April 6, 2017
The chapter 11 bankruptcy filing by Payless ShoeSource this week pushed Fitch Ratings’ U.S. retail default rate higher, as the sector marches towards $6 billion of defaults this year. The Topeka, KS-based footwear retailer’s announced closing of 400 of its 4,400 stores immediately is the latest blow to retail bondholders.
Fitch said the retail sector’s trailing 12-month loan default rate climbed to 1% in April, from 0% in March and 0.5% at the end of February. The rate is expected to spike to 9% by year-end as a result of continued challenges from reduced traffic, smaller margins caused by steep discounting and e-commerce giant Amazon.com.
Payless was one of nine retailers on Fitch’s “Loans of Concern” list. Others included Sears Holding Corp., 99 Cents Only Stores LLC, Charming Charlie LLC, Gymboree Corp., Nine West Holdings Inc., NYDJ Apparel LLC, rue21, Inc. and True Religion Apparel Inc.
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