These 10 Companies May Not Make It Through the Summer

It's tough enough to run a business successfully in ordinary times. With efforts to stem the coronavirus pandemic leading to widespread shutdowns throughout much of the economy, that challenge is only getting tougher.

The longer the economic slowdown lasts, the harder it will be for all but the strongest businesses to survive. Several companies have already declared or are on the verge of declaring bankruptcy due to the abrupt declines in revenue they've seen. While bankruptcy doesn't always mean the end of a business, it does mean that it needs structural changes in order to have a legitimate chance of surviving. With that in mind, here are 10 companies that may not make it through the summer.

5 Winning Stocks Under $49 We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

A furniture retailer for over 60 years, Art Van was already struggling before the coronavirus pandemic hit full swing. The company filed for bankruptcy reorganization protection on March 8, 2020. Unfortunately, by April 7, 2020, once the extent of the coronavirus pandemic became clearer, the company converted its bankruptcy claim from a reorganization one to a liquidation one.

As a result, the company is already largely out of business, with only liquidation/going-out-of-business sales remaining before it shuts down forever.

ALSO READ: 2 Incredibly Cheap Retail REITs

Rental car company Hertz (NYSE: HTZ) filed for bankruptcy reorganization protection on May 22, 2020. The curtailing of air travel put a significant dent in its business. In addition, with auto auctions also shut down or otherwise hampered by the virus, it had no reasonable way to unload its suddenly-excess vehicle inventory to raise cash.

That ugly combination forced Hertz to declare bankruptcy after it started missing lease payments and once it became apparent that the coronavirus crisis wouldn't end quickly. The bankruptcy is designed around a restructuring and the hope it can operate effectively with a less burdensome debt load, but it all depends on its primary market -- rental cars -- returning to health. If that doesn't happen because people continue to cut back on travel, even the restructuring may not be enough to save it.

Even before COVID-19 reared its ugly head, mass-merchandising retailer J.C. Penney (NYSE: JPC) was circling the drain. Thanks to a high debt load, liquidity provided largely by a credit line, and back-to-back-to-back years of losses, even last year, there was plenty of speculation that it would file bankruptcy.

COVID-19 turned out to be the straw that broke that camel's back, and J.C. Penney filed for bankruptcy reorganization protection on May 15, 2020. The company plans to close hundreds of its stores and see if it can sustain profitable operations from the remaining ones. Of course, that assumes it will be able to fully reopen in a post-COVID world and that consumers will return in sufficient numbers to allow it to cover its costs.

5 Winning Stocks Under $49 We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Imported home décor retailer Pier 1 Imports (NYSE: PIR) also faced its share of challenges prior to the coronavirus outbreak. On Feb. 17, 2020, the company filed for bankruptcy reorganization protection after struggling to remain relevant as other retailers honed in on its niche. Once the extent of the coronavirus pandemic became known, however, it changed its bankruptcy plan to a complete liquidation.

The company has started its going out of business sales, and once it liquidates its inventory and sells off its other assets, it expects to close its doors forever.

No-frills closeout discount retailer Tuesday Morning also succumbed to the incredible pressures forced upon it by the coronavirus-related shutdowns. On May 27, 2020, it filed for bankruptcy reorganization protection and announced plans to permanently shutter around a third of its locations.

Although the company has taken steps to reopen many of its stores as social distancing restrictions ease, its ultimate survival depends on it lasting through the ongoing retail apocalypse. Depending on how steep and long lasting other retailers' liquidation sales are, it may be challenging for Tuesday Morning's business to recover enough for it to return to health.

ALSO READ: 2 Discount Retailers That Will Thrive in a Recession

Clothing retailer J. Crew was among the first national retailers to fall to the shutdown driven by measures to stem the spread of the coronavirus pandemic. On May 4, 2020, it filed for bankruptcy reorganization protection, confident in its ability to emerge and return to profitability. J. Crew indicates that it was operationally profitable prior to declaring bankruptcy but that it couldn't service its debt load, which it intends to reduce by converting debt to equity during the bankruptcy.

That said, J. Crew has a perception problem where consumers view its clothes as "both boring and a bad value for the money." Unless it can shake that perception, exchanging debt for equity may very well turn out to be a short term stopgap that only prolongs the inevitable.

Even in good economic times, premium department store giant Neiman Marcus is well known to consumers by the nickname “Needless Markup." That's a testament to the healthy margins the company was able to command when times were good.

Unfortunately, high margins only provide profits when consumers are willing and able to shop and have enough disposable income to find value in paying that type of premium to buy those products. In the midst of a pandemic with skyrocketing unemployment, on the other hand, it's a recipe for a quick path to bankruptcy. Indeed, Neiman Marcus filed for bankruptcy reorganization protection on May 7, 2020.

The company does have plans to emerge from bankruptcy later this year, but obviously that requires it to be able to resume operating with sufficient revenue to cover its costs. Whether customers will return in strong enough numbers to allow it to continue earning such healthy margins as it once did is key to whether or not it will survive.

One of the most iconic names in the fitness industry, Gold's Gym was forced into bankruptcy reorganization by the COVID-19 pandemic on May 4, 2020. The chain of gyms has permanently closed around 30 of its locations as a result of the pandemic, and during the height of the crisis, each and every one of its company-owned locations was shuttered.

The company does plan to reopen its facilities with enhanced cleaning precautions as areas become judged safe enough to do so. Still, for it to truly emerge from its bankruptcy and sustain operations, it has to have enough locations open and enough members willing to pay in order to reliably cover its costs. With the enhanced cleaning precautions in place, those costs per gym will likely be higher than they were previously.

5 Winning Stocks Under $49 We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

The parent company behind Men's Warehouse and Jos. A. Bank men's suits stores, Tailored Brands (NYSE: TLRD) is teetering on the edge of potentially being forced into filing bankruptcy. The COVID-19 pandemic is driving more people to work from home, which means suits are getting used less and getting less wear and tear on them. That doesn't bode well for the company's near-term prospects, as the business relies on men needing to buy and replace suits frequently enough to keep revenue strong.

That Tailored Brands has avoided bankruptcy this deep into the COVID-19 pandemic is somewhat remarkable, as it was struggling even before the virus reared its ugly head. For any sort of sustained recovery to take place, bankruptcy or not, men need to get back to where they need to wear their business suits more often. If we don't get there in the not too distant future, then any actions Tailored Brands takes to keep operating may simply serve to postpone the inevitable.

ALSO READ: Tailored Brands Makes the Wrong Fashion Statement

In a world where oil futures briefly traded hands at negative prices, is there any wonder that a company that specializes in offshore drilling is struggling mightily? Offshore drilling is generally a far more expensive way to get oil than land-based approaches. With oil trading as if it were completely worthless, the more expensive ways of extracting it would clearly be among the first to run into troubles.

Those prices, driven by a demand slowdown from COVID-19 and a Saudi/Russia price war, were enough to force Diamond Offshore Drilling (NYSE: DO) to seek bankruptcy reorganization protection on April 26, 2020. The company is trying to reduce its debt load and restructure its costs to resume operations. Still, the higher structural costs associated with operating offshore makes it fundamentally difficult for it to operate profitably when oil prices are low.

Unless oil prices continue to recover, thanks to a strengthening economy and an end to the Saudi/Russia price war, debt restructuring alone won't be enough to save Diamond Offshore Drilling.

Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.