The recovery stock market may not matter to you right now, but the economic devastation of the COVID-19 pandemic continues in full force.
In fact, this week highlights the continuing pain that plagues corporate America. The overly indebted vitamin vendor GNC filed for bankruptcy on Wednesday, crushed by the pandemic closure of shopping malls. Chuck E. Cheese, who was also bragging about a ton of debt after a leveraged buyout in 2014, filed for bankruptcy Thursday because the prospect of catching COVID-19 by playing dirty games keeps parents and children away.
“I think what you are seeing is what we will call the prolonged COVID laundering,” Barclays chief economist Michael Gapen said in Yahoo Finance’s The First Trade. Gapen says he is more concerned with the prospect of service-oriented companies in life after COVID-19, and does not rule out more bankruptcies in the months and years to come.
“We think that [those sectors] will fight for a longer term, “adds Gapen.
Bankruptcy statistics so far in the year underscore Gapen’s “laundering” theory.
Chapter 11 business filings increased 48% in May year-over-year, according to industry legal services provider Epiq. The number of Chapter 11 applications increased an alarming 30%. In all chapters of US bankruptcy codes, Epiq notes that the total number of new bankruptcy applications has increased 3.9% since April.
In addition to bankruptcies, major corporate restructurings persist as companies prepare for weaker futures due to COVID-19 scars.
The slowly dying Macy’s department store said Thursday it will lay off 3,900 corporate workers in a bid to save $ 365 million this year. The pandemic has hit the company’s bottom line and bottom lines hard, despite a race to offer curbside pickup and reopening stores.
“We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that advance,” said Jeff Gennette, Macy’s CEO.
The Macy’s news comes immediately after Hilton said last week that it would cut 22% of its corporate workforce as demand for hotels remains weak.