For retailers, facing an apocalypse isn't anything new. What's new is the fact that everyone else is too.
Retail has for years faced the challenges of slowing foot traffic, changing shopping patterns and online competitors that has caused an industry upheaval some analysts have deemed the "retail apocalypse."
But as the coronavirus pandemic has ground U.S. business to a halt, the pain has spread far and wide to upstart retail brands, landlords, lenders and suppliers. With everyone in duress, landlords and creditors with the ability to pull the trigger that could put a retailer into bankruptcy have become gun shy.
"Everyone has a gun to their head," said one banker requesting anonymity. "It's mutually assured destruction."
In March, there were four retail bankruptcies, according to Debtwire parent Acuris. That's more than the two retail bankruptcies that occurred in the same month last year, but it doesn't reflect the pain that has crippled the industry which has been forced to shutter its stores.
State governments are telling Americans to avoid crowds and ordering nonessential businesses shut. With nowhere to go, Americans have little reason to shop the inventory that retailers have already stocked. Macy's market capitalization has dropped from about $6 billion in mid-February to $1.5 billion. Fast-fashion retailer H&M has said it is weighing temporarily laying off tens of thousands of workers worldwide. There could be a record-setting 15,000 store closures this year, according to Coresight Research.
But unlike prior crises that swept other industries, the issue isn't simply that the retail business is broken — the problem is that there's deep uncertainty about when the pandemic will end and what the world will look like after the crisis is over. That's not a problem bankruptcies can solve, and it's not a problem many lenders want to take on themselves.
When Delta, United Airlines and U.S. Airlines filed for bankruptcy in the wake of Sept. 11, they were able to shed onerous debt, restructure labor contracts and reduce capacity. They did, in fact, emerge stronger companies than they were prior to bankruptcy.
Retailers, though, are facing a cash-flow problem, not just a structural challenge. They're not bringing in money because they can't operate. Any retailer weighing filing for bankruptcy has no idea when stores may reopen again, and what the world will look like when they do.
"Filing for bankruptcy doesn't create a sudden cure for the virus, it doesn't create a cure to open stores — so why incur the expenses of Chapter 11 when you're not going be able to do anything while business is closed?" said Michael Sirota, co-chair of the bankruptcy and corporate restructuring department at Cole Schotz
Landlords and creditors, which are sometimes one in the same, are aware of that reality.
Luxury retailer Barney's filed for bankruptcy last year after its landlord raised the rent that wiped away its earnings. But Barney's landlord likely believed it had other alternatives to replace the retailer in its prime real estate, like Manhattan's Madison Avenue. Now, with virtually every retailer's stores shuttered, there is no easy replacement to stand in on a property.
Instead, landlords are in their own pain and facing their own uncertainty. The nation's largest mall owner, Simon Property Group, has temporarily closed all its more than 200 malls and outlet centers. When and how many malls it reopens will significantly impact the economics of its business.
"There is disruption in the real estate market and a lot of unknown in retail: is the mall going to be there or not? Will I have cash or not?" said Christa Hart, senior managing director at FTI Consulting.
Debt-holders that have the ability to help force a company into bankruptcy if it is late on interest payments or violates its covenants are aware of this reality, say bankruptcy bankers and lawyers. It makes it difficult for them to negotiate the terms of emerging from bankruptcy, because there is no clear view of what retail looks like in one month or three months. There is limited upside forcing a retailer to liquidate because it is nearly impossible to hold a liquidation sale with retailers forced close.
Modell's recently had to pause its liquidation efforts, because its liquidation sales ran right up against government guidance to stay home. The sports retailer had filed for bankruptcy on March 11 and began its closing sales March 13. The same day, President Donald Trump declared a national emergency over the coronavirus pandemic and the U.S. economy began to shut down.
"It's not as if we were using the space or premises and selling inventory and not paying them," said Sirota who advised Modell's on the bankruptcy "We were deprived of that access."
The landlords agreed in that case to delay rent payments.
With liquidation sales seemingly untenable in the short term, there is also little desire to finance bankruptcies. Financing bankers who spoke to CNBC on the condition of anonymity said while it may be possible to get financing for bankruptcy from existing lenders, the bar has been raised significantly for new lenders. That stands in contrast to bankruptcies like Toys R Us and even Sears, when banks lined up to offer assistance.
That's not to say there won't be retail bankruptcies, particularly for companies with impatient investors or with already significantly broken businesses. Once the cloud of uncertainty lifts, there will likely be many more.
But until then, though, for most retailers, the only option is to cut costs. Macy's and Kohl's have furloughed most of their employees. Retailers are slashing investment, putting projects on hold, and culling through other expenses like outside consultants. They're also delaying their payments to the brands that have already shipped product to help conserve their cash, say sources familiar with the situation.
Some have thought about tapping the pool of money laid out for business in the $2 trillion CARE act, lobbyists have told CNBC, but it remains unclear how quickly they can get those funds. The government has implied it will attach tough strings to any loans it offers to large businesses, like requirements around headcount that industries with high-fixed costs − like retail −are wary to commit to.
Some retail companies are also pushing for relief in a potential fourth package, lobbyists said.
The separation of winners and losers that was already happening in retail will continue, but at an expedited pace. Department stores will suffer, weighed down by large real estate footprints that make little sense to today's shoppers. Those that have been strapped with debt and unable to invest in their business will fall further behind. Many apparel brands will struggle to compete. And Walmart will be a survivor.
"In the summer, it will be where we thought the industry would be in five years," said FTI's Hart.
CNBC's Lauren Thomas contributed to this report.