showed that U.S. retail sales fell 8.7% month-on-month to $483.1 billion in March, the largest month-on-month decline since data records began in 1992. . The National Retail Federation predicts that U.S. retail sales will decline by at least 20% in the next three months, resulting in total losses of $429.9 billion, including direct and indirect sales. Meanwhile, a sharp drop in retail activity will put 1.7 million jobs at risk.
High-risk watch list of some U.S. companies
Centric Brands
The Wall Street Journal reported that Centric Brands Inc., an American apparel brand company, has hired restructuring consultants from PJT Partners Inc. and Alvarez & Marsal. While the company has been negotiating a potential debt deal, the talks could also lead to a bankruptcy filing, sources said. Centric Brands Inc. was founded in 1987 and is headquartered in New York. It is listed on Nasdaq under the code CTRC and operates brands such as HUDSON, CK, and UNDER ARMOR.
Academy Sports+Outdoors
Moody’s has lowered the corporate family rating of Academy, Ltd., a US sporting goods retailer, to Caa2 from Caa1 and its default probability rating to Caa3-PD from Caa1-PD. Founded in 1938, Academy is a large American sporting goods and outdoor equipment retailer founded by the Gochman family and sold to private equity giant KKR in 2011. In recent years, operations have been sluggish due to increasingly fierce competition in the sporting goods industry.
Party City
On March 19, Standard & Poor’s downgraded the credit rating of the US party supply retailer Party City from B to CCC+. The related downgrade was affected by the decline in the company’s sales and the imbalance of product positioning and pricing competitiveness. Founded in 1986, Party City is the holiday party supplies retailer with the largest market share in the United States. In 2005, it was acquired by Amscan, the largest holiday supplies purchaser in the United States at the time.
J.C. Penny
Fitch Ratings downgraded the credit rating of department store J.C. Penny from CCC+ to CCC- with a negative outlook. The related bankruptcy rumors are already on the paper and need not be elaborated.
Burlington
Fitch lowered the credit rating of Burlington, a well-known national department store apparel retailer, from BB+ to BB- due to declining sales, high leverage and failure in store positioning management. Founded in 1972, Burlington has nearly 641 stores in 40 states across the United States.
Joann Store
On March 19, Standard & Poor’s downgraded Joann Store’s rating from B- to CCC, a well-known craft and gift retailer in the United States. The reason is that the company’s related operating sales have plummeted, and A.C. MOORE in the industry had previously filed for bankruptcy protection. Joann Store is the third largest arts and crafts retail buyer in the United States, behind Michaels Store and Hobby Lobby.
At Home
S&P lowered the credit rating of At Home, a well-known home furnishings retail store in the United States, from B to CCC+. The company’s stock price has fallen by nearly 90% in the past year.
Tailored brands
S&P lowered the issuer credit rating of U.S. apparel retailer Tailored Brands from B to CCC+. Tailored Brands was founded in 1973 and is headquartered in California, USA. It is engaged in men’s fashion clothing retail. Its brands include Men’s Wearhouse and JoS.A.Bank, a company listed on the New York Stock Exchange, trading code TLRD, has seen its stock price fall by 82% in the past year, and its current default value reaches 50%.
J.CREW
On April 13, Moody’s downgraded the family-owned enterprise rating of U.S. clothing retailer J.Crew Group, Inc. from Caa2 to Caa3. J.CREW is a large American clothing brand retailer headquartered in New York. It owns two main brands, J.CREW and MADEWELL. The group originally planned to list the MADEWELL brand separately in March this year, but due to the turmoil in the US stock market, the listing plan was shelved.
Risk warning and suggestions
Recently, due to the The regional epidemic situation is changing rapidly, consumption expectations have been significantly reduced, retail consumption has declined, liquidity pressure has increased, and the risk of buyer rejection and buyer bankruptcy has increased. Overall, overseas buyers’ ability and willingness to pay have declined, and companies are facing increased risks in foreign exchange collection. Based on the current situation, the following suggestions are for enterprise reference:
01 Pay attention to negative information such as economic decline, reduced consumer demand, and rising unemployment in areas with high epidemic incidence. The economic situation of the export destination country is an important indicator of whether its orders can be fulfilled normally and whether the payment for the goods will be in arrears. It is recommended that export enterprises comprehensively sort out and evaluate orders on hand, communicate with buyers in a timely manner, and negotiate with buyers in a timely manner for orders that may be suspended or canceled by customers to reduce export risks.
02 Be wary of the buyer’s bankruptcy risk. Affected by the ongoing spread of the epidemic, the risk of bankruptcy for overseas buyers has increased significantly. Take the retail industry as an example. Recently, there have been frequent reports that large foreign retail companies are facing bankruptcy. At the same time, considering the sharp decline in cash flow caused by store closures, the pressure on existing debt burdens, and the increased uncertainty in future operations, it has been Rating agencies have begun to downgrade the credit ratings of many European and American physical retailers, and the risk of buyer bankruptcy in the retail industry will continue to increase in the future.
03 Continue to pay attention to the exchange rate changes in the buyer’s market. Affected by factors such as the continued spread of the COVID-19 epidemic, the local currencies of many countries have experienced sharp falls in their exchange rates recently. When a country’s local currency depreciates significantly, import costs will be raised, and some importers may choose to abandon goods, refuse to accept goods, delay payment, or even not pay in order to avoid losses. Therefore, paying attention to exchange rate changes in the buyer’s market will help export companies grasp market changes in advance and reduce risks reasonably.
04 Pay attention to countries (regions) that have declared a state of emergency or taken relevant control measures due to epidemic prevention. The number of countries (regions) that have recently declared a state of emergency or taken relevant control measures due to epidemic prevention is still rising. Countries are also taking unprecedented traffic restrictions. International logistics is facing numerous obstacles and commodity transportation is threatened. For orders placed by buyers in areas with severe epidemics, it is recommended that companies maintain communication before shipment and pay attention to local traffic control conditions to prevent being unable to pick up the goods.
05 After shipment, pay attention to the transportation situation of the goods, reserve sufficient time and pay attention to additional costs. More importantly, you must always pay attention to the relevant policies of the transit/destination country to avoid the risk of goods being expropriated or detained by the transit/destination country. For countries (regions) that are already at high risk due to severe epidemics, it is recommended that export companies must be more cautious when accepting new customers and new orders to ensure the safety of payment. </p
