The Restructuring Reprieve is Over for the Retail Sector
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May 15, 2024
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This article from ABI Journal was first published on May 1, 2024. The entire publication is available at: https://abi.org/abi-journal/the-restructuring-reprieve-is-over-for-the-retail-sector
Prior to the COVID pandemic, many large retail chains had already been facing significant challenges from a profitability perspective. As traditional retailers increasingly shifted away from store-based, many struggled to develop, integrate and maintain an omnichannel strategy. Online sales led to high fulfillment costs absorbed by retailers, including the costs of delivery, exchanges, returns and restocking.
COVID momentarily changed the prevailing retail narrative, as personal funds generally spent on travel and leisure were diverted towards consumer goods. While e-commerce sales boomed in the height of the pandemic, Americans were eager to return to stores once the vaccine became widespread and life began to get back to normal. For the first time since the advent of online shopping, total year-over-year store-based sales growth outpaced online sales growth for five consecutive quarters, from the second quarter of 2021 through the second quarter of 2022. As a result, large retail bankruptcies plummeted from pre-COVID norms and profitability metrics improved across the retail sector.
In this American Bankruptcy Institute (“ABI”) Journal article, Michael Eisenband and John Yozzo examine how the two-year lull in restructuring activity for the retail sector following the pandemic has not changed its reality: even the largest of chains must change with the times in how they sell goods to consumers, or risk irrelevance.
Reprinted with permission from the ABI Journal, Vol. XLIII, No. 5, May 2024.
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May 15, 2024
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