New day, new bankruptcy: Bon-Ton bids goodbye

The state of the retail sector and the increasing bankruptcies of popular retailers have been discussed at length in every forum, so that so that we have reached saturation point. So far this year, many well-known names have decided to shut down business as they could not keep up with the increasing pace of online shopping. As Toys R Us continues with the liquidation of its stores, another retailer gets ready to go down the same path.

Department store chain Bon-Ton Stores Inc. will wind down its operations and begin the complete sale of its inventories and other fixtures soon. Bon-Ton — which owns the Carson’s, Boston Store and Younker’s brands — found itself tangled in debt in a difficult retail landscape. The company’s attempts to survive by reducing expenses and investments hurt its ability to keep up with the cut-throat competition.

A bid by mall operators Washington Prime Group and Namdar Realty Group to keep a portion of Bon-Ton stores open failed, and a JV by Great American Group and Tiger Capital Group won the auction for Bon-Ton’s inventory and assets.

While scores of retailers like Bon-Ton have decided to close down, many like J.C. Penney and Macy’s are still trying to hold ground. They will be aided by the Bon-Ton’s bankruptcy regarding market share. In fact, even struggling retailers like Stein Mart will benefit in terms of gaining leases.

Real estate services firm CoStar Group estimates that over 90 million square feet of retail space is likely to close in 2018. This estimate, which includes the Bon-Ton stores, is on track to exceed the 105 million square feet that closed last year.

As more and more retailers vacate spaces, mall owners will find it difficult to replace them with newer tenants. The current state of the retail sector is not likely to foster store openings, and expansions so many real estate owners will have to look at options for redevelopment and these usually come at high costs. The current environment is a tough one, and as Bon-Ton bids goodbye, we can expect others to follow.