Retail in the Red: BDO’s Bi-Annual Bankruptcy Update

Through the second half of 2018, U.S. retail enjoyed a strong economy, marked by healthy consumer spending, low unemployment levels and controlled inflation rates. But these promising economic indicators weren’t enough to lift a few long-standing industry players off their path toward bankruptcy, according to the latest Retail in the Red: BDO Bi-Annual Bankruptcy Update.

Outside of the landmark filings that occurred in the latter half of 2018, the rate of retail bankruptcies remained sluggish when compared with previous years. However, with some struggling to reduce their debt and others aiming to rationalize their brick-and-mortar store base retailers announced plans to close more than 145 million square feet of retail space in the U.S. in 2018, according to real estate research group CoStar. This represents a marked increase over 2017, when only 102 million square feet of retail store closures were announced.

With 2019 well underway, the rate of retail bankruptcies is picking up steam. Several retailers have also filed for “Chapter 22” bankruptcy early this year, after previous restructuring efforts proved futile. 

Despite this, with consumers benefitting from a strong job market and rising wages, the economic signs bode well for U.S. retail. While retail sales are expected to continue climbing in 2019, savvy retailers will keep the threat of a potential market correction, shifting consumer preferences and rising labor costs top of mind as they strive toward growth and expansion.

To read more about this year’s retail bankruptcies and turnaround efforts, view the full report here.

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