Bass, Berry & Sims attorney Glenn Rose discussed the current and potential future landscape of bankruptcy filings in the retail industry for a story in Chain Store Age. The retail industry was marred by bankruptcy and economic struggles well before the COVID-19 pandemic, and while some businesses who have cash on hand are better positioned to weather the storm through the holidays, a large uptick in filings could be on the way in Q1 2021.
“I don’t think we’d have seen this many bankruptcy filings if COVID-19 didn’t happen, but many of them happened at companies like J.C. Penney that people have been expecting to go under for years,” Glenn said.
The emergence of online shopping and other changes in the retail landscape are factors that have contributed to these pre-pandemic struggles, but the rise in actual filings can also be attributed to the differing priorities between family business owners a generation ago and the private equity investors who own many of the retailers in the news today. “J. Crew is a classic example of this,” Glenn added. “The private equity company is throwing in the towel and saying ‘We got the most we could out of this. We can’t salvage it. Our only option is to file a bankruptcy.'”
Still, it can be expected that filings stay low during the fourth quarter of 2020 thanks to the sales boost from the holidays. “We won’t see any bankruptcy filings in the fourth quarter, but the first quarter of 2021 will be very busy,” Glenn said. “Retailers generally file after the holiday season when they don’t see a lot of options.”
The full article, “Retail Bankruptcies Subside, But Will Return With a Vengeance in Q1 2021,” was published by Chain Store Age on August 25 and is available online.