Consumer confidence in the U.S. is sky-high, unemployment is low and the economy is growing—normally a recipe for a retail boom. But more chains are filing for bankruptcy or are rated “distressed” than during the financial crisis.
As Bloomberg reports, if the so-called retail apocalypse is underway, then what’s coming in the coming years could spell disaster, and not only for retailers.
But it’s not just the Amazon effect, nor is it merely millennials changing their spending habits, driving the downturn. Much of retailers’ woes stem from being overloaded with debt. Private equity firms, especially after the financial crisis, made leveraged buyouts, which thrust billions in debt onto these chains’ balance sheets.
Sustaining that load will only become more difficult, even for the healthy chains.
That debt coming due, coupled with the proliferation of online shopping and America’s over-stored suburbs, has all the makings of a disaster.
The ramifications could be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate.
“The spillover will likely flow far and wide across the U.S. economy,” Bloomberg writes.
