Dive Brief:

• S&P Global Market Intelligence included Tuesday Morning, which went through a Chapter 11 restructuring last year, in its latest monthly list of the most vulnerable retailers.
• Tuesday Morning has a 14.1% chance of default over the next year, according to S&P.
• Also on the list are J. Jill (22.5% chance of default), Destination XL (19.1%), Revlon (15.1%), Wayfair (14.9%), Vince (14.7%), Build-A-Bear Workshop (13.1%), Casper (12.7%) and iMedia Brands (11.1%). Those companies have also appeared on S&P's previous lists. 

Dive Insight:

The pace of retail bankruptcies has slowed since the tumultuous early months of the pandemic last year. But many retailers are still vulnerable, struggling against financial constraints, and continued traffic and sales declines at their stores.

S&P Global Market Intelligence counted 52 retail bankruptcies in all from 2020, the most of any year in the past decade. To date, in 2021, the firm counted six retail bankruptcies, which is more Chapter 11s than had filed at this time last year, but below some past years, including 2019 and 2016. 

Retail as a whole has benefited from a strong holiday, the second wave of stimulus and transfers of spending from the hardest-hit sectors of the pandemic, such as travel and eating out. The year ahead could bring much higher levels of foot traffic as more adults receive vaccines.

However, many companies still expect to struggle this year. A BDO survey of retail CFOs found that 42% expected their company to restructure or reorganize in some fashion this year, and 44% expected their revenue to decline. 

Financially vulnerable retailers face all of the same challenges to keep up with their well-capitalized, low-priced and technologically adept peers that they did pre-pandemic. Add to that protracted sales declines, and many could be forced into bankruptcy court to shrink their footprint, shed debt, seek a buyer, or even liquidate.

S&P's list of vulnerable retailers includes legacy retailers trying to manage mall-based store chains, such as J. Jill — which avoided bankruptcy last year through a deal with lenders — and Destination XL. Tuesday Morning's appearance on the list is a reminder that bankruptcy can offer a second chance, but it doesn't guarantee the future health of a company that goes through the process. Recent years have brought several retail Chapter 22s, including Payless, Gymboree and Charming Charlie. 

Also on S&P's list are relatively young, digitally oriented companies, namely online home goods retailer Wayfair — which has produced far more losses than profits throughout its life — and the mattress specialist Casper. The latter has never produced a profit, in part because of its high marketing costs, something that afflicts Wayfair's bottom line as well. The financial vulnerability of both is a reminder that digital models are just as capable of burning up cash as brick-and-mortar.