Online Retail Woes Continue for Brick-and-Mortar Retailers

Moody’s current list of U.S. retailers with troubled financials tops the record of 19 retailers at the peak of the Great Recession.

June 12, 2017

MCLEAN, Va. – USA Today reports that the list of U.S. retailers with troubled financials, which could make them potential bankruptcy risks, now totals 22. The ratings by Moody's Investors Service tops the record of 19 retailers recorded at the peak of the Great Recession.

With a major shift to online shopping, retailers like Sears and Neiman Marcus are facing a "perfect storm," said Moody’s senior retail analyst Charles O'Shea. "You're on the Andrea Gail right now, and the water's starting to get very choppy," he said of current financial conditions affecting troubled retailers.

He added that the worst of the storm could be coming. USA Today writes that the ranks of distressed firms and retail sector defaults are likely to grow during the next 12 to 18 months, according to Moody’s. However, the list of companies on the distressed list represent just 16% of retailers: "The majority of retailers remain fundamentally healthy," O'Shea said.

An earlier Moody's list of distressed retailers from March foretold the demise of a few retailers, like discount footwear company Payless and teen fashion retailer Rue21, which have since filed for bankruptcy court protection. Gymboree, a specialty seller of children's apparel, missed a June 1 interest payment on senior notes due in 2018.

Companies tagged with a high credit risk Caa rating by Moody's often earn higher ratings if their liquidity, debt management or other financial metrics improve. "There are companies that come out of that," said O'Shea, who noted that J.C. Penney "was down there, and is now out," with an improved rating.

Retailers rated Caa or lower by Moody's include discount retailer 99 Cents Only, TOMS Shoes, David’s Bridal, Nine West, Fairway Group Holdings, supermarket operator Tops Holding II and Calceus Acquisition, owner of Cole Haan footwear, among others. 

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