The previous 24 months has been a tough one for retailers with a high brick-and-mortar footprint. No less than 21 major brand name companies with traditional retail models filed voluntary petitions for Chapter 11 bankruptcy protection under the US Bankruptcy Code breaking a record previously set in 2008 during the housing crisis. Additionally, 6,700 stores where closed which also beats the previous all-time high. The "retail apocalypse" doesn't show signs of waning, as the business or retail continues to transform in America, with over 20 additional companies in danger of defaulting on debt obligations and being forced to declare bankruptcy. Among these retailers is the department store chain Bon-Ton.
Bon-Ton Debt Obligations
Bon-Ton had a deadline this week to pay a $14 million loan interest payment, which it has already delayed using a 30-day grace period. It's only saving grace was a forbearance agreement it struck with lenders and debt holders which gives the company until January 26th to make the payment but could possibly be extended. The company also stated that it is currently working with debt holders to strengthen the embattled retailer's capital structure to support ongoing operations. As a result of the missed payment, S&P Global lowered Bon-Ton's credit rating, stating that postponing loan payments could be an indication that debt restructuring would follow, possible in bankruptcy court.
Bon-Ton's Stock Hits Historic Lows
Because of the speculation that Bon-Ton is headed for bankruptcy, it's stock prices fell to as low as 17 cents per share this week, which is down from $1.30 per share last year. The company holds around $1 billion in total debt and has been unprofitable for the previous six years.
Store Closing Eminent
Bon-Ton, which has 261 stores, including nine furniture galleries and five clearance centers in 25 states operates under a few different brand names including Boston Store, Bergner's, Carson's, Younkers, and Herberger's. The company has already announced the closure of 60 stores as of November 2017, and if it is unable to meet the debt payment or establish debt restructuring with creditors, more store closures may be coming.
E-commerce giants and discount outlets continue to take a big chunk of retail revenues and the gap is growing larger. As these trends continue, there's a high likelihood of continuing Chapter 11 bankruptcies in the retail sector in 2018.