What Fashion and Luxury Goods Companies Need to Know About Restructuring and Bankruptcy
By the of the end of 2017, the industry saw more than 300 companies file for bankruptcy, with no less than 30 involving major retailers. By end of the third quarter of 2017, more than 6,400 store closings occurred — triple the number of closings during the first half of 2016.
Analysts predict the total number of store closings for the year will approach 9,000, well above the 6,200 closings the industry weathered during the 2008 financial crisis and significantly more than the total closings in 2016. At that rate, more than 10% of the total physical US retail landscape is estimated to have closed during 2017. These cutbacks resulted in more than 76,000 lost jobs – a 26% increase from 2016 – a rate unmatched in any other industry. It is clear that the trend of failing retailers will intensify before it improves. Healthy, stressed, or challenged retailers competing for market share are in a position to acquire the assets of distressed retailer debtors and gain market share.
Adding to the stress, retailers are confronted with market pressures and unique legal issues in bankruptcy that make successful reorganizations more difficult. Once a retailer gets in trouble, it becomes harder to recover than it is for businesses in other industries. It is essential that retailers and their business partners address issues in advance, while adopting a collective, problem-solving attitude. Proper planning and an understanding of underlying dynamics are keys to maximizing the probability of success and avoiding failure.
As retailers and bankruptcy discover their new and uneasy relationship (especially apparel stores, which accounted for 52% of all retail bankruptcy filings in 2017), it is essential for executives within the industry to understand how to navigate the field, maximize success, and manage the effect of – or avoid all together – the pitfalls and loss of value that occurs in a liquidation.
This analysis is designed to help retailers, creditors, vendors, and opportunistic investors who are poised to take advantage of the trend by becoming involved in bankruptcy cases.