Bankruptcies are low but retail concerns are rising
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.