Retail

The 10 biggest retail bankruptcies of 2020

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Key Points
  • This year, Neiman Marcus and J.C. Penney joined the ranks of some of the biggest retail bankruptcies on record, including Sears, Toys R Us and Circuit City.
  • About 60% of the retailers that filed for bankruptcy in 2020 through August listed more than $100 million in assets, compared with 50% of filings during the same period in 2019 and 36% in 2018, a BDO analysis found.
  • The new year will bring more turmoil for retailers that didn't have a strong holiday season.

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Robert Barnes | Getty Images

More than three dozen retailers, including the nation's oldest department store chain, filed for bankruptcy this year, marking an 11-year high.

Pre-pandemic, several of these retailers were already teetering on the brink of survival. But the Covid health crisis pummeled the industry. Lockdown orders put in place in March to slow the spread of the virus turned into prolonged store closures for many businesses that didn't sell essential items like groceries. Retailers that started 2020 already in a tough spot were hit harder. Liquidity was strained and sales went into a freefall.

"The magnitude of bankruptcies has been larger this year compared to previous years," said David Berliner, chief of BDO's business restructuring and turnaround practice. "You're noticing national brands and other prominent franchises, that had hundreds of stores, now being liquidated or going through a restructure to salvage what they can."

About 60% of the retailers that had filed for bankruptcy in 2020 through August listed more than $100 million in assets, compared with 50% of filings during the same period in 2019 and 36% in 2018, Berliner said.

Neiman Marcus, J.C. Penney, Ascena Retail Group and Tailored Brands have now joined the ranks of some of the all-time biggest retail bankruptcies on record — including Sears, Toys R Us and Circuit City.

The pandemic accelerated a number of industry trends, including rampant growth in digital commerce. Consumers habits shifted, and the items they wanted to buy changed abruptly. Sales of apparel fell sharply, as working from home and not getting dressed up became the norm. And instead, consumers looked to buy things to entertain themselves at home, like bikes and puzzles. This has largely benefitted companies such as Amazon, Walmart and Target, which have strong online businesses and sell a little bit of everything.

After the holiday season wraps, more turmoil is expected in the new year. The holidays are always a "make or break" time for retailers, but analysts say that's especially true in 2020.

"The silver lining of all this, however, is that in an accelerated understanding of great weakness comes the ability to look at 2021 and our new normal when modeling for the future," said Scott Stuart, CEO of the Turnaround Management Association.

"I believe the retail sector is in a time of soul-searching and reckoning, understanding that what was, is likely gone forever," he added.

Below are the 10 biggest retail bankruptcies of 2020, listed by asset sizes and liabilities at the time of their filings. The list was compiled using data from court filings, S&P Global Market Intelligence and BDO.

J.C. Penney

Signage is seen on a shopping cart inside a J.C. Penney Co. store in Peoria, Illinois.
Daniel Acker | Bloomberg | Getty Images

Assets: More than $5 billion
Liabilities:
More than $10 billion
Stores at time of filing:
846

Following more than a century in business and a years-long sales slump, J.C. Penney filed for Chapter 11 bankruptcy protection in mid-May. Weighed down by debt, it was struggling long before the pandemic, but the Covid crisis exacerbated its problems.

Penney, which employed roughly 90,000 full- and part-time workers as of February, has closed more than 150 locations since its bankruptcy filing. Another 15 stores will close by March, it said earlier this month.

The department store chain has been given another chance with new owners: Simon Property Group and Brookfield Asset Management. After months of negotiations in the courtroom, the two mall owners acquired Penney in early December, keeping more than 60,000 jobs intact. But Penney's future is dependent on shoppers heading back to malls for dresses, shoes and handbags. And this year has proven that will be a hard-fought battle.

Neiman Marcus

People walk outside of Neiman Marcus and The Shops at the Hudson Yards as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on July 31, 2020 in New York City.
Noam Galai | Getty Images

Assets: More than $5 billion
Liabilities:
More than $5 billion
Stores at time of filing:
67

The upscale department store chain filed for Chapter 11 in early May, marking one of the highest-profile retail collapses during the pandemic.

After eliminating billions in debt, Neiman brought on a new board of directors that includes former LVMH North America Chair Pauline Brown and former eBay Chief Strategy Officer Kris Miller. Geoffroy van Raemdonck has remained as CEO.

"While the unprecedented business disruption caused by Covid-19 has presented many challenges, it has also given us the opportunity to reimagine our platform and improve our business," van Raemdonck said in the fall.

As part of its restructuring, Neiman has closed a handful of shops, including a massive store at Hudson Yards in New York that had hardly been open for a year. Over the next three years, the company has earmarked more than $160 million to invest in its stores, including renovating its Dallas flagship, the CEO said in a recent interview.

Neiman hopes to ride the strong rebound of the luxury market, as high-income consumers splurge more on themselves, with travel and other social activities are on hold.

Guitar Center

ans pay tribute to the late rock legend Eddie Van Halen at the site of his guitar and handprints on the Hollywood Rock Walk after the announcement of his death on October 06, 2020 in Hollywood, California. (Photo by AaronP/Bauer-Griffin/GC Images)
Aaron P. | GC Images | Getty Images

Assets: More than $1 billion
Liabilities:
More than $1 billion
Stores at time of filing:
Roughly 300

Guitar Center started its business in Hollywood in the 1950s selling home organs, and grew to become a leader in the music category. But temporary store closures brought on by the pandemic hurt the company, as shoppers turned to the internet to buy instruments and sheet music. The retailer, which employed roughly 13,000 people, filed for Chapter 11 in late November.

Its goal to rebound in the new year is taking shape. In early December, Guitar Center's restructuring plans were approved by a court judge, and it expects to emerge from bankruptcy by Dec. 31. The retailer and stakeholders reached a restructuring agreement that slashes its debts by almost $800 million and raises as much as $165 million in new equity.

"With our strengthened financial position, we will continue to reinvest and grow our business," CEO Ron Japinga said in a statement. "We are nearing the end of a successful holiday season and I am excited about our bright future."

Tailored Brands

A Jos. A. Bank store window
Source: Getty Images

Assets: More than $1 billion
Liabilities:
More than $1 billion
Stores at time of filing:
1,400

Tailored Brands, the owner of Men's Wearhouse and Jos. A. Bank, filed for Chapter 11 in August, expecting to reduce its debt and strengthen its finances, which were eroded by the pandemic.

Tailored Brands' filing was among a string of apparel retail casualties blamed on the work-from-home casualization of corporate America and fewer men buying suits and ties. About a month before its bankruptcy filing, Tailored Brands announced plans to close as many as 500 stores "over time." It also slashed its corporate workforce by 20%.

In early December, the company announced it had successfully emerged from Chapter 11 and eliminated $686 million of existing debt. Looking to the future, President and CEO Dinesh Lathi said the company is planning to adjust its merchandise and launch new brand partnerships.

Ascena Retail

Shopper enters a Ann Taylor LOFT clothing store located on Madison Avenue in New York City.
Adam Rountree | Bloomberg | Getty Images

Assets: More than $1 billion
Liabilities:
More than $1 billion
Stores at time of filing:
2,800

The parent of Ann Taylor and Loft, Ascena Retail Group, filed for Chapter 11 in July. Founded as Dressbarn in 1962, the company grew to become one of the nation's largest sellers of women's clothing. But its sales dwindled from nearly $7 billion in 2016 to $5.5 billion in fiscal 2019, annual filings show.

Ascena increasingly struggled to grow its business as more women steered toward fast-fashion retailers such as H&M and Zara, off-price chains such as TJ Maxx and Ross Stores, and even Target, for clothing.

In 2019, Ascena announced it was winding down its Dressbarn business and it sold its Maurices plus-size banner. Since filing for Chapter 11, it has sold off its Justice children's clothing division and shut all of its Catherines stores. Earlier this month, a court judge approved Ascena's sale of its Ann Taylor, Loft, Lane Bryant and Lou & Grey brands to the private-equity firm Sycamore Partners for $540 million. 

Sycamore has vowed to keep the majority of Ascena's remaining stores open for business. But, like Tailored Brands, it will need to work to win over a generation of younger consumers seeking comfortable and casual clothing.

GNC

Pedestrians walk by a GNC store in New York.
Scott Mlyn | CNBC

Assets: More than $1 billion
Liabilities:
More than $1 billion
Stores at time of filing:
2,633

Despite earlier attempts to cut its store count and shift investments to digital, GNC filed for Chapter 11 in June. GNC said the pandemic only exacerbated the financial pressure of recent years. While in bankruptcy, GNC said it hoped to speed up the closure of 800 to 1,200 stores, while it searched for a buyer.

In September, a bankruptcy court judge approved the sale of the Pittsburgh-based, vitamin and health supplements maker to China-based Harbin Pharmaceutical Group for $770 million.

"Through the restructuring and court-approved sale to Harbin, GNC has optimized its store footprint, improved its financial standing and is now better positioned to meet the strong consumer demand for health and wellness products under Harbin's leadership," the company said in a statement.

J.Crew Group

A women holding a bag poses for a photograph at J. Crew Group Inc.'s new women's store inside the International Finance Centre (IFC) mall in Hong Kong, China, on Thursday, May 22, 2014.
Brent Lewin | Bloomberg | Getty Images

Assets: More than $1 billion
Liabilities:
More than $1 billion
Stores at time of filing:
491

The preppy apparel company J.Crew filed for Chapter 11 in early May, marking the first major retail bankruptcy of the pandemic.

It had already been struggling under a heavy debt load and sales challenges, suffering from criticism that it fell out of touch with its once-loyal customers. J.Crew had also once hoped to spin off its Madewell brand in an IPO that could have helped pay down its debt load but faced pushback from creditors. 

In September, the company emerged from bankruptcy, with its portfolio of stores about unchanged. When it filed, it had 181 J.Crew stores, 140 Madewell shops and 170 locations at factory outlets.

The restructuring deal cut its debt and shifted ownership of the retailer to a group of lenders, led by New York hedge fund Anchorage Capital Group.

"Looking forward, our strategy is focused on three core pillars: delivering a focused selection of iconic, timeless products; elevating the brand experience to deepen our relationship with customers; and prioritizing frictionless shopping," Jan Singer, who was CEO of J.Crew Group at the time, said in a statement. Singer was replaced by Libby Wadle, a longtime J.Crew exec, in November.

Brooks Brothers

Brooks Brothers, one of the oldest apparel retailers in the United States, filed for bankruptcy protection on July 8, 2020 as the coronavirus pandemic continues to impact businesses.
Wang Ying | Xinhua News Agency | Getty Images

Assets: $500 million
Liabilities:
$500 million
Stores at time of filing:
244

Brooks Brothers, one of the oldest apparel chains in the nation, filed for Chapter 11in July. Leases from its real estate expansion over the years became too costly, and the pandemic forced it to rethink its retail strategy as many consumers shifted into sweat pants.

In bankruptcy, the company sought a new owner while it began shutting dozens of stores, attributing the decision to the health crisis.

In September, mall owner Simon and the apparel licensing firm Authentic Brands Group, which also owns Forever 21 and Aeropostale, completed their acquisition of Brooks Brothers. They paid $325 million for the retailer and promised to keep at least 125 locations open for business.

"We see a great opportunity to strategically expand this powerhouse brand across the globe," ABG CEO Jamie Salter said.

Stein Mart

A Stein Mart store in King of Prussia, PA.
Google Earth

Assets: $500 million to $1 billion
Liabilities:
$500 million to $1 billion
Stores at time of filing:
281

The discount apparel and accessories chain Stein Mart sought Chapter 11 protection in August, and went on to liquidate all 281 stores. Stein Mart was already struggling with an overhang of debt pre-Covid, but its sales dried up during temporary store closures in the spring.

Earlier this month, the Miami-based investment firm Retail Ecommerce Ventures acquired Stein Mart's intellectual property in a court auction for $6.02 million. SteinMart.com is expected to relaunch in early 2021.

"Any time you see the big, 800-pound gorilla competitor, like TJ Maxx, you know they're doing something right," REV co-founder Tai Lopez said in a recent interview. "We want to be kind of an online version."

Pier 1 Imports

A "Going Out of Business" sign hangs outside a Pier 1 Imports store on August 9, 2020 in Las Vegas, Nevada.
Ethan Miller | Getty Images

Assets: More than $400 million
Liabilities:
More than $250 million
Stores at time of filing:
991

The home-goods chain Pier 1 Imports filed for Chapter 11 in mid-February, after nearly 60 years in business. Its plans to find a buyer were unsuccessful, as the pandemic worsened in March, ultimately pushing Pier 1 into a total liquidation.

Going-out-of-business sales at its hundreds of stores were temporarily stalled until the spring and summer, when local lockdowns were lifted.

But some still saw value in the Pier 1 brand name. REV, Stein Mart's new owner, acquired the rights to Pier 1′s trademark, intellectual property and other assets for $31 million in July. It relaunched Pier1.com in the fall. REV's Lopez has told CNBC he has no plans to reopen stores at this time. REV also owns Modell's Sporting Goods, Dressbarn and Linens 'n Things.

"I've always been a big fan of Warren Buffett, and his strategy of just acquiring things that are already there versus building from scratch. And in 2019, we started seeing the writing on the wall with the so-called retail apocalypse," Lopez said.

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The 2020 holiday season could be a make or break it for many retailers