Jun 13, 2017 11:04 AM EDT
This week experiences a rather rough start with the news of another retailer closing its doors for good. Retail clothing giant Gymboree has filed for Chapter 11 bankruptcy this Monday, June 12. And there are more retailers that will most probably follow Gymboree's move.
According to Moody, the number of retail companies that received a "Caa" or lower rating increased to 22 from the original 19. A company with such rating means that it is heavily distressed because of weak operating trends and high debt leverage.
Some of the companies included in the list are Nine West, Sears, David's Bridal, Charming Charlie, Claire's Store, 99 Cents Stores, True Religion Apparel, J. Crew, Charlotte Russ, Vince, and NYDJ Apparel.
Prior to Gymboree's bankruptcy filing, Payless Shoesource and Rue21 had already filed first. With these becoming almost a trend in the retail industry, the question is not which brand is next but rather, when.
Charlie O'Shea, Moody's lead retail analyst, said that the retail industry os over-stored already and that many of them don't have the flexibility to "do what they need to do." He also suggested keeping an eye to the stores included in the list.
Joshua Friedman, a legal analyst for Debtwire, warned that if retailers will not be mindful of their interest expense, interest payments, maturing debts, and other near-term triggers, they might find themselves in the same place with Gymboree.
Meanwhile, Gymboree should be able to reduce their debts by $900 million after they filed for Chapter 11 bankruptcy. The company also announced that it has secured commitments for around $308.5 million for additional financing. It also plans to close 375 stores.
Despite the bad news, there are still retailers who are trying to counter the negative trend happening in the retail industry. Three of these include Nordstrom, Wal-Mart, and Best Buy.
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