There’s an alarming amount of well-recognized, long-standing companies that have filed for bankruptcy protection during the Covid-19 pandemic. Maybe because the announcements have been spread out over time, this big issue hasn’t received the appropriate media coverage. When the corporations file for bankruptcy, stores, factories and facilities are closed down and tens of thousands of workers are laid off. As several sectors have been hit hard, there may not be any jobs available for those who’ve been downsized. For instance, over the last couple of months, we have witnessed bankruptcy filings—ranging from retail stores to oil and gas producers.
Lord & Taylor, the oldest retailer in the nation, founded in 1826, filed for bankruptcy protection. Previously, J.C. Penney, J. Crew, Brooks Brothers, Lucky Dungarees, Neiman Marcus, Lucky Brand, True Religion, the parent company of Ann Taylor, Loft, Lane Bryant, Catherines stores and Tailored Brands, which owns Men’s Wearhouse and Jos. A. Bank.
Retailing has always been a tough market to operate. Profits can be razor thin and if shops miss a trend or have a bad holiday selling season, they’re in trouble. Now, they have to compete against the Amazon juggernaut. It’s almost impossible for these mostly mall-based chains to survive and compete against Amazon when they were forced to close down their operations. Even when opened, fear of contracting the virus made many people stay away. Those who bravely went to the malls and stores had to wear masks and felt uncomfortable trying on clothes that may have been worn by a number of other folks.
Collectively, these companies will shutter thousands of their stores throughout the country. With the closures and less business, significantly large numbers of workers will lose their jobs. There’s a huge dilemma for the newly unemployed—where can they go if all of the other department and retail stores have either closed or are not faring well in this environment? They’ll join the ranks of the over 53 million Americans who’ve already filed for unemployment benefits. For now, the newly jobless won’t receive the enhanced $600 per week that was part of the federal government’s stimulus package, which ended in July.
Retailers are just one example. The shutdowns stopped many businesses from operating and put millions of people out of work. Companies saw their revenue plummet and people lost their salaries. This results in a significant worrisome decline in tax revenue for a large number of cities. They are now asking the federal government for bailouts, as they risk financial ruin and possible bankruptcy. As thousands of companies were forced to shut down, some are now permanently closed, along with millions of people out of work. Tax revenue has fallen off of a cliff. Local governments’ revenues are thought to be down by about $11.6 billion in 2020—with no end in sight. For cities in the poorest shape, the pandemic could mean bankruptcy. Those who are a little better off will see a degradation in the quality of the lives of their citizens, as police, teachers, garbage collectors, firefighters and other public employees will be terminated to save costs.
The 35-year-old casual-dining chain, California Pizza Kitchen, recently filed for bankruptcy. The pizza chain, similar to other restaurants and chains, were told to close, thereby losing business, revenue and profits. Even when opened, with fewer patrons allowed to dine, it’s nearly impossible for the food establishments to turn a profit. If restaurants did not have a robust delivery service, their situations worsened. To stay afloat, in response to changing consumer needs and less patrons, California Pizza Kitchen started selling grocery items during the pandemic.
Similar to the retail space, there was a slew of bankruptcies, including Chuck E. Cheese, Italian food chain Vapiano, Le Pain Quotidien’s U.S. unit, the parent company of Bravo and Brio and the largest franchisee of Pizza Hut and Wendy’s with thousands of locations.
The oil and gas industry was slammed, as travel stopped and business and factories closed down. Similar to the retail space, a large number of oil and gas companies filed for bankruptcy protection. Noble Corporation, an offshore oil-and-gas driller, filed for bankruptcy last Friday. Noble’s just the most recent victim of the economic fallout from the outbreak. It joins the ranks of some of the largest, most well-known oil and gas companies that have also filed for bankruptcy, including Chesapeake Energy, Ultra Petroleum, Whiting Petroleum, Denbury Resources, Extraction Oil & Gas and others.
No one is safe—not even the company that provides us with the soft, pleasant and sometimes irritating elevator music. The owner of Muzak has filed quick bankruptcy to cut $400 million in debt.
In addition to the thousands of store closures and the large numbers of people out of work, there’s a dark side to all of this that’s gone underreported. A large number of the companies that have filed for bankruptcy protection handed out lush bonuses to their CEOs and executives, according to Reuters. These bonuses are paid out via a loophole. Bankruptcy law bans this practice while companies are undergoing the process. However, there’s no rule for doling out money months before the filing.
The bankruptcy trend will further weaken companies and some may never recover. Amazon, Walmart and a small handful of other companies will take their market share and become bigger and stronger. This will end up with fewer choices for consumers and less jobs available for those seeking employment. With a small number of corporations dominating their respective sectors and millions of people out of work, it’s only a matter a time before wages are pushed down and expectations of employees vastly increase. It’s time that attention is paid to this problem.