After a quiet period last year, corporate bankruptcies are seeing a growth spurt in 2023.
In the first five months of the year, 2023 has already seen more corporate bankruptcy filings compared to the same period in any year since 2010, according to a report this week from S&P Global Market Intelligence. In May, corporate bankruptcies saw an uptick over the prior month, with 54 recorded filings, up from 52 in April.
While these filings span a range of industries, the majority have been concentrated within consumer discretionary companies, which have seen 37 filings this year. Two of the largest bankruptcies this year — or those with more than $1 billion in liabilities — were major players in the retail sector: Bed Bath & Beyond and Party City. Tuesday Morning, Forma Brands, Independent Pet Partners Holding and Serta Simmons Bedding have also filed for bankruptcy this year.
Overall, experts predicted that bankruptcies in the retail sector would come back in a large way in 2023 after a slower year in 2022. the uptick can be attributed to a variety of factors, including a slowing economy, higher interest rates and a more cautious consumer.
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According to BDO’s bi-annual bankruptcy report released in late March, six major retailers had already filed for bankruptcy between the start of 2023 through the end of February. That total was more than the total number of retail bankruptcies in 2022, a year in which retail sales were relatively stable until the last quarter.
According to the BDO report, most of the retailers that filed for bankruptcy this year mainly sold discretionary items, which are less of a priority for consumers dealing with inflation. Also, the surge in filing at the start of the year could be an indication of a slump in sales post-holiday, which suggests that the surge could calm down in the back half of the year.
Meanwhile, public retail companies have largely reported softening sales in their most recent quarters as consumers pull back on discretionary spending. Some, like Macy’s and Designer Brands Inc., have downgraded their full-year outlooks to reflect the hit to sales.
