The risk of obsolescence is looming large on the brick-and-mortar retailers. With many traditional retailers closing stores across the country and the continuous decline of foot traffic, it is certain that consumers are migrating towards online retailers. Given the fact that online shopping is usually cheaper and more convenient than traditional shopping, it is no surprise that retail stores are closing down left, right and center.
The secular trend of consumers migrating to online retailers will ultimately result in several bankruptcies across the brick and mortar retail space. The companies with high debt will likely go out first, which is why I think investors should stay far away from them or even short them. The company with probably the biggest risk of bankruptcy is J.C. Penney (NYSE:JCP). The company was already distressed before online retailers started gaining traction and as a result, has accumulated a huge debt of roughly $4 billion. Continue Reading »