Retail Bankruptcies Surge to a 13-Year High as Inflation Forces Shoppers to Abandon Discretionary Spending

Retail Bankruptcy Update

Store Openings and Closings Update

Retailers That Filed for Bankruptcy Through June 2023

Outcome of Retail Bankruptcy Filings in BDO Retail in the Red Reports

Retail bankruptcies surged in the first half of 2023, reaching 17 major filings after a 13-year low in 2022, according to BDO’s Retail in the Red report. All bankrupt retailers primarily sold discretionary products, struggling as inflation-squeezed consumers prioritized essentials. High-profile casualties included Bed Bath & Beyond, Tuesday Morning, and Christmas Tree Shops, all of which liquidated after failing to find buyers. Reorganizations fell to just 8% of filings, down from 42% in 2021. Despite closings, store openings—approximately 3,300—still outnumbered closures of around 2,600, driven largely by dollar stores and discounters expanding aggressively.

In-Depth:

With alters in consumer spfinishing, some retailers are choosing to restructure or close stores. Retail bankruptcies have picked up in the first half of the year, following a lull in 2022. Pivoting from a 13-year low in retail bankruptcies, there have been 11 major filings through April, two in May, one in August and three through September 15, for a total of 17 bankruptcies.

Retail Bankruptcies According to BDO’s Retail in the Red*

Chart displaying Retail Bankruptcies according to BDO's Retail in the Red

*Data for 2023 does not include the 4 bankruptcies that have happened between June 30th and September 15th to compare data across equivalent time periods.

All of the retailers that filed for bankruptcy in the first half of 2023 primarily sold discretionary products, with the possible exception of a chain of pet supply stores. These retailers have suffered as consumers focus their spfinishing on essential goods due to limited budreceives. In some cases, these retailers filed for bankruptcy becautilize they could not sufficiently improve their ecommerce model enough to support operations and customer expectations.

Company	Filing Data	Description	Bankruptcy Strategy	Bankruptcy Result or Latest Intent	Stores as of Petition Date	Store Closures Announced
Retailing Enterprises LLC (Invicta Stores)	05/30/23	Watch retailer	Restructure debt	In process	24	0
Christmas Tree Shops	05/09/23	Specialty décor stores	Reorganization	Liquidation	82	82
Bed, Bath & Beyond¹	04/23/23	Homefurnishing	Market as going concern, including the acquireacquire Baby business.	Liquidation of all brick-and- mortar stores. Sold IP for BB&B and acquireacquireBaby brands.	480	896
David’s Bridal²	04/16/23	Wedding and special occasion apparel	Going concern sale process and “soft” sales in their retail locations to monetize inventory.	Court approved going concern sale to CION Investment Corp. for no cash purchase price (just assumption of debt). Kept 195 stores open.	274	79
Amerimark Interactive³	04/11/23	Catalog based marketer of apparel, shoes, cosmetics, and accessories	Sale process	Received $85 million credit bid for certain litigation assets. Two other winning bids totaling $97 million for different packages of assets.	0	0
Boxed	04/02/23	E-commerce wholesaler of pantest consumables	Sale of its Software- as-a-Service business, Spresso, as a going concern to the prepetition first lien secured lfinishers.	Sold Spresso software business and IP; winding down retail operations.	0	0
ESCO Ltd. (Shoe City)	03/31/23	Apparel and footwear	Conduct store closing sales and liquidate all assets.	Full chain liquidation.	39	39
Tuesday Morning	02/14/23	Off-priced home goods	Close unprofitable stores and shift resources to profitable locations.	Full chain liquidation after failing to find going concern acquireer. Converted to Chapter 7 liquidation.	464	464
Nielsen & Bainbridge	02/09/23	Wholesale home decor supplier	RSA to sell assets within 60 day timeline	Sold equity to DIP lfinisher; confirmed plan.	0	0
Indepfinishent Pet Partners	02/05/23	Chain of pet stores	Going concern sale process for liquidation of underperforming stores.	Sold 66 stores to lfinishers in credit bid; confirmed liquidation plan.	159	93
Party City	01/17/23	Party supply store	Restructuring	Cancelled about $1 billion in company debt and turned all of its equity value over to the retailer’s lfinishers.	823	64
Performance Powersports	01/16/23	ATV, RV and motorcycle dealerships	Sale process	Sold virtually all assets to DIP lfinisher for $10 million credit bid; proposed liquidation plan.	0	0
Forma Brands4	01/11/23	Holding company of beauty brands	Sale process	Sold to lfinishers for $723 million credit bid.	0	0
Subtotal					2,345	1,717

Information sourced from SEC Filings, Bankruptcy Court Filings, Company Press Releases, and Debtwire Stores numbers are closest approximations

In a somewhat distressing trfinish, the number of retailers restructuring in bankruptcy, as a percentage of total bankruptcies for that year decreased, while the percentage of liquidations and asset sales has increased. Three retailers reorganized in 2019, ten in 2020, five in 2021 and one each in 2022 (Revlon) and 2023 (Party City). As a percentage of total retail bankruptcy filings by year, retailers reorganizing have decreased from 42% in 2021, down to 20% in 2022 and only 8% for the first half of 2023.

Outcome of Retail Bankruptcy Filings in BDO Retail in the Red Reports (as a percentage of total bankruptcies for that year)

*Outcome of one bankruptcy is in progress and thus not yet

In addition, the first half of 2023 saw a proportionally large number of retailers enter bankruptcy with the intent of consummating a going concern sale only to find themselves unable to find acquireers willing to create a viable offer, thereby forcing these retailers to liquidate their assets. For example:

Bed Bath & Beyond and Buy Buy Baby sold their ininformectual property after closing all stores.
Tuesday Morning hoped to close unprofitable stores and restructure but ultimately sold all assets to a liquidator.
Christmas Tree Shops intfinished to stay in business after closing approximately 10 stores, but couldn’t find a acquireer, and liquidated all stores.

Changing consumer habits exacerbated by inflation, high interest rates, and increased competition from online retailers may be why these bankrupt companies struggled to find going concern acquireers and finished up liquidating their businesses. Private equity or strategic acquireers may not be interested in acquireing huge-box, mainly brick-and- mortar businesses that lack a strong ecommerce model. The feeling is that these businesses cannot compete with the retail giants that have mastered ecommerce and omnichannel retail.

2023 (through June*)

Liquidation

Reorganization

2023 Announcements
Company	Type of Retailer	Closings	Openings	Net
Retailers with 50 or More Closings/Openings in 2023
CVS	Pharmacy	300	0	(300)
Walgreens	Pharmacy	150	0	(150)
Foot Locker	Footwear/Apparel/Accessories	120	300	180
The Children’s Place	Apparel	110	0	(110)
Genesco (Journeys)	Footwear/Apparel/Accessories	95	25	(70)
Bath & Body Works	Specialty – Bath / Skin care	50	90	40
Ross Dress for Less	Discounter – Apparel/Home	20	100	80
Sephora at Kohl’s	Specialty – Beauty / Cosmetics	0	250	250
Ralph Lauren	Specialty – Luxury Lifestyle	0	85	85
Tractor Supply	Specialty – Rural / Lifestyle	0	80	80
Subtotal		845	930	85

Store Openings in 2023 (Announced Prior to 2023)
Company	Type of Retailer	Closings	Openings	Net
Dollar General	Discounter		1,010	1,010
Family Dollar	Discounter		330	330
Dollar Tree	Discounter		310	310
Five Below	Discounter		200	200
Casey’s General Stores	Convenience		140	140
JD Sports	Footwear/Apparel/Accessories		135	135
Aldi	Discount Supermarkets		120	120
TJX Companies	Off-price apparel / Home Goods		105	105
Total Store Openings in 2023 (Announced Prior to 2023)		0	2,350	2,350
Bankrupt Retailer Store Closings		1,717	0	(1,717)
Total Store Closings & Openings		2,562	3,280	718

Y-T-D actuals utilized as available.
Equitable distribution assumed if not otherwise specified with multi-year announcements.
Information sourced from SEC Filings and Press Releases
Numbers Rounded
Data as of August 2023

Nevertheless, in a recent report from Coresight Research, foot traffic in top-tier malls was up by 12% in 2022 compared to 2019 and, on average, top-tier malls were more than 95% leased last year. High-finish property developers have reported high demand for retail space in recent quarters. This perhaps displays further bifurcation of the retail industest. Discounters and dollar stores are doing well, as are high-finish retailers.

Although we continued to see more store openings (about 3,300) than closings (about 2,600) through August of 2023, many retailers are gradually shrinking the square footage of their store footprint, netting less overall space. For example, while the pharmacy category is performing well in terms of sales, some pharmacies are closing stores. Smaller format stores are replacing large format stores and retailers are leveraging in-store partnerships, where the host store’s operating square footage is reduced to create way for the in-store partner.

The vast majority of store openings continue to be by dollar, discount and grocery stores as Americans hunt for deals and off-label products to better balance their budreceives. Additionally, these categories tfinish to see a greater portion of their sales coming from brick-and-mortar stores over ecommerce, as these categories lfinish themselves to impulse and bulk purchases.

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