Seven Retailers Facing Fiscal Challenges

A shopper leaves a Party City store in Vernon Hills, Ill., on Oct. 15, 2020. (Nam Y. Huh/AP Photo)

In 2022, retail sales were hammered by persistent high inflation and weak consumer demand—and 2023 isn’t much better. Economists from S&P Global Market anticipate only 0.5 percent sales growth, but that equals a 0.1 percent decline when accounting for inflation.

Some retailers feel the pinch more than others and have begun closing stores. Even worse, some have filed for Chapter 11 bankruptcy protection. Here are seven retailers that are struggling and closing stores in 2023.

Party City Not Celebrating

Following its Chapter 11 bankruptcy filing in January 2023, Party City plans to close 30 stores. Before filing for Chapter 11, the retailer had closed 28 stores in 13 states. Previous to the closes, Party City had operated 823 retail locations. Of these locations, 770 were company-owned.

Party City is currently asking the court to release it from leases.

The chain’s sales have dwindled since COVID-19. There weren’t many parties thrown during the lockdown. Slower sales also were attributed to inventory shortages and tight helium supplies. This was due to global supply-chain interruptions.

But things may pick up for the party chain. It reached a pre-negotiated agreement with a bondholder group. The group would support an expedited restructuring that is expected to be completed this quarter.

Party City had reported $1–10 billion of estimated assets and liabilities, but had obtained $150 million in debtor-in-possession financing.

Discounter Big Lots Loses Vendor

Big Lots was hit by its furniture vendor going out of business. The Columbus, Ohio, discounter lost its furniture vendor when United Furniture Industries shut its doors in November 2022. United Furniture, which owned Lane Furniture, put 2,700 people out of work. There hasn’t been a clear explanation as to why United Furniture shut down.

The loss of its furniture supplier caused Big Lots comparable sales for the fourth quarter of 2022 to fall 13 percent. Products from United Furniture and Lane Furniture represented roughly 7 percent of the merchandise consumers purchased.

Rite Aid Struggling

In 2023, Rite Aid closed 145 unprofitable stores. Revenues have been on a downward path. For its fiscal year that ended on March 4, 2023, Rite Aid reported a loss of $749.9 million, or $13.71 per share. The previous year showed a loss of $538.5 million, or $9.96 per share.

There are several reasons why this is happening. First, Rite Aid lost COVID-19 vaccine and testing sales. It also lost members in its subsidiary Elixir, a pharmacy benefit management (PBM) service. Rite Aid had previously paid roughly $2 billion for the PBM in 2015 and had renamed it Elixir.

Competition from larger pharmacies like Walgreens, CVS Health, and Walmart are also a contributor to Rite Aid’s struggles.

Tuesday Morning Closing

After 49 years in business, Tuesday Morning announced on April 29 that it was closing its doors. It’s currently slashing prices for a closing sale. The chain filed for its second bankruptcy in three years this past February and had closed more than half of its locations. It had previously filed for bankruptcy during COVID.

The remaining 200 stores are having in-store sales of up to 30 percent off merchandise as they get ready to close. At its peak, Tuesday Morning had 700 stores.

Consumer spending had slowed. And with inflation, interest rates had become cost prohibited for borrowing.

Nordstrom Leaves Canada

The United States-based Nordstrom is shuttering all its Canadian stores. Less than a decade after entering Canada, it’s closing 13 stores. It plans to focus on domestic operations.

In 2022, Nordstrom’s Canadian division sold roughly C$515 million worth of goods. Unfortunately, it lost C$72 million the same year.

One reason for the poor sales was that Nordstroms had scaled too quickly. It also didn’t understand what customers wanted. For example, a Toronto customer is different than an Alberta customer.

Nordstrom will also close its Nordstrom Rack and Nordstrom department store in San Francisco. The company cited that the dynamics of San Francisco’s downtown has affected customer foot traffic.

The Children’s Place Faces Challenges

As part of its fleet optimization strategy, the largest children’s specialty apparel retailer will close 100 stores by the end of 2023. The Children’s Place has been reducing its brick-and-mortar footprint since 2013. Instead, it’s been focusing on e-commerce, intending to improve its profitability.

COVID-19 accelerated the closures. When the retailer was closed during COVID and later had to take social-distancing measures, its online demand grew.

By the fourth quarter of 2022, The Children’s Place was down roughly $53 million, or 10 percent from the previous fourth quarter.

The Children’s Place cited that economic strains on its core customers were higher than expected, which resulted in an increase in promotions to drive sales.

Bed Bath & Beyond Shutters Stores

Bed Bath & Beyond filed for Chapter 11 bankruptcy in April, and plans to wind down its business. However, the beleaguered retailer will keep 360 Bed Bath & Beyond and 120 buybuy Baby stores as it seeks a buyer. The company will also keep its e-commerce website.

Chains like TJ Maxx, Ross, and HomeGoods have taken over some of the Bed Bath & Beyond leases. Gyms and other retailers will also be grabbing the premium locations.

There were several proposed reasons for the demise. A private label that Bed Bay & Beyond tried ended up failing. A redesign of the stores’ looks shrank the amount of merchandise on the shelves. It also spent $625 million buying back shares, which proved costly.

Vendors were nervous about the buyback because they didn’t think Bed Bath & Beyond had enough cash to pay them. This led to empty shelves.

COVID and the Economy

COVID built the coffin for many retailers. But the economy certainly put the nails in it. With inflation growing and consumers pulling back on spending, other companies may also have fiscal challenges.

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