Retail Defaults In 2018 Could Outpace Last Year

Despite strong holiday sales across much of the industry, analysts with ratings agency S&P Global still have a negative view of the retail sector and cautioned that defaults could “could match or exceed” those in 2017, when retail bankruptcies surpassed the recession period. To date, S&P has issued 11 credit downgrades for retailers, with three defaults, and has negative outlooks for 34% of the sector it covers, according to a report emailed to Retail Dive. In all for 2017, S&P counted 75 downgrades and 11 defaults. Analysts led by Robert Schulz pointed to several danger points, including approaching debt maturities ($5.6 billion in 2018 and then $13 billion in 2019), shifting consumer spending, the “dangerous lag” of some retailers behind their competitors, a surplus of stores and highly leveraged balance sheets — dating back to “dozens of private equity buyouts over the past decade.” S&P also said that business liquidations in retail could pick up this year, with Bon-Ton (which filed for bankruptcy in February) being potentially “the first department store to liquidate in a number of years.” Read more at Retail Dive.