It is no secret that before the pandemic began, Department Stores were already struggling and facing a decline. This was highlighted when major names, such as Sears, filed for bankruptcy. Experts are now predicting that when the pandemic ends, department stores will be in an even worse position than they were before it began.

Examples of the Current Struggles for Department Stores

J.C. Penney is one of several perfect examples of the current struggles facing department stores. The retailer skipped an interest payment due in mid-April, and experts believe it is on the path to bankruptcy. The store did have plans to overcome its challenges, but with the pandemic forcing it to close all of its locations, it has been impossible to follow.

Macy’s has been looking for new financing and working with advisors at a law firm and an investment bank. Neiman Marcus also missed a bond payment on April 15. If the upscale department store does not make a payment on interest before mid-May, the bondholders could force it into bankruptcy court. There are reports that Neiman Marcus is looking into bankruptcy protection. In early April, Nordstrom turned to moving some real estate assets to a separate company, then issuing bonds to borrow against the entity to raise $600 million.

The Plans to Bounce Back Are Now Impossible

As mentioned, most of the department stores were well aware of their struggles and working on plans to bounce back and overcome the challenges of declining interest in in-store shopping. Some were focusing on opening smaller locations while others were offering more pick-up options, improving merchandising, or launching new in-house brands. Most of those plans were not able to accommodate the pandemic.

There Will Be Competition for Funding

The department stores are all currently closed due to the pandemic, relying either only on online shopping or their savings and other assets. Unfortunately for them, with all department stores and smaller retailers all in the same position, there will be stiff competition for bank loans and investments. This means that only those that are seen as worth saving will get money.

Expert Predictions

Mark Cohen, the Columbia University director of retail studies and former Sears Canada CEO, told CNBC that various department stores are in different stages of decline. According to estimates from Cowen & Co., most of the retailers in question should be able to last 4-7 months with $0 in sales in brick and mortar stores. It will, however, seriously push the limits of the stores.

Sources:

https://www.cnbc.com/2020/04/19/a-lasting-legacy-of-the-coronavirus-pandemic-fewer-department-stores.html

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