The chapter of the Guitar Middle will increase the toll in retail
Musical instrument chain Guitar Center filed for Chapter 11 bankruptcy protection in Virginia over the weekend as the pandemic continues to affect the beleaguered retail sector.
However, there is room for hope: the number of retailers at risk of judicial or extrajudicial failure and reorganization is decreasing.
Granted, part of the reason so many names have been removed from the list is that they have already been submitted. However, some retailers have figured out how to avoid a trip to court. For example, clothing retailer Land & # 39; s End and warehouse products retailer The Container Store have managed to refinance their debts and move them out of harm's way over the past few months, said David Silverman, a retail analyst with Fitch ratings agency.
Some of the usual suspects remain at risk: Belk department store chain; Clothing retailer JoAnn Stores, Boardriders, Iconix, and J. Jill; and specialty retailers like Party City, the multi-tier nutritional supplement marketer Isagenix, the mattress supplier Serta Simmons Bedding, the sock maker Renfro Brands and the online jewelry retailer Blue Nile.
Apparel, jewelry, and accessories continue to be slumped as well, in part because shoppers continue to seek shelter, which means fewer replacements are needed in these categories, Silverman said. The most polluted retailers tend to fall into the apparel category, but some beauty brands are also on the standard watchlist, including Revlon, Anastasia Beverly Hills and Rodan & Fields.
Aside from clothing, consumer goods purchases are generally expected to improve at the expense of leisurely activities such as travel and dining, Silverman said.
In fact, the category has surpassed retail as the most worrying as consumers turn their dollars away from leisure and entertainment, including travel. Fitch's top loans include tourism-dependent ferry operator Hornblower, theater chains Cineworld Cinemas and AMC Entertainment, and fitness chains Equinox and L.A. Fitness International. Theaters have received some good news, however, as Warner Media plans to release the action film Wonder Woman in December 1984.
According to rating agencies, the restaurant chains observed include Red Lobster, Millers Alehouse, Burger Boss, Checkers Drive-In and Steak & # 39; n Shake.
The retail leveraged loan default rate remains at a record 19.6%, which means that almost a fifth of all retailer-held loans have defaulted in the past 12 months, according to Fitch.
"The holiday season is going to be very difficult to analyze this year as it essentially started a few weeks ago when retailers were handing out discounts over an extended period of time to encourage social distancing in-store," Silverman said.
Fitch is researching a number of factors that could influence consumer sentiment and purchase decisions, including political news, impact on a future incentive in 2021, recommended or enforced protective measures, and vaccine adoption, he said.
“We believe the vacation will incorporate many of the same trends that we saw this year. A number of retail categories continue to benefit from wallet shifts away from services such as travel, entertainment, sporting events, dining, etc., ”said Silverman. “The consumer also benefits from the strength of asset prices such as real estate and stocks. While trends in these categories are expected to improve sequentially over the holiday season, most representative businesses are expected to see their earnings decline significantly compared to 2019. "
The rating agency S & P assumes that consumer spending will only increase by 0.3% in November and December, excluding the purchase of food and drinks, which is well below the average increase of 4.6% over the last 20 years .