Retailers Forecast Bankruptcy if Back-to-School Sales Fizzle

With the back to school selling season second only to the end of the year holiday season for many retailers, signs point to disappointing, if not disastrous, results for some retailers. This could be a foreboding signal that another wave of retail failures is forthcoming, says U.S. bankruptcy expert Chuck Tatelbaum.

Chuck Tatelbaum

Chuck Tatelbaum

Teen retailer Claire’s Stores needs a big sales lift from back-to-school or the business will likely go bankrupt, the New York Post reported Wednesday. Claire’s Stores, which has more than 3,000 retail outlets, announced recently that its overwhelming debt of $2.4 billion combined with a same store sales decline of 5% for the 10 weeks ending July 10 points to a possible bankruptcy filing, says Tatelbaum.

With many retailers burdened by high loan repayment obligations at a time when sales at some traditional brick and mortar stores are slowing, Tatelbaum says the downward spiral of a poor cash flow and the lack of credit for inventory replacement can foster a disaster.

He contends that the legal uncertainty concerning the validity of consignment sales raised during the Sports Authority bankruptcy case has further restricted the flow of goods to financially distressed retailers, at a time when bare shelves will further exacerbate their problems.

Tatelbaum is chair of the creditors’ rights and bankruptcy practice and partner at the Tripp Scott law firm in Florida. He focuses his practice on bankruptcy and creditors’ rights issues, complex business litigation, Uniform Commercial Code transactions and lender liability litigation and other types of secured transactions, as well as domestic and international letters of credit.

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