2021 has been largely quiet so far on the bankruptcy front but one retail restructuring expert believes it won’t stay that way for very long.
David Berliner, restructuring and turnaround services partner at BDO, thinks the tipping point could come around July or August.
“A part of it is going to be driven by seasonality,” he said, noting the “pressure points” retailers will face when scrambling to get rid of seasonal product that failed to sell while preparing for the critical back-to-school season.
Berliner suspects many merchants will face a cash-flow crunch when they’re supposed to be purchasing August and September merchandise in May and June.
“If they’re in distress, vendors could be putting them on cash on delivery or reducing their terms,” Berliner said, and with their liquid assets drying up, retailers will have even fewer options when preparing for the holiday season.
Many believe a rebound is coming in earnest in the second half of the year, in what would be a positive development for fashion and retail. However, there’s little clarity around what to expect with tourism. Domestic travel might return as vaccinated Americans resume taking intracontinental trips, potentially lifting business in popular and well-trafficked big cities.
However, Berliner isn’t banking on international tourism just yet. If students return to classroom learning in the fall, back-to-school sales across age groups, including college-bound Gen Zers, are poised to benefit. But Berliner cautioned that any unexpected developments on the coronavirus front, especially from the newer variants, could put a damper on expectations. “We’ll have to see what happens over the next few months,” he said.
At least 48 retail and fashion companies filed for bankruptcy last year, including three mall owners, in the U.S. and overseas.
Berliner doesn’t expect the number of bankruptcies this year to reach last year’s levels, mostly because firms that truly needed to file have already done so.