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Dec 26, 2017

Retailers may be at risk for business bankruptcy in 2018

Unprofitable stores going out of business is nothing new, but there has been a particular hit to retailers in the last year. Canadian stores such as Sears and Toys 'R' Us have faced business bankruptcy, while others have struggled over the course of the year. Ontario retailers are expected to continue facing fundamental changes as digital technology and negotiations regarding the North American Free Trade Agreement continue to affect their operations.

Along with store closures in Ontario and throughout Canada, retailers in the United States have also seen many challenges. It is expected that the United States will see a record 8,600 store closings in 2017, up from the previous record of 6,163 closures in the 2008 recession year. Popular names like Radio Shack, Gymboree and Payless ShoeSource (though not in Canada) all announced filing for business bankruptcy protection during the year.

The 2017 trends are attributed to online shopping, which has increased in popularity among people of all ages, especially young adults. RBC's projections show 2018 GDP growth at 1.9 percent, which is less than the 2.9 percent growth that was seen the year prior. NAFTA negotiations could also cause challenges, as the end of the trade agreement could cost Canadian stores to lose an aggregate of between $4 billion and $21 billion per year.

There are a few other things that may influence the rate of business bankruptcy among Ontario retailers. These include interest rates, which are expected to increase by at least half a percentage point, and high debt levels among Canadian consumers. Businesses that are considering filing for bankruptcy in the new year can benefit from the support of a lawyer.