Even when the great recession dampened consumer confidence and pushed unemployment higher, retail retailers said things weren't as bad as they were during the current Covid 19 crisis, according to a new analysis by Retail Metrics.
Days after the World Health Organization launched a pandemic in March, US retailers had to shut their doors for many weeks to curb the spread of the virus. The result: Retail sector operating income decreased 57.7% year over year in the first quarter – and 71.1% if Walmart was not included, who was allowed to continue operating to sell important items like groceries, says a new report on Friday.
This is the worst retail profit development since retail profit tracking began in the late 1990s.
According to Retail Metrics, the previous low in retail profits was during the Great Recession, when profits in the fourth quarter of 2008 declined 26.6% year over year. The biggest quarterly decline after the Dot.com bubble was an 11.7% decrease in the fourth quarter of 2000, Retail Metrics said.
While the profit differentials between retail and non-mall retail profits have increased in recent years, the difference has widened significantly this quarter as retailers in shopping centers have had to close in many places due to the pandemic. Mall chain earnings fell 626% in the first quarter, while off-mall companies saw only a 26% drop in income.
In view of the mandatory closings and declining sales, many companies have taken cost-saving measures, including vacation days, permanent closings and extended roadside pickup. However, for some retailers, these cost-cutting measures won't be enough.
Before the pandemic, many companies struggled to stay afloat and adapt to new consumer habits. However, the current crisis has accelerated pressure on the industry.
Retail Metrics listed all companies that have filed for bankruptcy or warned of the possibility since the pandemic started.
Companies that have completed bankruptcy fillings, liquidations or company progress:
Modells Sporting GoodsTrue ReligionRoots USAJ. CrewGolds GymNeiman-MarcusLord & TaylorStage StoresJC PenneyTuesday MorningRTW RetailwindsGNC Inc.Chuck E. CheeseLucky BrandsBrooks BrothersSur La Table
Reported as likely to file for bankruptcy:
Retailers who issue going concern notices: