Fitch: Sears Could File for Bankruptcy by 2018

Print Friendly, PDF & Email

Sears
As the retail industry waits for Sears Holdings to finally stick a fork in its operations, one major credit-rating firm has named it a “high risk” for bankruptcy.

Fitch Ratings released its latest retail bankruptcies study last week, a 114-page report that named Sears, Nine West and True Religion Apparel among seven chains most at risk of filing for Chapter 11 in the next year to 24 months, Bloomberg said.

Other at-risk chain stores named in the report include Claire’s, Rue21, 99 Cents Only and Nebraska Book Co.

According to Fitch, these seven retailers have struggled to survive amid the rise of online shopping and discount retailers combined with falling mall traffic and consumer spending shifts. Added to this, falling comparable sales and fixed cost deleveraging have resulted in negative cash flow and unsustainable capital structures.

Sears Holdings, for instance, recently borrowed $300 million from chief executive Eddie Lampert’s hedge fund, after the company reported yet another quarterly loss. Moody’s Investors Service estimates Sears’ negative operating cash flow to be roughly $1.5 billion this year.

“Brand degradation and competitive pressures to either price or experience can be real threats to the survival of struggling retailers,” Sharon Bonelli, senior director of leveraged finance at Fitch, said in a statement. “As a result, many retailers move into the bankruptcy process without a real reason to exist and ultimately end up in liquidation more often than bankrupt companies in other sectors.”

Following a study of 30 retail bankruptcies involving $10.5 billion of debt, Fitch concluded that half of all Chapter 11 cases in the retail sector ended in liquidation, compared with just 17 percent across other industries. The report also found that it took 11 months to settle a case, on average, though it took 26 months for department store chain Gottschalks to do so, before ceasing operations in 2009.

In addition, Fitch discovered that first-lien lenders, the highest priority debt, recovered at least one bank loan or secured bond issue in most cases, but unsecured debtors rarely (less than 25 percent) recovered their claims.


Recent News

Tommy Hilfiger on Innovation, Instant Gratification and Courting the Instagram Generation

Tommy Hilfiger credits his brand's staying power to tapping into the fountain of youth, whether that means teaming with Gigi Hadid or jumping on nascent AI technology.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register
Read more

Maersk and IBM Forming Blockchain Joint Venture to Digitize Supply Chains and Improve Trade Flow

A.P. Moller - Maersk and IBM said they intend to establish a joint venture to provide more efficient and secure methods for conducting global trade using blockchain technology.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register
Read more

Norway’s Move to Ban Fur Farms Brings Praise and Criticism

In a move that was both political and a recognition that fur has fallen out of fashion even in a nation that was once the world’s top producer of fox pelts, Norway’s government has decided to phase out fur farms by 2025.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register
Read more

See How Walmart is Positioning to Move at the Speed of Innovation

Despite its smaller, nimbler competitors, Walmart is determined to be a disruptor in this new retail landscape and its technology incubator Store No. 8 is leading the charge.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register
Read more

5 Trends Taking Over the Latin American Footwear Market for Fall ’18

As Brazil continues to emerge from its economic crisis and shoppers are starting to spend again, women’s fashion footwear trends are channeling some of that same cautious but confident energy.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register
Read more