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Bankruptcies are low but retail concerns are rising

U.S. consumer discretionary bankruptcy filings
Data: S&P Global Market Intelligence; Chart: Axios Visuals

Corporate bankruptcies are at their lowest levels since 2010 based on the 143 that have been filed so far this year, S&P says. But filings by consumer discretionary companies have begun to edge upward over the last three months.

Why it matters: These low levels could be upended by inflation and interest rate hikes, which respectively harm consumer confidence and make debt more expensive to service.

Driving the news: Cosmetics brand Revlon, with more than $2.7 billion in loans according to rating agency Fitch, is reported to be preparing to file for bankruptcy

What's happening: Consumer discretionary has the second most corporate bankruptcies as of May 31 with 20 filed, trailing only the industrials sector, according to S&P Global Market Intelligence.

Yes, but: As noted, even the number of filings by consumer discretionary businesses remains below past years' levels.

  • Moreover, retail only has three bankruptcies in 2022 as of May 16, its lowest level in 12 years.
  • All three retailers that have filed — Top Line Granite Design, Cherry Man Industries and Vey's Bandit — had liabilities between $10 million and $50 million.

Between the lines: According to a report issued by Fitch in late May, for two months in a row its list of "top market concern loans" rose.

  • Consumer and retail companies most in danger of default include Revlon (see above), Serta Simmons, Anastasia Beverly Hills, Rodan & Fields, Boardriders, Men's Wearhouse, Isagenix International and Outerstuff, Fitch says.

The bottom line: "Tightening financing conditions are making it harder and more expensive for companies to refinance or issue new debt, and additional defaults could be in store for companies with debt rated B and lower," S&P stated.

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