New York (CNN Business) — They were the giants of the retail trade in United Statesstrong 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 crisis coronavirus.
“Retailers that wandered aimlessly before the pandemic will be much less likely to get out of step than they had previously,” said Mark Cohen, research director of retail at the Columbia Business School.
During the pandemic, the shops have been closed. Retailers have been given licenses to hundreds of thousands of employees, and they are losing most of their sales. And buyers have reduced the majority of purchases that are not groceries and articles of daily use. Depending on how much time is to stop the consumer demand, companies may be forced to lay off workers, closing stores permanently or restructure.
“The retail-based stores already were struggling with the trends of consumption of the internet by the coronavirus, and now he will face the accelerated changes of the demand on the internet,” said Randal Konik, analyst at Jefferies, in a note to clients last week.
Sears, JCPenney, Neiman Marcus and J. Crew were some of the companies concerned before the outbreak, according to analysts. Many were forced to close stores in the face of decreasing sales, even when unemployment reached a minimum of 50 years.
Now, with a record number of americans applying for financial assistance for unemployment, it is likely that the rate rise for months, or even years, which will further reduce the appetite and the purchasing capacity of americans. Sears will be bankrupt in 2018, and its future has been in doubt since then.
JCPenney, Neiman Marcus and J. Crew are overwhelmed by debt burdens overwhelming. They are also at risk due to the decrease of the share of the market, too many stores, on-line sales are limited and a focus on the sale of discretionary items, analysts say.
JCPenney had a debt of US$ 3,700 million at the end of 2019. Although JCPenney has sufficient liquidity to survive during the coming months, may face challenges refinancing their debt in the future, said David Silverman, senior director of Fitch Ratings.
“There’s a good possibility that they may survive, but it will not be an easy shot,” said Craig Johnson, president of Customer Growth Partners. “This is going to be a three-point shot from the corner with time expired”. JCPenney will need to dramatically reduce its 850 stores, ” Johnson said.
JCPenney did not respond to requests for comment.
Neiman Marcus is considering filing bankruptcy to relieve your debt burden of US$ 4.300 billion, reported Bloomberg last month. Neiman Marcus is “completely helpless in the light of the fact that the luxury sector may not emerge as quickly when the pandemic crisis has ended,” said Cohen of Columbia Business School.
Neiman Marcus declined to comment.
J Crew has a debt of US$ 1,600 million. Before the outbreak, the firm planned to spin off Madewell brand denim of rapid growth to help pay a portion of their debt. But those plans now are in danger.
“The inability of potential for them to do an IPO of Madewell might lead to a restructuring more serious,” said Silverman, of Fitch Ratings.
J. Crew did not respond to requests for comment.
Fitch has also downgraded the credit ratings of GNC, Party City, and Tailored Brands, the owner of Men’s Warehouse and Joseph A. Bank, in the last few weeks.
Is this the end of Sears?
Last week, Sears announced that it would close all of its stores remaining the brand Sears at least until the 30 of April due to the outbreak of coronavirus. Yes holds open the Kmart stores where it is allowed. Many of these stores sell groceries and have a pharmacy. It also gave licenses to the majority of the employees in its corporate headquarters.
But the company has been closing stores, so it is continuous and permanent, for years. Losses of US$ 12,000 billion since its last profitable year in 2010 made inevitable the bankruptcy.
The closures of stores continued after Sears came out of bankruptcy, suggesting that the losses in the company now private had continued. At the end of February was down to 182 stores.
A spokesman for the company declined to comment for this story.
A second and final declaration of bankruptcy would not be exclusive to Sears. The cemetery retailer is full of companies that emerged from bankruptcy with plans to continue to operate, but soon closed. Among them are Payless Shoes, Gymboree, American Apparel and RadioShack.