Bankrupt retailers face tough sell with inventory

Proceeds from liquidations have dropped since start of pandemic.

The nation’s bricks-and-mortar retailers were undergoing a reckoning years before the pandemic led to shutdowns and a tanking economy, tipping more than a dozen major retailers into bankruptcy and prompting many others to thin their ranks.

The result: Thousands of liquidation sales, at a time when many Americans are wary of in-store shopping or spending.

Firms that specialize in winding down stores say liquidating now is markedly different from what it was before the pandemic. Companies are offering deeper discounts to win over consumers — with sales starting at 40% off instead of the usual 20% — as well as other incentives. Even then, results can be spotty: Proceeds from liquidation sales have fallen about 25% since the novel coronavirus took hold, according to Jim

Schaye, chief executive of retail liquidation firm Eaton Hudson.

“It’s like throwing a party and having nobody come,” he said. “People are just not running out to a J.C. Penney liquidation or a Lord & Taylor liquidation like they would have in the past. Even at 60% off, they’re saying: ‘So what? I don’t need it so I’m not going to buy it.’ ”

The Gap last week announced that it would shut 200 locations, while Ascena Retail Group — the parent company of Ann Taylor, Lane Bryant and Justice — is closing nearly 1,600 stores while in bankruptcy proceedings. Department store chain Lord & Taylor is liquidating all of its stores, as are Pier 1 Imports, Modell’s, Stage Stores and New York & Co.

The typical liquidation sale, which used to last about nine weeks, now takes about 30% longer, according to Michael McGrail, chief operating officer of Tiger Group, which is among the firms managing closeout sales for J.C. Penney, New York & Co. and Modell’s. There are some variations, though, based on the type of product being sold: Sporting goods, furniture and housewares tend to sell quickly, though clothing, shoes and jewelry have become more difficult to offload during the pandemic.

“For certain things, the cus

tomer does return,” he said. “Do they come back at 100%? No. But (the virus) isn’t enough to wipe out consumerism.”

But it has been enough to complicate matters. Sales at clothing stores have declined 37% from a year ago, while sales of electronics, appliances, furniture and home goods have all dropped by double digits, according to the latest retail sales figures from the Commerce Department.

As a result, liquidation firms say they’ve changed the way deals are structured. Instead of paying retailers for their inventory upfront, as has long been the norm, they have shifted to a fee-based model where the retailer gets a portion of the proceeds after the sale is complete. The pandemic also has forced them to take on new tasks, such as ordering protective equipment for workers, and hiring and training workers to staff stores.

Specialty apparel, like men’s suits, has been particularly difficult to sell, even at half price, said Ian Fredericks, executive vice president of the retail group at Hilco Merchant Resources. There have been other challenges, too: “People aren’t necessarily walking around, looking to browse,” Fredericks said. “If they are going to the mall, it’s because they have (a) specific need in mind — and specialty apparel just isn’t it.”

ASSOCIATED PRESS 2019 Lord & Taylor is among bricks-and-mortar retailers that have been going out of business and trying to liquidate at a time when many American shoppers are wary of in-store spending.