2024 holds much anticipation. The Fed rate hikes have started to reduce inflation, yet some prices remain high. Unemployment figures persist at record lows despite many large employers cutting back. Continuing supply chain issues persist as China reopens in the face of its COVID crisis. And consumer spending is tightening in preparation for bumps in the year ahead. Will we avoid a recession and have a soft landing? This volatile mix of economic data may lead several retailers to use the bankruptcy process to stay viable.
Following are our top 10 retailers to watch for a possible Chapter 11 filing in the year ahead.
- Petco – Is Fido Chasing a Chapter 11 Bone? According to Retail Dive, the company has a high long-term debt load of $1.7 billion. According to iHeart, the company’s FRISK Score at the end of last year was 2 with CreditRiskMonitor, which represents a 4% to 10% chance of bankruptcy in the next 12 months. These factors could lead the 1,500 store chain to think about reducing its footprint through a bankruptcy filing.
- JOANN – Crafting a Chapter 11 Plan? Retail Wire reports that Jo-Ann Fabrics, now known as JOANN, continues with declining sales, comps, margins, and increasing costs, creating an uphill battle for the crafts retailer. The Corridor Business Journal reported that heavy debt and declining sales decreased the Fabric and craft store to a CreditRiskMonitor FRISK Score of 1. It seems like it may only be a matter of time before the retailer sews the Chapter 11 blanket.
- Express – Is it on the Fast Track to a Filing? The Wall Street Journal reports that Kirkland & Ellis has been hired by the Ohio based-retailer for debt restructuring, which could include the filing for Chapter 11 in a few weeks. Reuters notes that the company stock shares were down 59% in 2023 and fell 23% in recent trading.
- AMC – Does it Have a Second Act? Recently, Market Watch highlighted a post of CEO Adam Aron, who derided the “prophets of doom,” declaring that AMC is still innovating and blazing trails. The company has reduced its debt burden and liabilities. Still, its shares have fallen more than 80% in the last 12 months compared with the S&P 500 SPX index’s gain of more than 20%.
- Big Lots – Lots of Issues. iHeart reports that the big box retailer scored a 2 from Credit Risk Monitor, meaning there is a 4 to 10% chance of bankruptcy in the next year. In a recent earnings call, the company noted call that low-income customers are delaying or pulling back on discretionary spending. Bloomberg Law reports that the company is seeking new financing to address its years of losses and shrinking liquidity. Can the company stave off a Chapter 11 filing?
- Kohl’s – Can a Department Store Survive in This Market? According to Forbes, the retailer’s stock has dropped 60% from its pre-inflation high (May 2021). In addition, the retailer is still struggling to adjust to consumer buying habits, which have shifted away from department stores. Yet, Yahoo Finance notes that the company has invested in new vendor relationships and is focused on accelerating its digital business. Only time will tell if the department store retailer can avoid a Chapter 11 filing.
- Foot Locker – Is the Shoe Dropping? According to The Street, the athletic shoe retailer said it would close 400 stores by 2026 – most with expiring leases and underperforming stores. Footwear News says that this would take the company to about 2,400 stores.
- Stein Mart – More Store Closes Ahead? The discount retailer for items like home goods and clothing previously filed for bankruptcy in 2020, emerging with a confirmed plan in 2021. According to data compiled by Creditsafe, The Street reported that the company was at least 90 days behind on bills. Further, Finance Buzz reported that the company hired restructuring personnel – a possible sign of an impending bankruptcy.
- The Container Store – Organizing a Bankruptcy. Marie Kondo kickstarted the decluttering bug, leading to several stores catering to organizing, like the Container Store. According to Finance Buzz, the retailer reported poor earnings 2023 with quarterly sales falling by 20%, despite the zeitgeist. In addition, the company recently laid off roughly 2.5% of its total workforce, according to Retail Dive. Unless something changes, a bankruptcy filing may be on the horizon.
- JCPenney – Is a Chapter 22 in the Near Future. Although Simon Property Group and Brookfield Asset Management rescued the company for $1.75 billion in 2020, FinanceBuzz Finance Buzz reports that the department store continues to face sales issues, which could force more store closures. However, The Street reported in late summer a $1 billion revival plan to upgrade the in-store experience. Only time will tell if the store can avoid a second Chapter 11 bankruptcy – a “Chapter 22”.
Stark & Stark’s Shopping Center and Retail Development Group regularly represent owners, developers, and/or landlords throughout the country in leasing, buying/selling, 1031 Exchanges, refinancing, and enforcement activities.
One of our Group’s specialties is bankruptcy representation/protection for owners, developers, and/or landlords nationally. Currently, our team is providing value-added services in several national Chapter 11 cases, including Rite Aid, Party City, WeWork, Buyk, Regis, Stage Stores, Modell’s, 24 Hour Fitness, Sears, Art Van, Ascena, NPC, Toys R Us, Charming Charlie Part 2, and A&P.
For more information on how Stark & Stark’s Shopping Center Group can assist you, don’t hesitate to contact Thomas Onder, Shareholder, at (609) 219-7458 or tonder@stark-stark.com, as well as Joseph Lemkin at (609) 791-7022 or jlemkin@stark-stark.com. Tom and Joe write regularly on commercial real estate issues and are both active members of ICSC. Tom is Marketplace Director for ICSC’s Philadelphia region and a member of the ICSC Legal Advisory Council.
