The Restructuring Reprieve is Over for the Retail Sector

This article was originally authored by Michael Eisenband and John Yozzo and published in ABI Journal's May 2024 issue.

Prior to the COVID pandemic, many large retail chains had already been facing significant challenges from a profitability perspective. As traditional retailers increasingly shifted away from store-based, many struggled to develop, integrate and maintain an omnichannel strategy. Online sales led to high fulfillment costs absorbed by retailers, including the costs of delivery, exchanges, returns and restocking.

COVID momentarily changed the prevailing retail narrative, as personal funds generally spent on travel and leisure were diverted towards consumer goods. While e-commerce sales boomed in the height of the pandemic, Americans were eager to return to stores once the vaccine became widespread and life began to get back to normal. For the first time since the advent of online shopping, total year-over-year store-based sales growth outpaced online sales growth for five consecutive quarters, from the second quarter of 2021 through the second quarter of 2022. As a result, large retail bankruptcies plummeted from pre-COVID norms and profitability metrics improved across the retail sector.

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