In a retail environment where middle class consumers are not only shrinking, but increasingly shifting their shopping habits online, companies that depend on actual foot traffic are yielding an avalanche of dismal earnings reports.

This year could easily shape up to be "the year of retail bankruptcies," Cori Lopez-Castro, partner with Kozyak Tropin Throckmorton, a bankruptcy firm, told TheStreet back in March. Stores like The Limited Stores, a women’s apparel retailer that closed 250 locations, and Wet Seal, a mall-based women’s clothing chain, have filed for Chapter 11.

In June 2017, Fitch Ratings published its Loans of Concern list — a list of retailers which is considered to be at risk of default within the next 12 months — which included Sears (SHLD​), Claire's Stores Inc., Nine West Holdings, Inc., 99 Cent Stores, LLC, J. Crew Group Inc., True Religion Apparel, Inc., Charlotte Russe Inc., Charming Charlie LLC, NYDJ Apparels LLC and Vince LLC.

The Closers

The number of retailers either closing stores and betting on growing their online sales and the number of retailers who have filed for bankruptcy is at a peak.

The women's clothing store Bebe announced in late April it would close all of its 173 stored by the end of May, according to an SEC filing. The retailer appears to be keeping its e-commerce business, and expects a $20 million impairment charge in the third and fourth quarter of this year, in connection to the store closings. 

Similarly, JCPenney is also in trouble — or rather, is still in trouble. The department store announced in late February that it would close 138 stores and one supply chain facility, eliminating 5,000 positions nationwide according to a statement. JCPenney has long been the subject of bankruptcy rumors among analysts. 

Also in April, the luxury retailer Michael Kors announced the closure of 100-125 under-performing stores. It's been a rough year financially for the company, which reported a net loss of $28.6 million — or 17 cents per share — in the first quarter. As of April 1st, the retailer had 827 stores.

In August, Under Armour (UAA) announced they would restructure and let go of 2% of its workforce — about 280 people. The cuts mainly applies to its Baltimore headquarters, but the athletic apparel chain already closed 33 factory outlets and and 23 stores over the past year.

Members of the family that founded Nordstrom announced in June, 2017, they were exploring ways to take the company private, and the parent company of Saks Fifth Avenue and Lord & Taylor — Hudson's Bay Company — disclosed it would cut 2,000 positions in North America in order to reduce costs. Nordstrom's looking into ways to go private, however, has been seen as a sign of the commitment Nordstrom has to the retail industry, rather than a sign the department store will go under.

The Filers

In March, Gordmans Stores Inc. (GMAN​), a discount department store chain based in Omaha, Nebraska, reported that it had has been losing sales to the internet, and filed for bankruptcy with a plan to liquidate all of its stores. Gordmans employs 5,100 people in more than 100 stores. 

HHGregg Inc., the home appliance store, also filed for bankruptcy in the beginning of March, after quietly delisting its stock from the New York Stock Exchange. (See also, Bankruptcy Looms for HHGregg)

The latest was the children's apparel retailer Gymboree which filed for Chapter 11 on June 12, 2017. The chain plans to close 375 of its 1,300 stores, it said in a statement.

The Bottom Line

Many other retailers, with a slew of recent investment downgrades, could also be heading down the bankruptcy road. This 2017 list of troubled retailers, so far, also includes Macy’s Inc. (M), Neiman Marcus Group and Charlotte Russe Inc., all three of which received downgrades from S&P Global Ratings in the past months, according to TheStreet. The firm cut Macy’s to BBB- from BBB, a rating just above junk bonds, after the company reported sluggish holiday sales.(See also, Retails Face Rising Shutdowns as Losses Mount)

S&P Global downgraded Neiman Marcus to CCC+ from B- saying the department store’s "capital structure is unsustainable over the long term. Trends such as weak mall traffic, a highly promotional retail apparel environment and cautious consumer spending continue to weigh heavily on Neiman Marcus."

Private mall chain Charlotte Russe’s rating was lowered to CCC+ from B- with S&P saying a "lack of prospects for a strong, sustained rebound could lead the company to pursue a potential debt restructuring."

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