S&P: These Ten Retailers Will File For Bankruptcy Next

http://www.zerohedge.com/news/2017-04-26/sp-these-ten-retailers-will-file-bankruptcy-next

S&P: These Ten Retailers Will File For Bankruptcy Next


by Tyler Durden
Apr 26, 2017 11:01 AM
Three weeks ago, we reported that Fitch had put together a list of 8 retailers who were likely next in line to file for bankruptcy. The rating agency speculated that distressed legacy "bricks and mortar" outlets such as 99 Cents Only, rue 21, Gymboree and True Religion would follow what has already been a historic surge in retailers filing for Chapter 11 protection and/or shuttering stores. The Fitch list is below:

• Sears Holdings Corp (roughly $2.5 billion);
  
• 99 Cents Only Stores LLC;
  
• Charming Charlie LLC;
  
• Gymboree Corp.;
  
• Nine West Holdings Inc.;
  
• NYDJ Apparel LLC;
  
• rue21, Inc.; and
  
• True Religion Apparel Inc.
  

Putting this list in context, over the weekend we presented a chart from Credit Suisse showing that on an annualized basis, some 8,640 - or more - stores would be closed in 2017, the highest number on record.
.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/CS retail stores.jpg][/url]
As we further showed, the number of announced store closures so far in 2017 - whether in bankruptcy or otherwise - is already staggering:
.zerohedge.com/sites/default/files/images/user5/imageroot/2017/04/19/store closings announced_1.jpg][/url]

Additionally, as the WSJ previously observed, the number of bankruptcies so far this year has already come close to the total in 2016, with 14 retailers filing compared with 18 last year.
And it's only just beginning.
Taking a cue from their peers at Fitch, analysts at S&P Global Market Intelligence likewise released a list of 10 publicly traded retailers they consider most at risk of default within the next 12 months. As the WSJ notes, the firm’s analysis is based on industry factors, such as intensity of competition and barriers to entry, as well as company-specific metrics.
“The shift to online shopping has left a lot of financial distress in its wake,” Jim Elder, director of risk services at S&P, wrote in a research note. “The results from the first quarter do not suggest that a quick recovery is on the horizon.” As expected, some (surprisingly not all) retailers disputed S&P’s analysis; the rest pointed to previous statements or didn’t respond to requests for comment.
Also notable: while there were some similarities between the Fitch and S&P lists, namely Sears, most of the names in the two lists diverged, suggesting that between Fitch and S&P up to 17 retailers may be going under soon.
Here’s S&P’s ranking, courtesy of the WSJ:
1. Sears Holdings Corp.
Sears has been buying time by making cost-saving maneuvers that include the sale of its Craftsman brand and the closure of 150 stores. On Friday, the retailer said it would shutter 92 Kmart pharmacies and 50 Sears Auto locations this year. Sears “is determined to remain a viable competitor in retail and we are taking all necessary actions to improve our performance,” said a spokesman for the company.
2. DGSE Companies Inc.
The Dallas-based seller of precious metals and jewelry has been struggling with declining sales. It has a market value of about $43 million. Following a leadership change in December, the company said it “eschewed the unsuccessful strategies of recent years” and expects to post a profit in the first quarter for the first time in four years.
3. Appliance Recycling Center of America Inc.
The recycler and seller of household appliances, with about 18 retail locations under the ApplianceSmart banner, has a market value of less than $10 million.
4. The Bon-Ton Stores Inc.
The department store chain, with dual headquarters in Milwaukee, Wis., and York, Pa., reported a $63 million loss in 2016 and expects comparable sales to decline in 2017. It operates about 263 stores. Although it had more than $2.5 billion of revenue last fiscal year, it has a $13 million market value.
5. Bebe Stores Inc.
The mall-based women’s apparel chain, which was popular for its fitted clothing in the early 2000s, has suffered from declining foot traffic and a consumer shift toward more subtle styles. Last week, the company said it would close its remaining 168 locations and only sell online.
6. Destination XL Group Inc.
The chain sells men’s big and tall apparel in about 344 stores. The company said in March it would slow store expansion, increase marketing spending and improve its digital operations. It projected a net loss for 2017 on about $470 million to $480 million in revenue. “We strongly believe the analysis by S&P Global Research is misguided and does not in any way, shape, or form fairly represent our company’s current financial position,” said David Levin, CEO of Destination XL. “Our financial condition is extremely healthy.”
7. Perfumania Holdings Inc.
The specialty retailer, which sells perfumes and fragrances, has been facing dwindling foot traffic to its stores in malls and tourist-dependent areas. The company has a market cap of about $14 million.
8. Fenix Parts Inc.
A small reseller of automotive parts reclaimed from damaged vehicles. It has a market value of less than $25 million.
9. Tailored Brands Inc.
Tailored Brands, which primarily sells men’s apparel, has been struggling amid increased competition from several e-commerce players. Comparable sales at Men’s Wearhouse, the company’s largest brand, fell 2.2% in the fourth quarter and are expected to decline in fiscal 2017. Shares are down nearly 50% this year. The S&P’s analysis is “extremely misleading” because it “does not take into account debt maturities and our first debt maturity is not until 2021,” a company spokeswoman said.
10. Sears Hometown and Outlet Stores Inc.
The retailer, which was spun off from Sears Holdings in 2012, closed 160 stores in fiscal 2016 as part of an effort to cut costs. As of Jan. 28, the company or its independent dealers and franchisees operated a total of 1,020 stores. It had $2 billion in revenue last fiscal year, but has lost money for three straight years.