Retailers on life support may go the way of the dinosaur in early 2023 should the economic slowdown cause a lackluster holiday shopping season.
"I think we will see a flurry of bankruptcies likely in the first quarter of 2023 if this holiday season is anything less than completely robust," Mark Cohen, former longtime CEO of Sear Canada and current Columbia University professor of retail studies, warned on Yahoo Finance Live (video above). "I don't think it will be, by the way."
Retail bankruptcies — which picked up in droves at the start of the COVID-19 pandemic — have fallen by the wayside as consumers returned to stores to stock up on apparel and other items coming out of the pandemic.
Only three retailers filed for bankruptcy in the second half of 2021 versus 20 in the same period in 2020, according to a report from BDO. There were no new retail bankruptcies filed from mid-September 2021 through mid-February 2022, the report found.
"There is no question as business becomes tougher to manage, weak players fall by the wayside," Cohen said. "They are particularly vulnerable to inflationary pricing and inflationary costs."
The bad news in retail continues to mount as the economy slows, calling into question how even the strongest in the sector would navigate a potential recession in 2023.
In early June, Target kicked off concerns about the retail sector's health with a shocking decision to liquidate massive amounts of slow-moving inventory and take a more cautious view on near-term profits.
Since then, discretionary retailers such as RH, Bed Bath & Beyond, and Kohl's have issued financial warnings for their second-quarter results.
Hal Turner Editorial Opinion
We are at risk of an accelerating hyper-collapse as people massively cut back spending due to things like inflation and fear. Most of our economy is based on optional purchases that can be put off or not made at all. Once people get into survival mode, the accelerating hyper-collapse will kick in, with spending dropping significantly, unemployment skyrocketing and bankruptcies happening on a regular basis.
I saw a forum where people in my NJ home town were talking about rent increases of $200, $300, even $500
Good luck having any money left to spend at retail with rent increases like that.
I mean seriously if your rent went up 300 dollars would you be out shopping, going to shows, eating in restaurants, taking a weekend road trip?
The worst part of all this is that NONE of it had to be. This is all taking place because of Russia economic sanctions that should not have been imposed if our government would have minded its own business.
