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2018 May Be The Worst Year Ever For Retail


A total of 19 retailers filed for Chapter 11 bankruptcy protection last year, buried in debt they ate up ravenously over the last decade; and all indications are that this year might be even worse—mostly thanks to Amazon, the online retail giant that some are calling the dangerous ‘new monopoly’.

Shopping habits have changed with massive e-commerce developments, and many retailers have been slow to adapt, finding themselves left behind, dragging around unmanageably heavy debts loads.

And we haven’t seen the bottom of the retail sector yet. The negative trend has shifted into the New Year, and now it’s threatening to claim even more victims, according to S&P Global ratings agency. So far in 2018, we’ve seen two defaults and one near-miss:

Bon Ton Stores, Inc: This Wisconsin- and Pennsylvania-based parent company of Younkers and Boston Store, among others, filed for Chapter 11 bankruptcy protection in early February, after seven years of being unprofitable.

Tops Markets: Tops--a supermarket grocery chain with 170 retailers in New York, Pennsylvania and Vermont--filed for Chapter 11 bankruptcy protection to restructure debt.

Charlotte Russe, Inc: This clothing retailer narrowly escaped default in late February after it completed a “distressed exchange” on a $214-millio loan, creating a new $90-million loan and giving existing lenders a majority stake in the company. Liquidity, however, remains tighter than tight.

Going forward, department stores, specialty apparel and regional grocery stores are among the most likely to default, says S&P Global.

“With almost 20% of ratings in the ‘CCC’ category, we have a strong expectation for continued defaults over the next 12 months,” according to an S&P report. “The pace of liquidation might also pick up this year, as most retailers that defaulted in 2016 and 2017 reorganized.”

But it gets even worse: S&P says that despite all the crash and burn here, the sector is still oversaturated.

Traditional retail, it would seem, is dead in the water, and the future of retail is not just online, it’s fully automated, like Amazon Go’s checkout-free grocery story that opened its doors in late January in Seattle. Related: Australia Certifies First Cryptocurrency Exchange

And we don’t mean ‘self-check-out’, either: This is completely check-out free, with the latest in advanced cameras watching what you buy and charging your app as you leave the store.

The problem isn’t that no one wants to physically go shopping anymore…

"Brick-and-mortar retail isn't dead, but boring retail is dead,” retail consultant Steven Dennis, president of SageBerry Consulting, told an e-commerce conference in late February.

With all the tech advances of our time, consumers high a much higher level of expectation when shopping. They’ll physically go shopping, as long as it’s not boring.

By Jan Bauer for Safehaven.com

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