The retail industry, rife with bankruptcies and shuttered stores long before the coronavirus, is facing its biggest test yet.
Lockdowns triggered by the pandemic have forced the temporary closures of 263,000 stores, according to GlobalData Retail, and analysts say it remains to be seen how many will be able to reopen.
A number of the nation’s most iconic brands are at risk of disappearing, as weeks-long lockdowns and deep economic unrest disrupt consumer spending. More than 100,000 stores could disappear by the end of 2025, according to UBS. There already are signs of distress: Retail sales plummeted 8.7 percent in March, their worst drop on record, and analysts say conditions will only worsen in the coming months.
Change in retail revenue by store type,
March 2019 vs. March 2020
Change in retail revenue by type, March 2019 vs. March 2020
Change in revenue by store type, March 2019 vs. March 2020,
adjusted for inflation
Grocery
and health
stores
*Includes warehouse clubs, supercenters and other retailers
Change in revenue by store type, March 2019 vs. March 2020,
adjusted for inflation
Grocery
and health
stores
*Includes warehouse clubs, supercenters and other retailers
J. Crew and Neiman Marcus filed for Chapter 11 bankruptcy this week, becoming the first major retailers to do so during the pandemic. Both said they will keep operating stores as they take steps to shore up their businesses.
The crisis accelerates a long-expanding divide between the nation’s strongest retailers — like Amazon, Walmart and Target — and its weakest. Department stores and apparel companies have reported huge drops in sales since March, as many Americans hunker down at home. Other sectors, like restaurants and car dealerships, which have notoriously low profit margins, also have been hard hit. (Jeff Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
“The companies with the thinnest margins are the most vulnerable,” said Hugh Ray, a bankruptcy attorney for the Dallas-based law firm McKool Smith. “The bread and butter for bankruptcy lawyers is restaurants, grocery stores, and automobile businesses with margins that are too thin to sustain much of an interruption.”
Agencies like Moody’s and S&P Global Ratings have slashed credit ratings for a number of struggling retailers, scuttling their chances of accessing corporate bonds or government stimulus money reserved for companies in good financial shape. This means that some of the nation’s weakest retailers, including Neiman Marcus, Gap and J.C. Penney, have little recourse against mounting losses.
Companies in this faux mall are rated as speculative investments at Moody’s and S&P as of April 13. These stores are already in financial trouble, and may not be able to access government stimulus money. The stores with the worst ratings are closer to the top of the mall. Brands that are part of the same company, like the Gap and Old Navy, are included in the same storefront.
Store footprint is relative to
company revenue
Near or in default,
they have a low
likelihood of recovering
Poor-quality investment
ratings with a very
high credit risk
Moody’s: Caa1, Caa2, Caa3
GPS Hospitality Holding owns
franchises for these chains
Burger King / Popeyes / Pizza Hut
P.F. Chang’s China Bistro
Declared bankrupcy
on May 4th
Ann Taylor / Loft / Justice
Bob’s Discount Furniture
Vulnerable
to economic
difficulties but able
to meet financial
commitments
Spencer’s / Spirit Halloween
Victoria’s Secret / Bath & Body Works / Pink
Abercrombie & Fitch / Abercrombie Kids / Hollister
Men’s Wearhouse / Moores / JoS. A. Bank
Anywear / Cherokee / Dickies
Carrols Restaurant Group
owns franchises for these chains
Arby’s / Buffalo Wild Wings / Sonic
Maggiano’s Little Italy / Chili’s
Applebees / Taco Bell / Panera
Less vulnerable
to economic
conditions
but face major
ongoing difficulties
Macy’s / Bloomingdale’s
Zales / Jared / Kay Jewelers
Yum Brands owns
franchises for these chains
KFC / Pizza Hut / Taco Bell
Tim Hortons / Burger King / Popeyes
Restaurant Brands
International
The Gap / Old Navy / Banana Republic
Michael Kors / Versace / Jimmy Choo
Tommy Hilfiger / Calvin Klein / Izod
Carters / OshKosh B’gosh
Naturalizer / Sam Edelman
Companies in this faux mall are rated as speculative investments at Moody’s and S&P as of April 13. These stores are already in financial trouble, and may not be able to access government stimulus money. The stores with the worst ratings are closer to the top of the mall. Brands that are part of the same company, like the Gap and Old Navy, are included in the same storefront.
Store footprint is relative to
company revenue
Near or in default,
they have a low
likelihood of recovering
Poor-quality investment
ratings with a very
high credit risk
Declared
bankrupcy
on May 4th
Moody’s: Caa1, Caa2, Caa3
Ann Taylor / Loft / Justice
GPS Hospitality Holding owns
franchises for these chains
Burger King / Popeyes / Pizza Hut
P.F. Chang’s China Bistro
Bob’s Discount Furniture
Spencer’s / Spirit Halloween
Vulnerable to economic
difficulties but able to
meet financial commitments
Carrols Restaurant
Group owns franchises
for these chains
Victoria’s Secret / Bath & Body Works / Pink
Abercrombie & Fitch / Abercrombie Kids / Hollister
Men’s Wearhouse / Moores / JoS. A. Bank
Anywear / Cherokee / Dickies
Arby’s / Buffalo Wild Wings / Sonic
Maggiano’s Little Italy / Chili’s
Applebees / Taco Bell / Panera
Yum Brands owns
franchises for these chains
KFC / Pizza Hut / Taco Bell
Tim Hortons / Burger King / Popeyes
Restaurant Brands
International
Macy’s / Bloomingdale’s
Less vulnerable to economic
conditions but face major
ongoing difficulties
The Gap / Old Navy / Banana Republic
Michael Kors / Versace / Jimmy Choo
Tommy Hilfiger / Calvin Klein / Izod
Carters / OshKosh B’gosh
Zales / Jared / Kay Jewelers
Naturalizer / Sam Edelman
Companies in this faux mall are rated as speculative investments at Moody’s and S&P as of April 13. These stores are already in financial trouble, and may not be able to access government stimulus money. The stores with the worst ratings are closer to the top of the mall. Brands that are part of the same company, like the Gap and Old Navy, are included in the same storefront.
Store footprint is relative to
company revenue
Near or in default, they have
a low likelihood of recovering
GPS Hospitality Holding owns
franchises for these chains
Burger King / Popeyes / Pizza Hut
P.F. Chang’s China Bistro
Poor-quality investment ratings
with a very high credit risk
Moody’s: Caa1, Caa2, Caa3
Declared
bankrupcy
on May 4th
Bob’s Discount Furniture
Ann Taylor / Loft / Justice
Spencer’s / Spirit Halloween
Vulnerable to economic difficulties but
able to meet financial commitments
Carrols Restaurant
Group owns franchises
for these chains
Victoria’s Secret / Bath & Body Works / Pink
Abercrombie & Fitch / Abercrombie Kids / Hollister
Men’s Wearhouse / Moores / JoS. A. Bank
Anywear / Cherokee / Dickies
Arby’s / Buffalo Wild Wings / Sonic
Maggiano’s Little Italy / Chili’s
Applebees / Taco Bell / Panera
Yum Brands owns
franchises for these chains
KFC / Pizza Hut / Taco Bell
Tim Hortons / Burger King / Popeyes
Restaurant Brands
International
Macy’s / Bloomingdale’s
Less vulnerable to economic conditions
but face major ongoing difficulties
The Gap / Old Navy / Banana Republic
Michael Kors / Versace / Jimmy Choo
Tommy Hilfiger / Calvin Klein / Izod
Carters / OshKosh B’gosh
Zales / Jared / Kay Jewelers
Naturalizer / Sam Edelman
Companies in this faux mall are rated as speculative investments at Moody’s and S&P as of April 13. These stores are already in financial trouble, and may not be able to access government stimulus money. The stores with the worst ratings are closer to the top of the mall. Brands that are part of the same company, like the Gap and Old Navy, are included in the same storefront.
Store footprint is relative to
company revenue
Near or in default, they have
a low likelihood of recovering
GPS Hospitality Holding owns
franchises for these chains
Burger King / Popeyes / Pizza Hut
P.F. Chang’s China Bistro
Poor-quality investment ratings
with a very high credit risk
Moody’s: Caa1, Caa2, Caa3
Declared
bankrupcy
on May 4th
Bob’s Discount Furniture
Ann Taylor / Loft / Justice
Victoria’s Secret / Bath & Body Works / Pink
Abercrombie & Fitch / Abercrombie Kids / Hollister
Men’s Wearhouse / Moores / JoS. A. Bank
Spencer’s / Spirit Halloween
Anywear / Cherokee / Dickies
Vulnerable to economic difficulties
but able to meet financial commitments
Carrols Restaurant Group owns
franchises for these chains
Arby’s / Buffalo Wild Wings / Sonic
Maggiano’s Little Italy / Chili’s
Applebees / Taco Bell / Panera
Yum Brands owns
franchises for these chains
Macy’s / Bloomingdale’s
KFC / Pizza Hut / Taco Bell
Tim Hortons / Burger King / Popeyes
Restaurant Brands
International
Less vulnerable to economic conditions
but face major ongoing difficulties
The Gap / Old Navy / Banana Republic
Michael Kors / Versace / Jimmy Choo
Tommy Hilfiger / Calvin Klein / Izod
Carters / OshKosh B’gosh
Zales / Jared / Kay Jewelers
Naturalizer / Sam Edelman
“The question becomes how strong you were going into the crisis,” said Mickey Chadha, a senior credit officer at Moody’s. “A lot of retailers that were already weak are going to come out of this even weaker, if they come out at all.”
In recent weeks, S&P Global has downgraded 50 of the 125 retailers and restaurants it tracks, including Jo-Ann Stores and Party City.
“The traditional retail sector has been distressed for many years, and now this intense shock is pushing more companies to the brink,” Sarah Wyeth, sector lead for retail and restaurants at S&P Global. The proportion of retailers the company considers “distressed” has risen from 15 percent to about 30 percent since the pandemic began, she said.
U.S. department store revenue
in March 2020 dollars
The most vulnerable companies, Chadha said, tend to have two things in common: large swaths of debt and little cash. Many, like Neiman Marcus and J. Crew, have struggled for years to pay back billions of dollars from leveraged buyouts.
Another at-risk category: mall-based department stores like Macy’s, Belk and J.C. Penney, which are losing customers to online retailers and direct-to-consumer brands. Neiman Marcus filed for bankruptcy Thursday, following in the footsteps of Sears and Barneys New York. J.C. Penney this week failed to pay a $17 million interest payment on its debt, while Nordstrom announced plans to permanently close 14 percent of its namesake department stores.
“Retailers have furloughed employees. They’re taking salary cuts. A lot of them have stopped paying rent, but it’s still not enough,” Chadha said. “Stores are shut, so there is zero revenue coming in. And they’re burning through cash.”
He added that even department store chains with relatively stable balance sheets and credit ratings, like Nordstrom and Kohl’s, are facing “extreme pressure.” Their fates, he said, may depend on exactly how long the pandemic lasts.
Stores with low credit ratings where foot traffic has taken a hit
Change in traffic observed by SafeGraph
from Sunday, March 1, to Saturday, April 18
99 Cents Only Stores
368 STORES IN DATA
Jo-Ann Fabric
and Craft Stores
859 STORES
Stores with low credit ratings where
foot traffic has taken a hit
Change in traffic observed by SafeGraph
from Sunday, March 1, to Saturday, April 18
99 Cents Only Stores
368 STORES IN DATA
Jo-Ann Fabric
and Craft Stores
859 STORES
Stores with low credit ratings where foot traffic has taken a hit
Change in traffic observed by SafeGraph from Sunday, March 1, to Saturday, April 18
99 Cents Only Stores
368 STORES IN DATA
Bob’s Discount Furniture
123 STORES
Jo-Ann Fabric
and Craft Stores
859 STORES
Stores with low credit ratings where foot traffic has taken a hit
Change in traffic observed by SafeGraph from Sunday, March 1, to Saturday, April 18
99 Cents Only Stores
368 STORES IN DATA
Bob’s Discount Furniture
123 STORES
Jo-Ann Fabric
and Craft Stores
859 STORES
Stores with low credit ratings where foot traffic has taken a hit
Change in traffic observed by SafeGraph from Sunday, March 1, to Saturday, April 18
99 Cents Only Stores
368 STORES IN DATA
Bob’s Discount Furniture
123 STORES
Jo-Ann Fabric
and Craft Stores
859 STORES
The Gap last month warned that it could run out of cash to cover routine costs. The company, which also owns Banana Republic and Old Navy, didn’t pay rent in April and said it is talking to landlords about permanently closing some of its stores.
The newest challenges come on top of years of bankruptcies and store closures that have gutted some of the nation’s best known retailers, including Toys R Us and Sears. More than a dozen national brands including Gymboree and Payless ShoeSource filed for bankruptcy last year, fueling thousands of store closures. The Trump administration’s tariffs on Chinese imports have taken a toll too, costing retailers about 300,000 jobs, according to Moody’s Analytics.
Now analysts say the coronavirus pandemic that has killed more than 75,000 Americans could change the face of the retail industry, which employs 29 million and supports 1 in 4 U.S. jobs, according to the National Retail Federation. It could be years, analysts say, before consumers feel comfortable walking into a shopping mall again.
“From a big-picture standpoint, it’s obvious that the pandemic is not going to leave any retailer unscathed,” said Chadha.
Lenny Bronner and Reuben Fischer-Baum contributed to this report.
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About this story
Retail sales data come from the U.S. Census Bureau’s advance monthly retail trade report. Historical numbers are adjusted for inflation to March 2020 dollars.
Credit rating data was provided by S&P and Moody’s. Not all retailers they rated are included in the graphic. If the two agencies gave significantly different ratings for a company the higher rating was used, unless that rating had a negative outlook attached. Revenue data for public companies was taken from SEC annual reports. Totals are from the 2019 fiscal year, except for 99 Cents Only Stores which is from the 2017 fiscal year. Revenue data for nonpublic companies was collected from Moody’s reports and Forbes.com.
Foot-traffic data was provided by SafeGraph, a company that aggregates location data from tens of millions of devices and compares it with building footprints. The number of mobile devices recorded fluctuates, so the visits data is normalized according to how many devices were reported each day. The stores total represents the number of stores the show up in the data, not the total number of stores operating.