AÉROPOSTALE, PACSUN, SEARS AND K-MART ALL ON THE VERGE OF COLLAPSE…

[2/24/17]  There was a time not long ago when the idea that malls had killed Main Street was an important business narrative. Now it’s malls that are withering under the pressure of having to face off with online competition. Not every chain has suffered, but a trip to the mall in 2018 might look very different than one right now.

And while we’re not yet to the point where we have to wonder if the concept of the mall still makes sense, in some markets, giant shopping centers will close due to lack of tenants. Even those malls that pull through will have a lot of space to fill.

It’s a difficult transition made even harder by the fact nobody knows where bottom is for physical retailers. Some chains such as The Limited and Sports Authority have already gone to the big mall in the sky, while major anchor chains Sears and Macy’s have laid out plans to close significant numbers of stores.

Expect a number of further complete closures in 2017 and even more chains to close underperforming locations. It’s going to get worse before it gets better. Here’s what we know so far.

Aéropostale clings to life

After filing for Chapter 11 bankruptcy protection in May, Aéropostale received $160 million in debtor-in-possession financing provided by Crystal Financial, which, “combined with operating cash flow, will allow Aéropostale to meet its go-forward financial commitments,” according to a press release.

The company has already closed 113 locations in the United States, as well as all 41 stores in Canada. That is likely only the tip of the iceberg for the chain, whose survival is very much in doubt.

PacSun emerges from bankruptcy protection

Another clothing retailer, PacSun, came out of bankruptcy protection in September. The chain closed 10 to 20 stores this go-round (after previously shuttering more than 100), but it may be in a decent position going forward.

The company was able to cut its debt, close its weakest stores and force its beleaguered landlords to lower its rent in many cases. “That’s every distressed retailer’s dream,” Poonam Goyal, a retail analyst with Bloomberg Intelligence, said in a published report.

Sears and K-mart struggle

Sears and K-mart, both owned by Sears Holdings, have been on a slow, sad death march, closing stores steadily in the hopes that somehow less will eventually equal more. In January, plans were made public to close another 150 stores — 108 K-mart locations and 42 Sears stores.


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