Over a Quarter of Large Retailers Are at Significant Risk of Filing for Bankruptcy or Facing Financial Distress in 2009 or 2010
December 29th, 2008Via: Wall Street Journal:
The good news for retailers reeling from the holiday sales season is that 2008 is almost over. The bad news: The fallout in 2009 could be worse.
This year’s retailing slide — when stores were forced to cut prices to convince wary consumers to spend — promises to have a lasting impact on the way the retail industry operates. Many retailers are rethinking how they do business, as others prepared for a large number of bankruptcies and store closures.
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Analysts estimate that from about 10% to 26% of all retailers are in financial distress and in danger of filing for Chapter 11. AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010. In the previous two years, the firm had estimated 4% to 7% of retailers then tracked were at a high risk for filing. Retailers are particularly vulnerable to a recession because of their high fixed costs.
Research Credit: Lagavulin
