Why January Sees More Retail Bankruptcies Than Any Other Month

Bankruptcy

After the holidays, the month of January is often a welcome respite, a return to normalcy for many people. But it’s also the one month that sees more retail stores file bankruptcy than any other time of the year.

According to Forbes, most at-risk retailers wait to file for bankruptcy protection until after the holidays, thinking they’ll get a boost in business as consumers do their holiday shopping. In many cases, however, this doesn’t happen.

And with strained liquidity as well as cash flow that doesn’t meet the needs of the retailer, these stores will often turn to filing bankruptcy in January.

If December was bad, January will only be worse,” says Charles Huber, Principal, Law Offices of Charles Huber. “Also, it is the month before most people get their tax refunds, so people are generally going to wait until February or March to spend any more money.”

Perhaps most at risk is the teen retailer — these apparel stores depend on heavy mall traffic for business, and as the shopping mall continues to decline thanks to teens increasingly doing their shopping online and parents budgeting less toward clothing, once-popular teen stores have gone under.

In December, both Delia’s and Deb Stores announced that they would be filing for bankruptcy protection. Aeropostale, which reported losses of $141.8 million in its most recent fiscal year on record, will be closing 240 of its store locations to cope with such losses.

Teen retailer Wet Seal, which has been facing steady losses throughout all of 2014, is likely next on the list of January retail bankruptcies, according to a Business of Fashion article.

Just last month, Wet Seal’s CEO Ed Thomas said his company would likely need “immediate liquidity in order to have time to implement our operating strategies.” Last week, the company announced it received a notice of default from one of its creditors, another bad sign for the retailer.

With today’s generation of teens preferring to spend their money on new technology rather than clothes, it’s clear the state of the teen-focused retailer — along with that of many other formerly-prosperous retailers — has nowhere to go but down.

Leave a Reply

Your email address will not be published.

RSS
Follow by Email