Moody's names retailers on the brink this holiday season

By

Cassidy Mantor

Published
Nov 24, 2017

Moody's Investors Service has named a list of retailers who have to post good holiday sales to be able to pay off large loans that are about to come to maturity. Included are Sears, J.Crew and Nine West.

Moody's reports over $3 billion dollars of bonds that will come due in 2019. As more consumers turn to online platforms, traditional retailers are faced with a potentially bleak future, with salvation, in many cases, depending on this year's holiday shopping results.

Sears tops the list of retailers in trouble, with Bloomberg reporting that the company has lost over $10 billion in recent years. In March, during the early days of the retail apocalypse, Sears announced thousands of store closings, but has been unable to dig out. It is currently being held to tighter payment terms by suppliers and some deliveries are even being withheld until payment is made.

J.Crew's total debt was $1.7 billion last month, up from $1.5 billion last year, and S&P Global Ratings has reported that the company's capital structure is "unsustainable in the long run." As it currently operates, lenders will be able to recover only 15% of their investment should the company go into bankruptcy.

J.Crew's turmoil is hitting all areas of operations. On the creative front, the company has lost two creative directors in a row and skipped its first New York Fashion Week runway show in six years. The company recently announced it would be closing 50 stores this year.

Nine West is operating with an 18 percent debt to earnings ratio and continues to lose money through poor product decisions, which are driving consumers away. According to a report issued in August by Suyun Qu, an analyst at S&P Global Ratings, the company is likely heading for a debt restructure or exchange this year.

Accessories mall chains Claire's Stores and Charming Charlie are also in trouble. Claire's owes $1.3 billion due in 2019 and currently has an 11 percent debt to earnings ratio. Charming Charlie is expected to report negative cash flow for 2017 and 2018. Moody's expects it to breach covenants or pursue a distressed exchange in the next year.

Moody's also called mentioned department store chain Bon-Ton. The company has been given a reprieve from its creditors and suppliers to get through this holiday season. Shipments have been reduced and creditors are demanding payment up front to minimize losses. Bon-Ton's CEO left earlier this year and the company has now hired restructuring advisors to help support business.