America's 'Retail Apocalypse' Comes From Bigger Problems Than Amazon

In the first three quarters of this year, retailers announced that 6,752 stores would close, as they struggle under crushing debt that even a growing economy and low unemployment can’t overcome.

Chains are filing for bankruptcy at an unprecedented rate, but it’s not just because shoppers are turning to Amazon and other online stores. Billions of dollars in outstanding loans are finally starting to come due, and retailers just aren’t equipped to handle it, according to a Bloomberg report analyzing the “retail apocalypse.”

Retailers like JCPenney continued to refinance their loans in order to buy themselves more time. This meant that they were struggling, but at least they weren’t bankrupt. Now, it looks like the tides might be about to turn.

Shoppers Pedestrians crowd Oxford Street, London, in December 2015. A special edition survey has recorded one of the biggest falls in consumer confidence in its history. Justin Tallis/Getty

More debt that stores have racked up will be due over the next eight years. About $100 million of high-yield borrowings are maturing this year, but that amount will turn into $5 billion between 2019 and 2025, according to Bloomberg.  

U.S. retailers also announced more than 3,000 store openings this year, but the rate of closures surpasses this rate. Commercial real estate expenses are starting to catch up to retailers decades after the suburbs filled with big-box stores like Target and Staples. Now that the cost of operating so many stores is too high in comparison to profit margins, the retail bubble is about to burst. The number of stores closing this year has already more than doubled the number that shuttered in 2016—and it's almost worse than the 6,900 that went out of business in 2008.

Some of the brands that have declared bankruptcy in 2017 include American Apparel, BCBG Max Azria, Payless ShoeSource and Radioshack. Other companies like GameStop, Kmart and Michael Kors are set to close dozens of locations to try and make up for recent losses.

Besides individual brands, shopping malls have been struggling in recent years. Half of all malls across the U.S. are expected to close by 2023, which will be an even further blow to department stores like Sears and Nordstrom that anchor many shopping centers.

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