TSL Express Daily News

B. Riley today released its Retail Industry Monitor entitled “The Ripple Effect.” Among key findings:

With the acceleration of retail bankruptcy filings into 2020, many retail store closings projected for 2021 were pulled forward during 2020. This dynamic, coupled with stronger than anticipated retail sales fundamentals in late 2020/early 2021, have reduced retail store closure announcements to their lowest level since 2016.

• Several retail categories have thrived in the pandemic environment including grocery, discount stores, and home/building supplies. Overall, these categories have sustained relatively consistent brick-and-mortar retail network growth throughout the economic downturn with strong increases observed in the faster growing metros of the Southern and Western United States.
• Other retail categories have been severely challenged during the pandemic as changes in consumer behaviors and broader economic impacts driven by the pandemic have impacted retail sales performance. These retail categories include apparel, fitness clubs, and department stores, among others.
• Across the hardest hit retail categories, large store count reductions were driven predominantly by distressed retailers forced to accelerate filing activities into 2020, restructuring their real estate portfolios and closing brick-and-mortar units prior to capitalizing on the benefits provided by the stronger than anticipated recovery in the latter stages of the pandemic.

With limited retail bankruptcy filings year-to-date, and the holiday shopping season on the horizon, retail bankruptcy activity should remain low through the balance of 2021, resulting in a bankruptcy filing volume roughly half that of the lowest level experienced over the past five years.

• While activity is historically low in 2021, distressed retailers that have benefitted from short-term financial assistance from their lenders and/or occupancy cost reductions from their landlords, will likely find themselves back in distressed situations as these short-term solutions burn off. This dynamic should see retail filing activity return to typical levels in 2022 and beyond.
• Given the supply chain challenges ramping up throughout the retail sector as well as other external factors, pressure on margins and retail lending facilities, alongside broader inflationary trends, will certainly threaten to disrupt the retail market, potentially causing a dramatic increase in retail filings should these issues remain unresolved.

For a comprehensive review of the industry and key activities in retail sub-sectors, such as real estate, e-commerce, department stores, off-price/dollar stores, sporting goods, footwear, pharmacies, furniture and home furnishings and more, see the full Industry Monitor here.