Retailers face financial uncertainty as many file for bankruptcy.
State economies are beginning to re-open, including the return of in-store shopping. The re-opening of stores is a hopeful landmark, but it isn’t an immediate fix to decreased revenue. Some retailers who were on a financial downturn before the pandemic have found themselves facing bankruptcy decisions far sooner than expected.
What Stores Have Filed for Bankruptcy?
Big-name brands are not immune to the effects of the economic shutdown. Popular retailers like J. Crew, Neiman Marcus, and JC Penney have all filed for bankruptcy this year according to an article by the Washington Post.
Department stores and other retailers focused on brick-and-mortar store sales found themselves struggling financially pre-pandemic. The popularity of online shopping grew as shoppers were discouraged from visiting physical store locations. This change in the shopping experience may spell trouble for traditional storefronts, even as the economy reopens.
The combination of pre-pandemic debt and already declining sales is a trend among many companies that are filing. Another commonality of these brands is that many of their store locations are inside or connected to a mall. With malls being a common place for crowds, the majority have been temporarily closed during the pandemic.
The same article by the Washington Post says some retailers have delayed product orders, laid off employees, and not made rent payments due to the effects of the pandemic. Bankruptcy filing has not been the only sign of financial stress for these brands.
Differences in Bankruptcy Filing
When a company files for bankruptcy, it does not automatically mean they will be going out of business and closing all stores. Chapter 11 Bankruptcy and Chapter 7 Bankruptcy handle debt differently. A Chapter 11 Bankruptcy is a reorganization of the debt, how it is paid, and other company assets. A Chapter 7 Bankruptcy is the liquidation of assets to repay debts.
Because Chapter 11 is a reorganization and not a liquidation, this type of filing does not necessarily mean permanent closure will follow. All three retailers mentioned above have filed under Chapter 11. Though some brands may be permanently closing some of their store locations, it does not yet mean the brand itself is disappearing.
If you or your business are also facing financial distress, contact our bankruptcy attorneys at hoglundlaw.com to see what options are available to you.