The retail market is healthier than you think


Thanks to the COVID-19 pandemic, the retail market set records last year for retail and restaurant bankruptcies, as well as store closures. Apart from a few booming retail sectors, most tenants, landlords and lenders faced unprecedented challenges. Still, retail trade proved more resilient than expected. The damage, although considerable, is far from what most analysts had expected.

The silver lining in the dark cloud of the pandemic is that after great – and accelerated – pain, much of the retail sector is moving into a healthier place than it was before the pandemic.

In this short video, Retail Economist and COO of Lockehouse Retail Group, Garrick Brown, provides an update on the current state of the retail market.

Here is an overview:

Right now we have the lowest level of retail bankruptcies since around 2012. But we set records last year. If you add up all the big chains – retail and restaurants, and it’s basically 100 or more units of chainsaws – we were moving over 75. More than double what we lost in a great recession. It was a brutally painful year, and of course the closures we had weren’t just for bespoke brands, which closed about a third of their stores in bankruptcy. They reappeared.

Here’s the thing: in the past few years, about 25 of those bankruptcies have ended in liquidation. Last year it was about 10 hours. I want you to think about it. Why, when there are so many bankruptcies and everyone is saying it’s the retail apocalypse, why would lenders be more willing to fix things?

Simple. Because the number of bankruptcies they couldn’t absorb. All of these blows so suddenly collectively as an entire industry, we’ve had nearly three-quarters of a trillion in debt wiped off the balance sheets of American retail and restaurant companies. Now, have we closed a ton of stores? Yeah, and it wasn’t just bankruptcy related. Because you know, for example, Microsoft said, “Hey, we’re done with the retail space. Our credit is great. We’ll just do everything online. They’re closing 130 stores so we’re setting records.

But what is the state of retail today is the real question. What I’m suggesting to you is that the ugly band-aid of retail has been ripped off all of a sudden and the silver lining of the very dark cloud of COVID is that we’re actually in better shape for the most part, just a few exceptions today, that we weren’t just pre-pandemic, but going back to 2019. That was the bankruptcy watchlist I had that was tracking the pandemic. It’s from Moody’s Fitch Credit Intel. Basically anyone who had a flag. It’s the first page of the bankruptcy watch list we had last summer and the rest of the second page. This is the list today. That’s the fewest retailers I’ve had on a bankruptcy watch list.


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