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Why are so many large retailers filing bankruptcy?

Recently, it is not a surprise to hear in the Virginia news that a large retailer is filing for bankruptcy. It seems to be a very common occurrence. Many blame online retailers, such as Amazon, or mass retailers, such as Walmart. While Amazon and Walmart may play a role, the real reason why so many are moving to file bankruptcy is to get ahead of their financial troubles.

USA Today explains that many retailers file when they notice their long-term finances look troubling. They want to file now when the financial impact is smaller. They do not want to wait until they get in the red. This allows them to survive the restructuring and bounce back afterward so they do not have to close their doors forever.

You may also notice that many of the companies filing bankruptcy make major changes during the process. The biggest one is reducing the number of locations. During the bankruptcy, the company may close stores, which allows it to cash in some assets and prepare for operation after the bankruptcy is dismissed. A reduction in overall size allows them to remain competitive when they reenter the market afterward.

You can often trace retail trouble back to Amazon and Walmart. Both companies can offer wider selections and lower prices than many other retailers. In addition, the closing of shopping malls has had a huge effect on many retailers. The bankruptcy trend is not likely to change due to these factors. This information is for education and is not legal advice.

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