and Sears expects 150 closures, including 109 Kmart
stores. Shopping malls depended on these anchor stores
to generate traffic that drew shoppers to the other in-line
stores. As traffic diminishes at those anchors, the in-line
stores will see reduced shopper volume.
Changing Consumption Patterns
Changes in consumer spending patterns have also contributed to the decline. A generation ago, clothing purchases
comprised bet ween 5% and 6% of consumer expenditure,
compared to only 3.5% before the Great Recession. That
reduction is continuing, according to data from the Bureau
of Labor Statistics, aggregate household spending on
clothing has declined by nearly 10% since 2005.
One reason for this decline, according to MasterCard
executive Sarah Quinlan, is the increase in casual attire
in the workplace. “It’s not that consumers aren’t buying
any clothing, but with relaxed workplace dress codes,
priorities and styles have changed. One wardrobe is all
that person needs,” she says.
Also, according to Marshal Cohen, chief industry
analyst at The NPD Group, “There’s less focus on
image and apparel and more focus on electronics.
The millennial and post-millennial is very focused on
being connected. Getting connected is already costing
hundreds of dollars per month. That used to buy jeans.
It’s not buying jeans anymore.”
Retail Bankruptcy Results
In addition to electronic gadgets, Americans are
spending more money on travel and restaurants.
According to the U.S. Travel Association, Americans
were projected to spend $802 billion in 2015 on leisure
travel, and spending on travel has risen 14.5% since
2011, according to a report by MasterCard. Restaurants
have also benefitted. Sales at restaurants open at least
a year have consistently outperformed retail same-store
sales, according to Thomson Reuters.
In this era of change in the retail environment, it is
not surprising that retail bankruptcies are increasing,
although few retailers that file for Chapter 11 survive and
reorganize. According to a 2016 study by turnaround
consultants AlixPartners, 55% of all retail cases result in
liquidations. There are two other notable trends in the
AlixPartners data: the huge spike in retail cases in 2008
and 2009 and the steady increase in cases since 2012.
The following are summaries of the outcomes in
some recent retail bankruptcy cases, which are consistent with the results shown in Figure 4:
• Sports Authority: Sold intellectual
property to competitor Dick’s Sporting
Goods for $15 million, closed 450 stores
and liquidated leases and inventory
• Wet Seal: Closed 340 stores, sold 140
stores and inventory to Versa Capital
Management for $7.5 million
• Hancock Fabrics: Closed 250 stores,
sold intellectual property to competitor
Michael’s Stores for $1.3 million and
liquidated leases and inventory
• RadioShack: Closed approximately 2,300
stores and sold assets to Standard General
Change in median household income and real price of selected goods
and services, 2000–2012
Note: Percentage change in CPI price index for individual components, de;ated by CPI-U-RS, from 2000-2013. Income is change in
median quintile incomes from 2000-2012 de;ated by CPI-U-RS.
Source: Author's calculations based on Federal Reserve Bank of St. Louis, "Economic Research" available at http://www.research.st-
louisfed.org/ (last accessed July 2014); and Bureau of the Census, "American Social and Economic Supplement" (U. S. Department
of Commerce, 2000–2012), available at http://www.census.gov/hhes/www/income/data/historical/household/.
for all families
Price of rents
Source: Federal Reserve Bank of St. Louis and the Bureau of Labor Statistics
2006 2007 2008 2009 2010 2011 2012 2013 2014 H12015
Retail bankruptcy outcomes by filing year
(Adjusted for repeats, January 2006 to June 2015)