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Department Stores at Risk to Default Amid Pandemic

Amid the COVID-19 pandemic, many credit managers fear their customers may default or file for bankruptcy. According to a recent article in RetailDive, department stores are the most at-risk for defaulting on debt within a year. Department stores are the highest at-risk among consumer companies, with a 42.1% median probability of defaulting on debt.

The risk for defaulting went up by nearly 20% from the last week of March to the first week in April, which was about the time department stores shut their doors in response to the coronavirus. While the pandemic has handicapped department stores, the switch to more online shopping and closures of brick-and-mortar malls did not make the beginning of 2020 easy for department stores.

JCPenney began to show serious signs of risk, with whispers of a possible bankruptcy in the future. Moody's downgraded JCPenney's rating into "junk" territory, with the retailer falling out due to the coronavirus pandemic and other factors that have been brewing for some time.

—Christie Citranglo, editorial associate 

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Tuesday, 28 May 2024

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