Think of your favorite troubled or defunct retailer: does it or did it have a reason to exist? That’s the deceptively simple question raised in a new report from financial ratings firm Fitch Ratings, which predicts that the combination of e-commerce, disinterest in malls, and a lack of strong brand identity for some troubled retailers could spell doom in the next year or so.
“[M]any retailers move into the bankruptcy process without a real reason to exist and ultimately end up in liquidation more often than bankrupt companies in other sectors,” Sharon Bonelli, senior director, leveraged finance at Fitch Ratings, said in a statement.
What does that mean? It means that when retail businesses take on too much debt and file for bankruptcy, no one wants to take them over. It’s retailers that don’t sell unique products or offer an experience that shoppers actually care about that go out of business, and half of the examples that Fitch studied liquidated.
Look at Aeropostale, a teen clothing retailer that was purchased by mall landlords not so much because the new owners believe in the company or think there’s a real future in clothing retail, but mostly to keep from having hundreds of extra store spaces empty.
The report outlines bankruptcy case studies from the past and names seven retail chains that the rating agency believes are in danger of going bankrupt in the near future.
Sears, Claire’s at High Risk in Fitch Study of Retail Failures [Bloomberg]
by Laura Northrup via Consumerist
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