NEW YORK, April 5 The default rate among U.S.
retailers will jump to 9 percent, equivalent to $6 billion worth
of debt, in the next year as consumers keep gravitating to
discounters and online shopping, Fitch Ratings said on
The rating agency's view came the day after Payless
ShoeSource filed for Chapter 11 bankruptcy, raising the sector's
default rate to 1 percent from zero in March.
"Fitch's expectation of increasing retail defaults stems
from increased discounter (including off-price and fast-fashion
apparel) and online penetration, and shifts in consumer spending
toward services and experiences," it said in a statement.
Payless was on Fitch's "loans of concern" list due to its
risk of default within 12 months.
Retailers that rely on sales from stores that stand alone or
are in shopping centers have struggled, leading some traders to
bet on declines in those stocks and on property bonds with heavy
mall exposure, analysts said.
"Brick-and-mortar retailers are facing increasing
competition from their purely online counterparts, and this is
being reflected both in decreasing sales and foot traffic, as
well as lower stock prices," Citi analysts Anindya Basu and
Calvin Vinitwatanakhun wrote in a research note on Wednesday.
The CMBX series 6 BBB- index index, which
tracks one group of commercial mortgage-backed securities, has
fallen about 10 points in price since late January to 87 on
Wednesday due to its high exposure to shopping malls, they said.
The level of bearish bets against these securities may be
overdone, as the average CMBS exposure to malls is less 10
percent, the Citi analysts said.
They instead recommend buying credit default swaps on a
basket of retailers as protection against defaults.
(Reporting by Richard Leong; Editing by Lisa Von Ahn)