11 retailers are now at high risk of bankruptcy according to a new report by Retail Dive and Moody’s Investors Service data.
This month I’ve reported several on several popular retailers that have already filed for Chapter 11 bankruptcy.
Today, we’re breaking down 11 retailers that are currently at high risk of bankruptcy according to fresh data.
“Moody’s Investors Service in July said defaults in retail and apparel would continue to rise, jumping from 6% to 8.6% in the following 12 months as weakening consumer spending and high product, labor and freight costs weigh on businesses,” reports Retail Dive.
“And in a Sept. 20 report, S&P Global Ratings warned that the risk of a U.S. recession in the next 12 months, while lower than the start of the year, was still elevated.”
“A lot of retail is consumer discretionary so in the event of an economic pullback, or economic uncertainty, you’ll see some of that revenue come down because it’s more of a discretionary purchase,” Elizabeth Han, a senior director on Fitch Ratings’ U.S. leveraged finance team, said in a recent interview.
Han noted supply chain and inventory challenges, as well as inflation and other macroeconomic concerns have affected retailers as well.
Fitch has witnessed more distressed debt exchanges from retailers recently, and Han cited high interest rates as another challenge for companies loaded down with debt.
Below are 11 popular retailers with high risk of bankruptcy.
Which Retailers Are At Risk of Bankruptcy?
The following 11 retailers are at high risk of bankruptcy.
- Fartech – Luxury
- Joann – Craft
- Qurate Retail – Video Commerce
- Rent the Runway – Apparel
- Rite Aid – Drugstore
- A.K.A Brands – Apparel
- Big Lots – Home
- The Container Store – Home
- Kirkland’s – Home
- Petco – Pets
- Vince – Apparel
CreditRiskMonitor, which labels companies with a FRISK score to measure the probability of them filing for bankruptcy within 12 months, listed 11 noteworthy retailers and brands with either a 4% to 10% chance of filing for bankruptcy (FRISK SCORE of 2) or a 10% to 50% chance (FRISK SCORE of 1).
- Fartech – FRISK Score: 1
- Joann – FRISK Score: 1
- Qurate Retail – FRISK Score: 1
- Rent the Runway – FRISK Score: 1
- Rite Aid – FRISK Score: 1
- A.K.A Brands – FRISK Score: 2
- Big Lots – FRISK Score: 2
- The Container Store – FRISK Score: 2
- Kirkland’s – FRISK Score: 2
- Petco – FRISK Score: 2
- Vince – FRISK Score: 2
We recently touched the topic of Rite Aid being at high risk given its precarious financials.
The company operates nearly 2,300 retail stores in 17 states, making it the preferred store for millions of Americans seeking to fill prescriptions or buy essential daily items, like toothpaste or aspirin.
However, Rite Aid’s front-end sales are slowing because of competition and theft.
Interest rates have also caused variable interest on its debt to balloon.
The retail pharmacy chain, which was already struggling to make good on loans it had previously taken out to acquire competitors, such as Brooks, spent $65 million on interest alone last quarter, up 35% from one year ago.
The Department of Justice filed a suit against it earlier this year, alleging it knowingly filled opioid prescriptions that it shouldn’t have, “potentially putting the company on what may turn out to be an inevitable path to insolvency.”
Walgreens and CVS settled similar suits for $5.7 billion and $4.9 billion over the past year.
However, Rite Aid doesn’t have nearly the financial firepower of its competitors.
Its market capitalization is only $43 million, and it owes over $3 billion to its lenders.
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Also Read: A Massive California Retailer Now Files An Unexpected Bankruptcy
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Which one of these retailers will be missed the most? Leave your thoughts below.