"Consumers are getting more stingy with their wallets," Berliner said. consumers said they plan to spend more money on the back-to-school season this year relative to the prior year, down from the number of people who said the same in 2021. More distress could start to appear after the upcoming back-to-school shopping season, he added, after families return from long-awaited summer vacations and may be forced to tighten the belt.Ī survey by UBS earlier this month found only about 39% of U.S. But a little less than two years later, the company succumbed to a heavy debt load and supply chain issues that prevented it from fulfilling all of its orders.Īs has always been the case, retailers that are grappling with the heaviest debt loads are going to be the most vulnerable to bankruptcy, said David Berliner, chief of BDO's business restructuring and turnaround practice. ![]() In late 2020, Revlon narrowly escaped bankruptcy by persuading bondholders to extend its maturing debt. "It seems the window is closing for more difficult refinancing," Ware said. More recently, however, Ware said he's noticed that refinancing activity over the past 12 months has begun to slow, with a bigger number of deals getting canceled or pulled. For example, department store chain Macy's in March said it completed refinancing $850 million in bonds that were coming due in the next two years. ![]() Some bought back debt or attempted to push out maturities. Riveron's Ware said businesses had been racing to get in front of future rate increases. The threat of future rate increases - after the Federal Reserve last week raised benchmark interest rates three-quarters of a percentage point in its most aggressive hike since 1994 - has prompted retailers looking to tap the debt markets to accelerate those plans. "We're at a moment now we're predicting what will happen next is far more complicated," said Steve Zelin, partner and global head of the restructuring and special situations group at PJT Partners. Americans with lower incomes have been particularly pinched by inflation while wealthier consumers keep splurging on luxury goods. What's going to happen now? It's a bit of a mixed bag."Ī split in consumer behavior could make things more unpredictable. "Then we got from 2020 through today with a tremendous amount of stimulus. ![]() "What you saw in 2020 was a tremendous amount of restructuring activity getting pulled forward," said Spencer Ware, managing director and retail practice leader at Riveron, an advisory firm. Instead, bankruptcies could be more spread out, they said. Still, advisors who have worked on retail bankruptcies in recent years believe, for the most part, that any looming distress in the industry shouldn't be as intense as the massive shakeout in 2020. ![]() "I wouldn't be surprised to see an uptick in retail bankruptcies." "We have potentially a perfect storm brewing," said Sally Henry, a professor of law at Texas Tech Law School and former partner at Skadden, Arps, Slate, Meagher & Flom LLP. It's not exactly clear when that tally could begin to grow, but restructuring experts say they're preparing for more trouble across the industry as the all-important holiday season approaches.Īn analysis by Fitch Ratings shows that the consumer and retail companies most in danger of default include mattress maker Serta Simmons, cosmetics line Anastasia Beverly Hills, skin-care marketing company Rodan & Fields, Billabong owner Boardriders, men's suit chain Men's Wearhouse and supplements marketing company Isagenix International.
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