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Episode 6: Retail in the Red: 2020 1H Bankruptcy Filings (Part 2)




Announcer: Welcome to this episode of “60-second Retail” - a BDO podcast keeping you in-the-know on events and trends in retail and consumer products industry impacting your bottom line, in just a few short minutes.

Natalie: Hello, my name is Natalie Kotlyar, I am the National Leader for the Retail and Consumer Products industry group at BDO USA.  In this special episode, we are speaking with David Berliner, Partner and National Leader of the Restructuring group at BDO USA, and author of BDO’s bi-annual Retail in the Red report.  We will discuss store closures, and what does the 2nd half of 2020 look like for retailers?

There have been a lot of store closures announced by retailers through mid-August.  Are the bulk of these store closures due to retail bankruptcy filings?

David: 18 retailers who are not in bankruptcy have announced store closures of 50 or more stores than this timeframe, totaling about 4,200 stores and retailers have announced closing about 6000 stores, bringing the total store closures so far for 2020 to about 10,200 stores.  That's already more than the 9,500 stores that closed in all of 2019.

Apparel retailers and department stores account for about 54% of the bankruptcy store closings, and 58% of the non-bankruptcy store closings so far.

 

Natalie: That is really incredible.  And what trends are you seeing that are contributing to this large number of retail bankruptcies and store closures?

David: Well I think the shifting consumer spending habits driven by the pandemic have led retailers to minimize their physical footprints and move more towards digital and omnichannel.
US retail sales are expected to drop 10.5% this year. That's a 14% drop for brick and mortar, partially offset by E Commerce sales increasing about 18%.

Other trends running underway were hastened by COVID, all of which have been devastating to brick and mortar retailers such as the decline of the middle class, more casual workplaces and less need for formal wear for occasions, as well as, the decline of shopping malls.

 

Natalie: Knowing what you know now, through September, do you believe that we’re going to see another wave of bankruptcies, or another wave of significant store closures through the end of the year?

David: No, I don’t think so.  I think the number of retail bankruptcy filings in the 4th quarter is going to be tempered by retailers holding off on filing, with the hope of one more profitable holiday season.

Conversely, I expect the number will jump in the 1st quarter of 2021, especially for distressed retailers who don't have a stellar holiday season and have a lot of debt.

 

Natalie: Thank you David.  Hopefully the next Retail in the Red report gives us better news, and we look forward to fewer bankruptcies.

Announcer: And that concludes this episode of BDO’s “60-second Retail” podcast.  Don’t forget to tune in for the next episode!  To find more information on our hosts, guests, BDO’s services, or listen to previous episodes of “60-second Retail”, please visit www.bdo.com/60-second-retail.
 

 
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