Off-price retailer Stein Mart Inc. announced bankruptcy on Tuesday amid rising off-price pressures, a retail category that grew for COVID-19.
To be sure, Stein Mart SMRT,
, like many other retailers that have submitted Chapter 11, face challenges even before the coronavirus pandemic. Fiscal losses for 2019 totaled 22 cents per share after a loss of 13 cents per share the year before.
In the last quarter, with the coronavirus pandemic, losses reached $ 1.38 per share on revenue of $ 138.2 million, down from $ 319.4 million the year before.
Neil Saunders, Managing Director at GlobalData Retail, notes the ‘relatively weak attractiveness of the Stein Mart brand,’ with stores in undesirable locations, low branding, and an online business that developed but was too far in the early stages to help when lockdowns went into effect.
“For a company that was in the process of selling itself to a private investment company at the beginning of this year, the bankruptcy is an abrupt change in fortune that has shown the tremendous damage that the pandemic has to retailers. has been built, “Saunders wrote.
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That damage has been extended to the off-price category as a whole. Off-price includes names like TJ Maxx parent TJX Cos. TJX,
, Ross Stores Inc. ROST,
and Burlington Stores Inc. BURL,
“Stein Mart’s failure is not only the latest in a long line of retail bankruptcies, it also underscores that even traditionally robust segments such as off-price are not immune to pandemic-induced disruption,” Saunders said.
Wells Fargo data from last month show that 85% of the 1,000 consumer respondents have become more concerned about returning to stores. Recent surges in COVID-19 cases are at the heart of that fear.
And 40% said they would need more time before going back to a store that sells clothes and shoes.
The sale of e-commerce has become faster. However, the off-price sector, with its “treasure hunt” style experience, does not rely much on e-commerce. In fact, Burlington announced in March that it was closing down its e-commerce site altogether.
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“Off-price, which has historically been an outperformer, will be dragged lower than companies like TJX, Ross Stores. and Burlington Stores share in the mounting pain of mandatory closures of retail stores and lower traffic, ‘Moody’s analysts wrote in a report published last week.
Moody’s predicts that operating income in this segment will fall from 120% to 130% in 2020, compared to an earlier forecast for a decline of 10% to 15%.
“We do not expect profitability to return to 2020 levels at the earliest,” Moody’s said.
Off-price will have some advantage in their focus on value.
“Cowen believes department stores and store-based retailers are likely to lose stakes in the coming years due to a combination of store closures and a greater shift in consumer preferences toward online and value-oriented concepts,” analysts wrote in a recent report.
Moreover, off-price is able to capitalize on unsold goods that are widespread in the retail trade.
“Our checks with advisors suggest that off-price is best positioned post COVID-19 to capitalize on what an abundance of goods and brands will be available across all price levels with payment terms averaging 120 days out,” Cowen said.
Stein Mart stock market took a 35% nose job on Wednesday after filing for bankruptcy. Shares have fallen more than 71% over the year so far, while the S&P 500 index SPX,
is up 4.6%.
.
