Retail

Retail defaults hit record high in first quarter, Moody's says

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Key Points
  • Retail defaults hit a record high in the first quarter of 2018, according to a new report from Moody's.
  • 9 of 28 defaults were by retailers, the firm found.
  • Moody's is also expecting retailers' maturities to spike in 2019.
Shoppers search for discounted items left at a Sears store that is closing in South Centre Mall in Calgary.
Photo: Ron Jeffery

The number of retailers defaulting on loans hit a record high in the first quarter of 2018, a new report shows, affirming many chains in the sector are still struggling under suffocating debt loads and changing business needs.

There were 28 total defaults by corporations in the latest period, Moody's Investors Service found, compared with 23 defaults during the same period a year ago. Nine of the 28 defaults were by retailers. (See the complete list below.)

Many retailers are still grappling with the debt load left behind from the private equity buyout boom several years ago. Meanwhile, all retailers are faced with the expensive task of investing in e-commerce, a business that without the right store footprint can eat into profits.

The latest retail defaults' come from Claire's Stores, which just filed for Chapter 11 bankruptcy protection last month, and Sears Holdings. The department store recently completed a distressed debt exchange, which Moody's considers a default.

"Stresses in the retail sector have weighed on the operating earnings of department stores, discount stores and drug stores in particular," said Sharon Ou, vice president and senior credit officer at Moody's.

CNBC reported last month that Moody's is expecting retailers' maturities to spike in 2019, meaning many significant debts are coming due. Companies on that list with loans to pay include Sears, Neiman Marcus and Guitar Center. These companies are also targeted as ones that could struggle to refinance or fund their loans.

Here are the 9 retailers globally that defaulted during the first quarter of 2018, according to Moody's:

Bon-Ton Stores
Sears Holdings
Claire's Stores
Tops Holding
BI-LO
BrightHouse Group PLC
Charlotte Russe
Tops Holding II
BI-LO Holding Finance