Brick-and-mortar retailers felt the pain at exaggerated levels due to the pandemic, according to the bi-annual BDO Bankruptcy Update.
Government-mandated store closures, social distancing requirements and increases in eCommerce only piled onto the problems brick-and-mortar stores were already having. That will have the effect of speeding up bankruptcies going into the end of the year, the report stated.
There are 29 Chapter 11 bankruptcies on file this year so far, including 10 apparel and footwear stores, five home furnishing stores, three department stores and 11 other businesses, according to the report. That means the year is on pace to rival the 2010 numbers during the Great Recession.
From January through the middle of August, there were more store closures than the 9,500 from the whole of 2019, which was a record itself. Most of them took place in malls, which saw dramatic declines in physical traffic because of the pandemic.
A forecast from June had as many as 25,000 stores closing by the end of the year, with big names like J.Crew Group, Brooks Brothers, Neiman Marcus and JCPenney filing or considering filing for bankruptcy. The number of Chapter 11 filings is up 26 percent from last year.
BDO said it thinks the current amount of Americans still furloughed or uncertain means retailers “must be prepared for a prolonged period of limited discretionary spending, even heading into the holiday season,” the report stated, with the uncertainty of a vaccine anytime soon a further deterrent for people to change their habits or for retailers to expect things to improve.
BDO said the retail industry has been affected in more ways than one; with some big-name stores closing, malls as a whole will see less traffic unless owners can fill the vacancies.