Since the start of 2020, 29 national retail chains have filed for bankruptcy, the latest being Guitar Center which opened as a singular storefront in 1959 before taking over the music retail market. Some companies’ luck was turning around at the start of the year, like Stein Mart, who had forged a deal with private equity firm Kingswood Capital Management. The firm was supposed to take over the company, but when Covid-19 spread throughout the United States, the deal was mutually interdicted. The Federal government provided companies with loans but for at least 30,000 companies whom have filed for bankruptcy this year, reported by the American Bankruptcy Institute, it was not enough. While the loans helped pay staff and fund logistical operations, the statewide lockdowns that began in March stopped potential customers from being able to shop in stores and travel causing a multitude of companies to file bankruptcy.
From retail to automotive, every type of company and corporation is struggling to keep their head above the water this year. The Hertz Corporation filed bankruptcy back in May and the 100-year-old franchise Ruby Tuesday filed for Chapter 11 back in October. The filings do not seem to stop but with the government loans and the Payment Protection Program (PPP) many large companies received, some have been able to stay afloat longer than anticipated. Small businesses have not been as lucky, however. The U.S. Small Business Association qualifies a small business as companies with less than 500 employees or self-employed people. There are around 58 million ‘small businesses’ within the U.S. and over 45 million applied to receive the PPP loan. Unfortunately, only 4%, or 1.8 million, received the loan according to the U.S. Chamber of Commerce’s report.
Other factors that greatly affected companies this year was the skyrocketing of the U.S.’s unemployment rate to 16% in May, rising greatly from 3.5% in February as reported by the U.S. Department of Labor. The rate is now inching back down to 6.7% this November. The customers that these now bankrupt companies needed to come in and spend money were filing for unemployment benefits and stuck inside. So even though these companies might have received federal loans, they were unable to bail themselves out.
Filing for bankruptcy does not necessarily mean that these companies will lock their doors for good and sell off their inventory, but it does mean that they are readjusting their financial plans. Some larger companies, like Ascena, the parent company for Ann Taylor, LOFT, and Justice, are looking to reopen some storefronts but not all, closing a majority of their locations in hopes to stay open.
The latest data from the American Bankruptcy Institute reports a total of 30,000 bankruptcy filings as of November 30th. Despite the slow reopening of the country, many companies nationwide will not recover from the economic downfall of this year. With rumors of another lock down on the horizon as cases of coronavirus rise, who will be next on the bankruptcy chopping block?