BankruptcyData's Analysis Reveals 35% YTD Increase In Retail Bankruptcies

by: George Putnam

Summary

The Retail, Services and Finance/Insurance/Real Estate sectors all saw increases in their percentages of overall business filing bankruptcies in Q2 2017 compared to the same period last year.

During Q2 2017, Texas overtook New York as the state generating the highest percentage of overall business bankruptcies but YTD 2017 New York remained on top.

Companies with sales of $500,000 or less generated 56% of all business bankruptcy filings during Q2 2017 and 61% YTD.

Though overall bankruptcy activity is trending upward, public company bankruptcies are down 31% thus far in 2017.

In 2016 we experienced a 26% increase in the number of business bankruptcy filings over 2015, which halted a several-year run of decreasing filing numbers. That upswing continued in 2017 with Q1 2017 business bankruptcy filing figures rising 4% compared to Q4 2016, 1% compared to Q1 2016--but up 25% compared to Q1 2015.

Q2 2017 experienced a 10% increase in business bankruptcy filings over Q1 2017 and a 1% uptick over Q2 2016, but a 35% rise in filings over the 2015's Q2 figures. The 2017 YTD business bankruptcy filing figure increased just 1% compared to the first six months of 2016 but rose 34% compared to the first six months of 2015. The Retail, Services and Finance/Insurance/Real Estate sectors all saw increases in their percentages of overall business filing bankruptcies in Q2 2017 compared to the same period last year. YTD, the Retail sector is up over 4 percentage points (approximately 35%) compared to the same periods in both 2016 and 2015.

During Q2 2017, Texas overtook New York as the state generating the highest percentage of overall business bankruptcies with 19.67% but YTD 2017 New York remained on top by generating 17.07% of overall business bankruptcy filings. Both New York and Texas saw the largest increase in overall business bankruptcy percentage for the first half of 2017 compared to the same period in 2016. Conversely, Missouri and Delaware were the two states that saw the largest decrease in overall business bankruptcy percentage during the first half of 2017 compared to the same period in 2016. The courts in New York-Southern, California-Central, Texas-Southern, Texas-Northern and Delaware have handled the largest percentage of overall business bankruptcies thus far in 2017. Overall, these five districts have overseen more than 35% of all business bankruptcies this year.

Small businesses make up the lion's share of all the businesses filing for bankruptcy: Companies with sales of $500,000 or less generated 56% of all business bankruptcy filings during Q2 2017 and 61% YTD. Companies with less than 50 employees generated 87% of all bankruptcies during the first six months of 2017.

The Service industry, our economy's largest employer, generated 31.57% of the business bankruptcy filings in Q2 2017 and 29.12% of 2017's YTD total. The YTD figure is up 1% compared to last year but is 7% less than 2015—and is down even further when compared to 2014 and 2013. Some of this slack is being taken up by the Retail sector whose percentage of overall business bankruptcy filings is up more than 35% when compared to the first halves of 2016, 2015 and 2014.

Though overall bankruptcy activity is trending upward, public company bankruptcies are down 31% thus far in 2017: 42 public companies filed for bankruptcy in the first six months of 2017, versus 61 in 2016. The total asset count for public company bankruptcies during the first six months of 2017 was approximately half of 2016's figure. Although there has been a lot of press about the struggling Retail industry recently, the Energy sector has continued to dominate the bankruptcy rolls--with 16 of 43, or 37%, of public company bankruptcies coming from Oil & Gas, Mining and other Energy sectors.

NUMBER OF PUBLIC COMPANIES FILING CHAPTER 11 OR CHAPTER 7:

* Assets in $mils

2017's U.S. Bankruptcy Court business filing activity is shaping up as we expected, with counts at or slightly above the 2016 levels but significantly above 2015 and earlier. The Energy sector, though slowing down, is not out of the woods yet. We also expect Retail bankruptcy levels to keep increasing as consumers continue to opt for online over brick-and-mortar purchases in this highly-competitive sector that is already besieged by liquidity issues, ailing credit ratings, unfavorable borrowing terms and more.

Download the Q2 2017 Business Bankruptcy Filings Report directly to your browser for immediate access to nearly 30 pages of analytical charts and graphs reflecting current U.S. Bankruptcy Court activity.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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