The true cause of the demise of big-box retail (and it’s not Amazon)

It's debt, billions of dollars of it

New York Weekend Edition /
Nov.November 12, 2017 11:08 AM

(Pixabay)

Though all the trappings that historically indicate a boom in retail are accounted for — consumer confidence, low unemployment and a growing economy — stores continue to shutter.

Explanations of behavioral economics dominate the discussion, however a Bloomberg investigation found a common cause underlying most of the relentlessly hemorrhaging sector (almost 7,000 stores closed so far this year): delinquent loan payments.

In Pittsburgh alone, for example, almost 27 percent of retailers have delinquent loans.

Most retail chains have major debt, typically from private equity firm’s leveraged buyouts, which, in combination with market conditions and negative sentiment, are causing the sector to continue close stores — and Bloomberg’s findings indicate its only likely to get worse.

By next year, $1.9 billion high-yield retail borrowings will mature, with an average of $5 billion borrowings subsequently maturing annually until 2025 and the prospect for refinancing looks precarious as $1 trillion worth of high-yield debt across industries matures simultaneously.

With the Federal Reserve’s increasing of interest rates, investors who were previously willing to take on retailers’ debt are now backing away and so, in combination with negative sentiment toward retail, companies’ efforts to buy additional time seems even more unlikely.

[Bloomberg] — E.K. Hudson


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)
Real estate stocks push up this week as U.S.-China trade tensions ease
Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Macerich president Edward Coppola and a rendering of the redevelopment in Pheonix (Macerich/City of Pheonix)
Macerich unloads Phoenix mall for $100M; redevelopment awaits
Macerich unloads Phoenix mall for $100M; redevelopment awaits
Hammerson CEO Rita-Rose Gagne and Brookfield's Bruce Flatt. (Hammerson, Brookfield, Getty)
Brookfield’s US malls are struggling. Now it’s buying some in Europe
Brookfield’s US malls are struggling. Now it’s buying some in Europe
604 Fifth Avenue and Minamoto Kitchoan president Kemmei Okada (Photos via Google Maps, Minamoto Kitchoan)
Fifth Avenue’s Childs Building sells for $45M
Fifth Avenue’s Childs Building sells for $45M
The 300 West 125th Street location of Buffalo Wild Wings is closing for good. (Google Maps, Getty)
Buffalo Wild Wings chickens out on Harlem lease
Buffalo Wild Wings chickens out on Harlem lease
Gaia's Daniel Fishman and 416 West 52nd Street (Linkedin, Google Maps)
Bulk condo deal leads Manhattan’s mid-market i-sales
Bulk condo deal leads Manhattan’s mid-market i-sales
Dollar General CEO Todd Vasos (Retail Industry Leaders Association, iStock)
Dollar General thrives amid retail apocalypse
Dollar General thrives amid retail apocalypse
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...