Retail Defaults To Ease, But Hurdles Ahead For Weaker Players

by MR Magazine Staff Feb 22, 2019

Over the last three years, retail has commanded one of the highest default rates among U.S. industries. While big names like Sears and Bon-Ton filed for bankruptcy last year, the spec-grade retail default forecast has fallen sharply from its peak of 19% in 2017 to 4.3% for a year from now, according to a new report published Thursday by Moody’s Investors Service and emailed to Retail Dive. Moody’s highlighted that four companies make up 71% of the $22.8 billion in outstanding distressed (Caa1 and lower) retail debt: Academy, Neiman Marcus, J. Crew and Petsmart. Three companies represent 59% of rated debt for B3 retail and apparel issuers: J.C. Penney, Rite Aid and Petco Animal Supplies. Looking ahead, the bifurcation between strong and weak retailers will continue to grow, Moody’s said, adding that it expects smaller, more leveraged companies to feed defaults. Immediate debt maturities have become more manageable ($5 billion versus more than $15 billion a year ago), but they will increase to a cumulative $12 billion through 2021. Read more at Retail Dive.