I remember 2008 well. I left big law early in the year. I could tell things were changing. I was about to turn 40, and wanted to take advantage of this opportunity. To build something. At a time when most things would be falling apart. You see, I am a “dooms day” guy. No, I am not Chicken Little. But my business is counter-cyclical. For the past 25 years, I have made a living in the insolvency arena, focused primarily on business failure. I am a commercial bankruptcy lawyer.
In my conference rooms, I have watched grown men cry, partnerships splinter and marriages fall apart, mostly a byproduct of the failure, or refusal to give up on a failing business model. In my experience, most failing businesses fail because of change – either too little or too much. Sounds like Goldilocks, but it’s true. They say that if you are not growing you are dying. In business, as in life, this is true. But too much growth too fast can kill a company with burdensome debt or culture shock. Of course, the 2008 recession was neither of these. It was a bottom-up failure – a micro-economic collapse. Driven from the top, but felt from the bottom.
The next recession is coming and coming quickly. It will be different and more devastating because it will be driven from the middle out. What we have come to accept as “growth” is simply a return to normal. Consumer spending is up. But who is spending? Where? On what? Look around you. Job growth is up while wages are flat or down. More people are making less money. And did I mention the one sector where job growth is down? No surprise, its retail.
In 2018, we saw massive numbers of store closings. That number is expected to be even higher in 2019. The number of retail bankruptcy filings will likely rise as well. Payless ShoeSource, Diesel USA and Z Gallerie are just the latest in a long list of retail bankruptcies. Experts claim the decline in retail profitability is not a trend. They claim this decline is sector specific – meaning the disease is only affecting a few patients. They may be correct. This disease is only affecting a few sectors NOW. But there is nothing to stop it from spreading. In fact, the disease will be a full-blown epidemic by the end of this decade and it will wipe out everything in its path. It may not be 2008, but we will still feel the effects.
The experts and I agree. Retail instability is not a trend. It’s worse than that. It is the beginning of the end of retail as we know it.
If your business has been impacted by a bankruptcy or other insolvency event, you need to call an experienced bankruptcy attorney right away to protect your rights.
About the Author: Jeffrey P. Bast has been practicing insolvency law for more than 21 years. He represents clients on bankruptcy and bankruptcy avoidance, emphasizing corporate reorganization, workouts, creditors’ rights, and commercial litigation both in and out of bankruptcy court. He also provides insolvency-related transactional advice and has extensive experience with all aspects of bankruptcy sales and acquisitions. Jeff represents corporate and individual debtors, shareholders, trustees, receivers, indenture trustees and creditors’ committees, as well as secured and unsecured creditors in complex workouts, reorganizations, and liquidations.