The list of U.S. retailers with troubled financials that could make them potential bankruptcy risks now totals 22, according to ratings by Moody’s Investors Service — topping the 19 recorded at the peak of the Great Recession.
Confronting a major shift to online shopping Sears Holdings, Neiman Marcus Group and others on the list face a “perfect storm,” senior Moody’s retail analyst Charles O’Shea said Thursday, as he invoked the name of the Massachusetts fishing boat lost with all hands in a 1991 tempest. The disaster, chronicled by author Sebastian Junger, was later made into a movie featuring actors George Clooney and Mark Wahlberg.
“You’re on the Andrea Gail right now, and the water’s starting to get very choppy,” O’Shea said of the financial conditions buffeting troubled retailers.
And the worst could be yet to come. The ranks of distressed firms and retail sector defaults are likely to grow during the next 12 to 18 months, the rating agency predicted in a separate report issued Wednesday.
More on store closings:
Retailers closing stores in 2017: See lists for J.C. Penney, Sears, Macy’s, more
Sears is closing 66 more stores
Nonetheless, the companies on the distressed list represent just 16% of the retailers analyzed by Moody’s. “The majority of retailers remain fundamentally healthy,” O’Shea said in a statement issued with the report.
The rating giant tapped companies for inclusion on the list based on an analysis of their financial liquidity, ability to manage maturing debt by refinancing, credit profiles, competition challenges, ownership, and management structure.Those that rank low in multiple categories were given Caa ratings, which O’Shea characterized as “deep junk.”
“When you’re down there in C-a land, bankruptcy is a real possibility,” he said.
Although it is impossible to predict the financial future of the companies, an earlier Moody’s list of distressed retailers issued in March proved prophetic in a few cases. Discount footwear company Payless ShoeSource and Rue21, a teen fashion retailer, 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.
Nordstrom could go private as department stores struggle
The Children’s Place is closing 300 stores by 2020
Hudson’s Bay to cut 2,000 jobs
Companies tagged with a Caa rating by Moody’s can and do get 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 iconic retailer J.C. Penney “was down there, and is now out,” with an improved rating.
Retailers rated Caa or lower by Moody’s:
Boardriders SA – sporting subsidiary of Quiksilver
The Bon-Ton Stores – parent of department store chain
Fairway Group Holdings – food retailer
Tops Holding II – supermarket operator
99 Cents Only Stores – discount retailer
TOMS Shoes – footwear company
David’s Bridal – wedding dresses and formalwear seller
Evergreen AcqCo 1 LP – parent of thrift chain Savers
Charming Charlie – women’s jewelry and accessories
Vince LLC – clothing retailer
Calceus Acquisition – owner of Cole Haan footwear firm
Charlotte Russe – women’s clothing
Neiman Marcus Group – luxury department store
Sears Holdings – owner of Sears and Kmart.
Indra Holdings – holding company owner of Totes Isotoner
Velocity Pooling Vehicle – does business as MAG, Motorsport Aftermarket Group
Chinos Intermediate Holdings – parent of J. Crew Group
Everest Holdings – manages Eddie Bauer brand
Nine West Holdings – clothing, shoes and accessories
Claire’s Stores – accessories and jewelry
True Religion Apparel – men’s and women’s clothing
Gymboree – children’s apparel
(First reported by USA Today) https://www.usatoday.com/story/money/2017/06/09/moodys-number-distressed-retailers-tops-total-during-financial-crisis/102626866/ (June 9, 2017)
Want more BFT? Leave us a voicemail on our page or follow us on Twitter @BFT_Podcast and Facebook @BluntForceTruthPodcast. We want to hear from you! There’s no better place to get the #BluntForceTruth.