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2020 has been an atrocious year for retailers. The coronavirus pandemic forced many stores to close earlier on in the year, which impacted retailers' revenue substantially. And now, months later, the struggle persists, with many retailers doing so poorly they can't even manage to keep up with their rent. Here are few retailers commercial landlords and investors should be wary of.
1. Ann Taylor
Ascena Retailer Group (NASDAQ: ASNA), which owns Ann Taylor, filed for bankruptcy earlier this year, so it's not surprising to learn that Ann Taylor stores had, as of mid-September, failed to pay rent over the past three months. The women's clothing store may also struggle due to its higher-end nature. With a recession still in full swing and more people working from home, demand for its product line may just not be there.
Justice is also owned by Ascena, so like Ann Taylor, it, too, missed months of rent earlier this year. The children's clothing store may see more demand than Ann Taylor in the coming months, as young ones are constantly outgrowing apparel, and its lower price point may drive traffic to the store despite the pandemic.
3. Lane Bryant
Third time's a charm for Ascena. Another of its holdings, Lane Bryant, also hadn't paid rent for three months as of mid-September. Because Lane Bryant caters to a niche group of consumers -- those needing plus-sized clothing -- it may have a slightly better outlook than Ann Taylor.
Francesca's (NASDAQ: FRAN) experienced a 50% decline in revenue for the three-month period ended May 2. As such, the retailer paid no rent in August and only a portion of its rent in June and July. Francesca's apparel and accessory offerings may seem more like luxury purchases during the pandemic, and so consumers may not be rushing to stock up on them.
5. The Gap
Like many retailers, The Gap (NYSE: GPS) has grappled with revenue declines since the start of the pandemic. As such, it only paid a fraction of its rent in June, July, and August. The retailer has already closed stores and intends to continue doing so in 2021.
6. Victoria's Secret
Owned by L Brands (NYSE: LB), Victoria's Secret has seen a significant decline in sales since the start of the pandemic. The retailer paid only 11.7% of its rent in June and just 13.46% in July. In August, it did a bit better at 23.39%, but it's still clearly experiencing its share of cash flow issues.
The Millionacres bottom line
As more retailers continue to struggle, commercial landlords will need to brace for withheld rent and lease negotiations. And as stores close, vacancies will increasingly become an issue in both malls and outdoor shopping centers. It's a scary time to be a commercial landlord or retail investor, and at this point, we can only hope the holiday rush pumps some added revenue into these and other sluggish businesses to minimize the existing pain.
But there's a good chance the economy won't recover until well after the pandemic is over, and given the way coronavirus cases are surging, it's fair to say that won't be happening anytime soon. Let's just hope retailers can hold out until things improve.
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