Posted on 04/08/2020 12:54:46 PM PDT by Diana in Wisconsin
They were once the giants of American retail, strong enough to survive wars, the Great Depression, the Great Recession, and the rise of online shopping. But Sears, JCPenney, and others may not be able to survive the CCP virus crisis.
“The retailers who were wandering around aimlessly pre-pandemic are going to be substantially less likely to muddle through than they were before,” said Mark Cohen, director of retail studies at the Columbia Business School.
During the pandemic, stores have been shuttered. Retailers have furloughed hundreds of thousands of employees and are losing most of their sales. And shoppers have cut back on most purchases other than groceries and daily essentials. Depending on how long consumer demand stalls, companies may be forced to lay off workers, close stores permanently, or restructure.
“Store-based retail was already struggling with internet consumption trends before coronavirus, and now will be faced with accelerated demand shifts to the internet,” Randal Konik, analyst at Jefferies, said in a note to clients last week.
Sears, JCPenney, Neiman Marcus, and J. Crew were some of the most distressed companies prior to the outbreak, according to analysts. Many were forced to close stores in the face of declining sales even as unemployment reached a 50-year low.
Now with a record number of Americans filing for jobless benefits, unemployment is likely to be elevated for months if not years to come, further cutting into Americans’ appetite and ability to shop. Sears filed for bankruptcy in 2018 and its future has been in doubt ever since.
JCPenney, Neiman Marcus, and J. Crew are burdened by crushing debt loads. They’re also at risk from declining market share, too many stores, limited online sales, and a focus on selling discretionary items, analysts say.
JCPenney had $3.7 billion in debt at the end of 2019. Although JCPenney has enough liquidity to survive for the next several months, it may face challenges refinancing its debt in the future, said David Silverman, senior director at Fitch Ratings.
“There’s a good chance they can survive, but this is no layup,” said Craig Johnson, president of Customer Growth Partners. “This is going to be a three-pointer deep in the corner with time running out.” JCPenney will need to drastically reduce its 850 stores, Johnson said.
JCPenney did not respond to requests for comment.
Neiman Marcus is considering filing for bankruptcy to ease its $4.3 billion debt load, Bloomberg reported last month. Neiman Marcus is “completely helpless in light of the fact that the luxury sector may not emerge quickly when the pandemic crisis is over,” said Cohen from Columbia Business School.
Neiman Marcus declined to comment.
J Crew has $1.6 billion in debt. Before the outbreak, J. Crew was planning on spinning off Madewell, its fast-growing denim brand, to help pay down a chunk of its debt. But those plans are now in jeopardy.
“The potential inability for them to IPO Madewell could lead them to a more dire restructuring,” said Silverman from Fitch Ratings.
J. Crew did not respond to requests for comment.
Fitch has also downgraded credit ratings for GNC, Party City, and Tailored Brands, the owner of Men’s Warehouse and Joseph A. Bank, in recent weeks.
The End of Sears?
Last week, Sears announced it would close all of its remaining Sears-branded stores through at least April 30 because of the CCP (Chinese Communist Party) virus outbreak. It is keeping Kmart stores open where allowed. Many of those stores sell groceries and have pharmacies. It also furloughed most of the employees at its corporate headquarters.
But the company has been closing stores—continuously and permanently—for years. Losses of $12 billion since its last profitable year in 2010 made bankruptcy inevitable.
Store closings continued after Sears emerged from bankruptcy, suggesting that the losses at the now privately held company had continued. By the end of February it was down to 182 stores.
A company spokesman declined to comment for this story.
A second, and final, bankruptcy filing would not be unique to Sears. The retail graveyard is filled with companies that emerged from bankruptcy with plans to continue to operate but soon went out of business. Among them are Payless Shoes, Gymboree, American Apparel, and RadioShack.
Sears and JC Penney are still in business? That’s the bit that’s news to me.
From my perspective Sears no longer existed before this. There is not a store within 100’s of miles and if you go online then everything is out of stock.
That is a shame about J. Crew. At one time they sold high quality classic clothes without obvious labels and logos but I have noticed a dip in quality (and price point!) over the last few years.
I thought Sears was completely dead finally? They kept pulling back like every year.
JCP definitely still alive but they keep reducing service in annoying ways, which makes me not like them as much. Just 10 years ago I liked them a lot, for a midway dept store.
These were dead before Covid-19!
It sounds like this virus and economic slowdown, may be what pushes ailing retailers off the cliff. They were in trouble before all of this happened, and survival was in doubt before this.
May.
The panic spreading is not just over the virus.
I knew Sears was in trouble and closing stores, but didn’t know they had lost $12 billion since 2010. Those are some serious losses. Over a billion dollars a year in operating losses cannot be absorbed long term.
Glad to hear this. These were the walking dead.
I was in a JC Penny’s a couple years ago. It was like a tornado had gone through. Most things were askew on the shelves, there were lots of bare-spots, poor selection
I really felt bad for a once great American name.
If it weren’t for the parade Macy’s would be on that list.
Husband worked for Sears 30 years...bought by KMart. They’re dead.
It’s not that any of these stores are bad. But times change.
Sears used to be the bastion for appliances, an anchor to every mall in America.
But Sears also sold clothes and other stuff because it was a department store.
There are no more department stores except the big ones like Walmart and Target.
Mail order and delivery by those little airplanes is the future of shopping.
Not sure why you’re glad. Now if it was Target that’s different.
“JCP definitely still alive but they keep reducing service in annoying ways, which makes me not like them as much. Just 10 years ago I liked them a lot, for a midway dept store.”
Penny’s was one of the first retailers to put homosexuals in their sales flyers. It killed them, it’s just taking a long time for them to die. Now it turns out they were just ahead of their time.
Not the stores but the jobs! What enterprise can soak up these employees? One thing when they were disappearing in dribs&drabs, very different when they remain unemployed after this lockdown has been released.
Already happened in my town last year.
I thought Sears was already dead.
All are businesses that were already on life support before the virus hit.
Companies like JC Penney saw their sales decline when they embraced LGBTQSVCQT and whatever other letters they use! They went woke, now they’re going broke.
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