U.S. retailers reel as bankruptcies surge amid inflation, high interest rates

LOS ANGELES, July 11 (Xinhua) -- From coast to coast, retailers big and small are grappling with a harsh economic reality in the United States: store closures, layoffs, and a growing number of bankruptcies continue plaguing the industry, spurred by rising inflation and high interest rates.

According to the U.S. Labor Department Thursday, the consumer price index (CPI) rose 3 percent in the 12 months through June, compared to a 3.3 percent of increase in May.

Pundits hailed the new data showed price hikes slowed sharply last month, which would offer relief to American consumers and bolster the Federal Reserve to cut interest rates.

However, several notable retailers have been succumbing to these pressures, filing for bankruptcy or winding down business operations in recent months. Northeast discount store Bob's Stores, teen apparel brand Rue21, and West Coast discount chain 99 Cents Only Stores are among the casualties.

Bob's Stores, after 70 years in business, has recently filed for Chapter 11 bankruptcy protection and is shutting down all 21 of its locations and liquidating inventory. "Bob's Stores was unable to secure the finances needed to maintain operations," the company said in a press release on July 1.

Rue21 filed for bankruptcy in May and is closing all 540 stores and ceasing online operations. Another clothing retailer Express has been battling lower volumes following its bankruptcy filing in April, prompting its logistics partner Bath and Body Works to permanently reduce operations and start laying off employees last month, according to the company's notice.

California-based 99 Cents Only Stores filed for Chapter 11 bankruptcy protection in April, ending the chain's 42-year business. The company said in a press release that it would sell all its 371 stores, as well as merchandise, store fixtures, furnishings and equipment.

The impact is visible on the ground.

Inside a Bath and Body Works store in the Great Mall in Milpitas, California, three employees attended a near-empty store on Tuesday afternoon. The store's manager, who gave only her first name Joanne, said the business had been slow, noting the vacated site of the former Bed Bath and Beyond nearby. The closed store was part of the houseware retailer's nationwide shutdown of over 370 stores last year.

Joann, a leading arts and crafts retailer, filed for bankruptcy in March, but emerged from the bankruptcy and reorganized later. The company's financial turmoil led to the closure of a superstore in Fremont, California, and has raised concerns among customers.

Cindy Harris, assistant manager of a Joann store in Cupertino, California, told Xinhua she had received frequent inquiries about the store's future. "They (customers) all ask when this store will be closed," she said, "I don't know."

These companies have cited inflation and increased borrowing costs as key factors in their financial woes. The retail industry has been hit by an unprecedented number of bankruptcies in recent years, which was in a notable surge in 2023 and 2024.

Inflation, which erodes purchasing power by raising prices on goods, rent, and wages, has squeezed retailers' margins. Many have been unable to pass these increased costs onto consumers without sacrificing sales.

Thursday's inflation data was still higher than the Fed's 2 percent target. Federal Reserve Chair Jerome Powell said the central bank wants more evidence that price gains are decidedly slowing down before lowering interest rates.

Moreover, elevated prices in key categories, such as car insurance, transportation, hospital service, make inflation feel much higher.

The high interest rates set by the Fed to curb inflation have further exacerbated the situation for many retailers who operate on thin profit margins. Those who once relied on low-interest loans to grow or maintain their operations are now grappling with much higher costs, leading to financial distress, industry experts said.

Daniel Bradley, a Tennessee-based insurance broker, wrote in an analysis posted on LinkedIn that these bankruptcies reflect deeper issues within the retail sector, including adapting to changing consumer behavior, managing high operational costs, and competing with online rivals in an increasingly digital age.

The challenges are not confined to mainstream retail, and even niche markets, such as kitchen and bath retail, have felt the heat, Bradley said.

He pointed to Pirch, a luxury kitchen and bath fixtures retailer which recently filed for Chapter 7 bankruptcy, as a particularly alarming example.

"Established showrooms across Southern California have shuttered, leaving behind unanswered customer inquiries and unfulfilled orders. This abrupt cessation of operations, highlighted by an ongoing lawsuit from American Express seeking to recover substantial credit card transaction chargebacks, underscores the critical importance of maintaining robust financial and operational strategies in retail," he said.