As Retail Bankruptcies Rise, Landlords Must Prepare

LOS ANGELES—Commercial landlords should take notice. Within the last several months, one women’s clothing retailer after another has gone out of business. On Dec. 4, 2014, Philadelphia-based Deb Shops filed Chapter 11. Next came Delia’s, based in New York, which filed bankruptcy only four days later. On Jan. 9, 2015, Body Central, based in Florida, a chain with 265 stores, announced that it was closing all of its stores by way of an assignment for the benefit of creditors, an alternative to federal bankruptcy. On Jan. 15, Wet Seal, a Southern California-based company, filed its own Chapter 11. Then on Feb. 4, Cachè, another New York-based chain filed Chapter 11. In addition to these, Jones New York and Kate Spade Saturday recently announced that their retail locations would be closing.

If one is an anomaly, two a coincidence and three a trend, then we should pay attention when we see so many substantial retail women’s clothing companies file bankruptcy all within a few months. There is anecdotal evidence that as millennials get older and start to assert their spending power, traditional brick-and-mortar businesses may be in for some tough times. Everyone has probably heard some version of the story about the teenage girls at the local mall, trying on clothes. Rather than buy anything, they all open up apps or websites on their smartphones and order the same clothes online (presumably, less expensively). Urban legend or not, if brick-and-mortar stores don’t quickly adapt by focusing on the right amount of e-commerce, then the past three months are likely to repeat themselves.