To appreciate the turnaround the entire retail industry has made over the past year, consider the months of July and August 2021 compared to July and August 2020.

In 2020, over those two months, 11 major retailers filed for bankruptcy. Over the course of just seven days last July, five retailers went bankrupt (The Paper Store, RTW Retailwinds, Muji USA, Sur La Table and Brooks Brothers).

During those same months this year, Retail Dive didn’t track a single major bankruptcy in the industry. At the same time, we counted more than 15 deals in retail during July and August — including initial public offerings, company sales and other transactions. Even Guitar Center, which exited bankruptcy just last year, was reported by Debtwire to have filed confidentially for an IPO. Mattress Firm and Claire’s, two other Chapter 11 alumni, have also filed for IPOs.

When the year began, few could have predicted some of these outcomes. “If somebody would have told me Guitar Center would be filing a confidential S-1 this year, I would have told them, ‘You’re crazy,'” Reshmi Basu, restructuring editor with Debtwire, said in an interview.

The deals are a sign that investors have confidence in the retail industry, that things are looking up after years of elevated bankruptcies going back to 2016. Across industries, U.S. corporate bankruptcies to date this year are at their lowest levels since 2014, while the consumer discretionary category still leads other industries with 48 total bankruptcies, according to S&P Global Market Intelligence.

Companies with a CCC-level credit rating make up less than 10% of the retail and restaurant category today, according to Sarah Wyeth, senior director and sector lead at S&P Global Ratings. Compare that number to last year, when the number of CCC issuers was nearly 30% of the sector as covered by S&P — meaning nearly a third of companies in the retail and restaurant industries were deemed at serious risk of defaulting on their debt.

According to Moody’s data, there were just two defaults in the retail and apparel sectors as of Aug. 31 this year, compared to 16 defaults in 2020 and 10 in 2019.

So far this year, the number of major retail bankruptcies tracked by Retail Dive is well below those during the same periods in 2019 and 2017, and slightly below 2018 as well.

RetailDive.com, Ben Unglesbee

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