The bleak state of retail has just seen another canary in the coal mine fall to the bottom of the cage.
While store closures and bankruptcies are moving in a record pace, now we are seeing for the first time in last five years credit card defaults are climbing as well.
Default rates on US credit cardholders have risen 13% from last year’s levels, as bank issuers have recently stepped up their reserves on their balance sheets to deal with the tapped out consumer, according to the S&P/Experian Bankcard Default Index.
The consumer credit card default rate, which has risen over the last five months, is back to 2013 levels. And it’s not just credit cards, auto loan and mortgage defaults or impairments are also climbing to years high levels.
The US consumer, who has not seen a significant raise in wages for almost a decade, is losing the war of attrition. And as the Fed eyes further rate rises the interest on credit purchases will rise as well leaving larger balances and further defaults.
On the pending retail bankruptcies apparel executives see a great shake out.
“There are just too many stores, especially those that sell clothing, Urban Outfitters Chief Executive Officer Richard Hayne said.
“This created a bubble, and like housing, that bubble has now burst,” said Hayne. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”
According to S&P Global Market Intelligence report, there are 10 retailers that are at high risk of defaulting this year Here are those companies ranked in order of likelihood.
- Sears Holdings
- DGSE Companies
- Appliance Recycling Centers of America
- The Bon-Ton Stores
- Bebe Stores
- Destination XL Group
- Perfumania Holdings
- Fenix Parts
- Tailored Brands
- Sears Hometown and Outlet Stores