Retail Bankruptcies in Kentucky Hurt More than the Store
July 13th, 2017 by Bunch & Brock
Retail Bankruptcies Spike in 2017
Retail bankruptcies in the first three months of 2017 have already surpassed the number reached last year, according to magazine The Consumerist. The magazine offers a few possible explanations for the issue. One of the biggest issues is online shopping. According to Fortune Magazine, a recent poll showed that in 2016, for the first time, more people purchased retail goods online (51 percent) than in stores. This year, it’s estimated that more than 190 million people will shop online in the United States in 2017 – more than half the population. And online retail has accounted for big sales – Amazon alone posted $82.7 billion in sales last year. As a result, Bloomberg reports, as of April 24, 14 major retail chains have filed so far this year.
Another major consideration is ownership. Many of the stores were purchased in the past by private equity firms using equity and debt, meaning that the businesses were already in debt when they were purchased.
Liquidating and Restructuring
This combination is toxic for traditional retail stores, and for its employees. There are two ways businesses traditionally file for bankruptcy – through Chapter 7 and Chapter 11 bankruptcy. Chapter 7 occurs when the store closes and liquidates its assets, leaving employees out in the cold. Chapter 11 is a bit more hopeful, allowing stores to negotiate payments with creditors and giving them a specific amount of time to restructure. However, a major part of coming out of the bankruptcy is an analysis and reorganization, which often means extreme downsizing.
Bankrupt Stores In Kentucky
Kentucky has not been immune. Clark.com reports that a huge majority of retailers filing for bankruptcy with hundreds of stores nationwide have stores in Kentucky, including:
- Sears and Kmart – 265 stores nationally
- Ascena Retail Group (Ann Taylor, Lane Bryant) – 268 stores nationally
- JC Penney – 138 stores nationally
- Macy’s – 68 stores nationally
- Gymboree – 450 stores nationally
- Michael Kors – 100-125 stores nationally
- Payless ShoeSource – 512 stores nationally
- Bebe Stores – 180 stores nationally
- Rue21 – 400 stores nationally
- RadioShack – 1,000 stores nationally
- Abercrombie & Fitch – 60 stores nationally
- Guess – 60 stores nationally
- Crocs – 160 stores
- The Limited – 250 stores
- Wet Seal – 171 stores
- American Apparel – 110 stores
- BCBG – 120 stores
- Gander Mountain – Undetermined
- hhgregg – 220 stores
- GameStop – 150+ stores
- Staples – 70 stores
- CVS – 70 stores
- Family Christian – 240 stores
Retail’s Impact on Kentucky and its Workers
These closings or reorganizations will have massive repercussions not only elsewhere in the United States, but in Kentucky as well. The National Retail Federation reports there are 3,793,621 retail establishments nationwide that support 42 million jobs and contribute $2.6 trillion to the national GDP. In Kentucky alone, there are 52,746 retail establishments which employ 399,829 workers in Kentucky and gross $28.4 billion in total GDP impact for the state.
Retail Bankruptcy to Personal Bankruptcy?
For those employed by the stores that have applied for bankruptcy, the future is uncertain. Not all will be fired, transferred or laid off, but for those that are, finding a competitive job in a market still recovering from a deep recession beginning in 2008 may be a difficult task. The fear is that retail bankruptcies may trickle down in the worst way possible: that the loss of employment for workers with bills to pay may in turn lead to a spike in personal bankruptcies.
For more than 35 years, the attorneys at Bunch and Brock have been serving our community and the entire state of Kentucky with their legal needs, including retail bankruptcies. We have acted as lead counsel for many such firms, including Samaritan Hospital, Black Diamond Coal and Appalachian Fuels. We don’t just serve the community – we are members of it, and we look forward to helping our neighbors when they need us. If you have legal questions or would like to set up an appointment, contact us online or call us at 859.254.5522.