Bankruptcy and Restructuring Advisor, David Berliner

Julia Raymond:
Hi, for today’s episode of RETHINK Retail, I’m joined by my guest, David Berliner. David currently leads BDO’s Business Restructuring, and turnaround services practice and lends his insight to firms retail and consumer products advisory services division. He brings over 25 years of experience and financial advisory services focused on retail, manufacturing, distribution, and services industries. David, will you kick us off by telling a bit more about yourself and your background in the retail industry?

David Berliner:
Sure. Hi, everybody. For the past 22 years, I’ve been a member of BDO’s Business Restructuring Services Group. The focus of our work is on distress businesses. I had been involved in numerous bankruptcy and work out situations representing unsecured and secured creditors as well as debtors. And over the years, I’ve been involved in various retail bankruptcy cases. A few of them include Sports Authority, Hastings Entertainment, Frederick’s of Hollywood, Fresh & Easy, Circuit City, Quiznos, Furniture Brands, Borders, Books, Acres, Footwear, Jackson Hewitt, Ultimate Electronics, Against All Odds, KB Toys, Filings, Basement, probably Miller and Montgomery Ward. I’ve also authored various articles and blog posts on bankruptcy issues in the retail industry. I’m a member. I’m also an author of BDO’s Bi-annual Retail in the Red Bankruptcy Update, which provides an overview of US retail bankruptcies and store closures.

Julia Raymond:
That’s excellent. And that was quite a laundry list of brands like Sports Authority, Borders, KB Toys, or some of the ones I heard you say. So really excited to have you on the show today and talk about that because store closures are definitely top of mind, but there’s also a lot of positive outcomes that we’re seeing starting to develop and going into the new decade. So thanks for joining.

David Berliner:
Sure.

Julia Raymond:
The first thing I want to talk about, so you mentioned you are the author of BDO’s annual report in store closures and you released store report earlier this year revealing that retail bankruptcies and store closures have accelerated this year compared to 2018 and it tied the increase of this year’s bankruptcies to actually 2018’s holiday shopping season, noting that 2018 saw the weakest performance in sales since December, 2009. So can you expand a bit on these findings? How did a poor holiday shopping season push retailers like Payless, for example, into bankruptcy? Was 2018 the last straw for a few struggling retailers?

David Berliner:
Sure. So the 2018 holiday season failed to meet expectations primarily because of what happened in the month of December. In that month alone, retail sales dropped 1.6% from the prior month. So up to that point through November, it was actually looking very good and then it kind of fell off very suddenly. The poor December sales performance thing contributed to about 10 retailers that filed for bankruptcy in the first quarter of 2019, and as you mentioned, that included Payless, also included Gymboree, and Charlotte Russe. And the bankruptcies of just those three retailers, just those three, led to the closure this year, about 3,700 stores. Most of these retailers were already struggling heading into the holiday season last year. And what happened was they just didn’t have the financial resources to weather that poor December. So, for example, you mentioned Payless. They first filed for bankruptcy back in April, 2017, and then they emerged from bankruptcy August of ’17, and then they filed again this February of ’19.

David Berliner:
So just a little under two years, about a year and a half later, they filed again and the second time was a liquidation. So clearly, that was kind of their last straw. They didn’t have a lot of room for error when they emerged. Also, Gymboree, just like Payless, they filed for bankruptcy the first time in June of ’17. They emerged from bankruptcy in September, just a few months later. And then they filed again in January of 2019, so just a little over a year later. And again, they primarily liquidated and sold their brands off in bankruptcy. So, again, for a lot of the struggling retailers just coming out of bankruptcy isn’t enough. They don’t always have enough financial breathing room to weather sudden downturns. And I think that’s what happens a lot of these based on last year’s results.

Julia Raymond:
Absolutely. And, like you said, coming out of bankruptcy isn’t always enough. And there was another report from a core site research and they predicted over 12,000 stores would be closed this year. And IHL Group reported that one for every retail store that closed this year, for everyone, there were five new stores on average that opened their doors. But most of these were in the convenience categories. So from your perspective, why are categories like apparel seeing so many closures and then we have convenience stores and discounters just cutting ribbons left and right.

David Berliner:
All right. So I think there’s a couple of things going on. In terms of apparel that you mentioned having so many closures, I think the simple reason is the US just has too many brick and mortar stores. We have much more retail square footage per capita than any other industrialized country. So, for example, the US still has about 23 square feet of retail space for every person and other developed countries have a lot less. So Canada, the next closest to us is 16 and then it drops down considerably. The UK, five, Germany between four and five, and France four, and again, the US has 23.

Julia Raymond:
That’s huge.

David Berliner:
So with that you then have … when you look at retail categories like apparel, they’ve seen the bulk of the store closures that we’ve been talking about. And I think there’s several things that are going on, particularly with apparel. Consumers are simply buying less apparel than they did in prior years. The trend has been away from durable clothing to more disposable clothing, which is also cheaper and therefore there’s a lot less of a need for more full, more attire than there used to be and more desire to consume other things. So casual Friday has now morphed into everyday business casual. So fewer and fewer employees need a separate wardrobe for work.

David Berliner:
And if you look at US Bureau of Labor Statistics Information, you go back 30, 40 years, 1977 and 1987, households spent about 6% of their spending on apparel. Fast forward 30, 40 years in 2017, the last time they did the study that was down to 3.1%. So that’s a 50% drop in three to four decades. So people are just buying a lot less apparel these days. And then other reasons, I think, about 35% of apparel sales are now happening online and online sales of apparel actually growing about three, 4% per year. So that’s taking a sales away from the brick and mortar apparel stores. Then mall traffic, because those sales are decreasing, mall traffic’s declining and many of these mall based retailers are dependent on the overall 10 Knicks of the mall for their sales. So as the number of customer shopping goes down, there are fewer sales, stores start to go out of business, and then the cycle just continues. A lot of these stores are becoming redundant, so there’s not much of a difference between a lot of the specialty apparel stores anymore.

David Berliner:
And I think the other factor is a lot of the stores are just too big. Now that you have the internet and the ability to have good ship to consumers so quickly, you don’t need as much inventory in the store as you did years ago when a lot of these malls were built before there was the internet in this quick shopping. Another interesting thing is on the size of the store is being too big. You look at Target, you mentioned convenience stores and discounters. So Target has found success with its small format concept, which is creating an inroad for them in the dense urban markets, the cities, where they haven’t been before, and also near college campuses. And they just announced that they’re opening about 30 of these small format stores per year because they deliver strong financial results for the company. They show much higher than average sales productivity than their larger format stores and meaningfully higher gross margin rates. So I think that’s telling as well.

Julia Raymond:
Absolutely. And you made a bunch of really great points that explains some of these factors with store closings. And I think it’s interesting because, like you said, stores are changing, Target’s finding a lot of success with their smaller format stores, opening, I think you said, 30 next year?

David Berliner:
That’s what they said, yeah.

Julia Raymond:
So that’s quite a few. And I know they just opened, I think, their 10th store in the Manhattan area, a small format. So it’s interesting to see how these new formats are being rolled out. And I wanted to ask you, because we had the retail doctor on our rundown podcast on December 9th and in regards to this year’s Black Friday, Cyber Monday promotion, he said, “What’s a winner? I’m sorry, I gave 60% off and I’m a winner?” And he was speaking sort of to the fact that retailers can’t rely on offering the biggest discounts and competing with retail giants like Walmart, or Amazon, or probably even Macy’s, because eventually they’ll kind of seal their own fate. So when it comes to offering great online discounts and being more of a traditional brick and mortar retailer, how do you see them competing if not by discount? Do you agree with this sentiment?

David Berliner:
Yeah, I think that’s part of what’s hurting some of these brick and mortar retailers. And I think the hardest hit ones are going to be those again that primarily sell apparel. And a lot of those are these mall based specialty stores and the department stores that we’ve been reading about struggling a bit. The retailers that have had the most store closings in the first half of this year were apparel specialty stores and they accounted for about 36% of the total closures. That’s up from 14% in 2018. And footwear retailers accounted for about 20% of the closures, a lot of that was Payless, and that was up for 8% in 2018.

David Berliner:
In addition to that, there was just an announcement yesterday, a smaller retailer RTW Headwinds formerly known as New York and Company. They just announced they’re going to close 30 stores in the coming weeks following disappointing third quarter results. They said they had a 5% net sales decline and a 4% decrease in comp store sales and a lot of that is because they can’t lower their price to compete with the online merchants who have much lower costs, don’t have stores, they can get their products sometimes cheaper than the brick and mortar retailers. And other than the apparel, I think we’re also seeing it in some of the home goods stores. So, for example, Pier 1 and Bed Bath & Beyond. Pier 1 recently reported their comp store sales are down 12.6% in the second quarter, and they’ve reported a very sizable loss.

David Berliner:
So I think eCommerce is also taking some of these sales. So years ago, these stores didn’t have to worry about eCommerce, so they got all the sales, but now they know they have to share some of the sales with the eCommerce. And I think, like we just said before, the poor performance by these apparel and the mall based home goods stores like Pier 1 are bad news for these malls in the US where traffic is declining. That’s already undermining other existing brick and mortar stores at the mall, so it’s kind of a self fulfilling prophecy and it’s likely accelerating this vicious cycle of further store closing. So like we’ve seen, when a mall loses an anchor, like a Macy’s, or a Sears, or JC Penny, it really hurts the tenants of that mall and that side of the mall where the department stores were located.

David Berliner:
And in addition, I think what we’re seeing is the foot traffic in many of the malls. It’s just not nearly as productive as it used to be, meaning people would go to the malls years ago and they would buy stuff and take it home with them, and now we’re not seeing the same level of productivity. So that’s part of the reason why I think many more of these retailers are carefully looking at their portfolios and trying to reduce the number of stores to get them more in line with the other Western industrialized countries. And then, I think, the other thing we’re seeing is that it’s not just all retail doing bad. In the first half of the year we saw that earnings actually rose for retailers that were outside these malls, but dropped almost 29% for some mall based retailers. And this just is further support for why mall based retailers are continuing to rationalize and close stores while say convenience stores and discounters are actually adding stores.

Julia Raymond:
And would you say you’re in the camp that’s predicting malls will be a thing of the past or is that too extreme?

David Berliner:
I think that’s too extreme. I think we just have too many malls, just like we have too many stores. I think there are 1200 malls in the US right now. And many of them were built years ago and don’t have the amenities as some of the newer or class A malls. So I think where we’re going to see is survival of the fittest. We’re going to see the stronger malls that have entertainment and other offerings continue to succeed. But the older malls that are losing key tenants are either going to have to reinvent themselves and find other tenants other than retailers to add to their mix or they’re going to have to close and move into something else. And I think we’re also seeing consumers more willing to shop out of the malls. That’s one of the reasons why these discounts stores are doing so well. And in particular, if you look at the discount segment, Dollar General, Dollar Tree, they’ve been expanding rapidly and posting very strong sales results.

David Berliner:
So while we’ve been talking about store closings, those two alone have added almost a thousand stores this year. And I think one of the reasons why they’re so successful is they really don’t have the internet competition. Those kind of stores, it’s kind of like a treasure hunt experience. They can offer that because you really can’t replicate that on eCommerce because the average ticket prices for their stuff is under $10 for that area. So it’s just not economical for an eCommerce vendor to compete given the cost of shipping. So they’ve kind of come up, their niche is almost an area where the eCommerce vendors can’t attack them.

David Berliner:
So when you look at their results, Dollar General reported that it had its best customer traffic and same store sales increases the third quarter of this year in five years. They’ve been able to handle the increased tariffs as well because they haven’t really diversified supply chain and a good cost controls. And Dollar Tree, which is the one who acquired Family Dollar, they’ve been accelerating the optimization of those Family Dollars forth both by closing some of the poor ones and then reentering them to Dollar Tree. So I do think that segment’s going to continue to grow and that includes what we talked about before, Target with these smaller format stores and just the other discounters continuing to do well at the expense of the mall paced stores.

Julia Raymond:
And I love your example there about the Dollar General and stores that are similar, not having a lot of eCommerce competition simply because it’s not viable versus the more macro view of just, the rise of the have and the have nots and people looking for the discounts. So that’s interesting because I think that is a really great point. You’re not going to buy Dollar General items online. So I haven’t heard that one as much. And from your perspective I wanted to ask, is there any example that you can share of a retailer that was financially stressed that successfully restructured to avoid liquidation? Because we’re seeing so many things going on. I mean, just with the sale of Barney’s recently and the plans that have been announced for that. So what’s a positive example?

David Berliner:
I think, obviously there’s been a lot of filings of retailers over the last few years and as we discussed a little while ago, a couple of them, like Payless and Gymboree were so-called chapter 22 is when they filed first a couple of years ago and then the second time filed to liquidate. But there are other stories of successful restructuring. So there’s not just not as many as there used to be. One of the examples so far where a successful restructuring … was Mattress Firm. So I don’t know if you know that company well, but prior to the bankruptcy case earlier this year, that company had expanded rapidly. They had made a lot of acquisitions since 2011. Back in 2011, they bought 236 mattress giant stores, and then 2014 they bought 131 back to bed stores, 2015, 314 sleep chain stores, and then in 2016, the big one, they bought over a thousand sleepy stores.

David Berliner:
They had significantly expanded their number of stores. Obviously, they took on a significant amount of debt and then they were purchased by a South African retail holding company called Steinhoff International after 3.8 billion back in ’16. So at that point they’ve [inaudible 00:19:19] billions of dollars in intercompany debt on their balance sheet and they were struggling to secure additional financing because support is now massive operation with all these stores. So they ended up filing for bankruptcy in October of 2018, so just about a year ago. And they blamed their financial troubles on this aggressive rollout strategy we were just talking about where they purchase these other mattress chains and then they rebranded those stores as Mattress Firm. That resulted in some cases, because of the way they did this, they had lots of stores that were too close together and in some cases they actually had stores right across the street from each other.

Julia Raymond:
Like Starbucks. Yeah.

David Berliner:
Yeah, exactly. And these are mattresses. These are not things you buy every day like coffee so that was a real problem. So again, they filed on October of ’19, October 5th to be exact, and they confirmed a bankruptcy reorganization plan just about 45 days later on November 16th and the plan went effective five days later in November 21st. And what was this plan? Well, the plan provided that it would fully repay its term loan and all its unsecured debt, that it would close 700 stores because again, it had too many stores too close together after the acquisitions. And then the other interesting aspect was the owner, Steinhoff, agreed to forgo a recovery on its intercompany debt. So with that Mattress Firm made it through chapter 11 in five weeks from this prepackaged planner, organization with their creditors and their owner.

David Berliner:
They close 700 of their 3,300 stores. They wiped out $3.1 billion in intercompany debt. And they also provided the company with $525 million exit facility to help pay for some of these debts they were repaying and to fund the company. So in summary, they were able to negotiate a viable restructuring plan with their owner, the secured and unsecured creditors, and they used the bankruptcy process to close about 20% of their stores. So they got it down to a manageable store base, and then they secured some financing to enable them to 60 going forward. So is it a guarantee that it won’t be a chapter 22? No, but at least they gave themselves a chance to succeed post-filing. So I think that would be an example of our recent success at least so far.

Julia Raymond:
Definitely. And I would be curious to know how many of those 700 stores were ones that were preexisting or ones that they acquired since they started an aggressive acquisition plan in 2011, I think you said.

David Berliner:
Yeah. That I don’t know. But on my suspicion is whilst they bought these overlapping chains, that’s what created some of that problem. So most likely it was some combination of that. And bankruptcy has a very favorable provision on store closures in terms of the lease costs. So there is a provision in the bankruptcy code that caps the lease liability to effectively one year, which is a huge reduction for retailers that may have longterm leases. Outside of bankruptcy you’d be liable for the entire term of the lease, but with the bankruptcy filing, it’s effectively limited to about a year. So that is one of the advantages of bankruptcy for a retailer as you can get out of some of these leases that you determined are onerous or not performing well and not get stuck with a huge liability. So that probably also helped them by reducing their footprint to more of a right size footprint and not having the huge costs to bear as well.

Julia Raymond:
Sure, sure. Yes, that’s a great example of Mattress Firm. So I’m excited to see where 2020 and beyond takes them. And you brought up leases, so I wanted to ask, there’s been a lot of discussion around leases and agreements moving away from being simply transactional. So how was the conversation changing when we talk about retail real estate?

David Berliner:
Well, there’s a couple of things going on. One is the accounting standards are changing for the way leases are classified on the balance sheets. So previously, leases were not reflected. The lease liability was not reflected on the face of the balance sheet as a liability. It was what’s called an off-balance sheet liability. The only way you could see it on financial statements was in the footnote disclosure. So when you looked at a retailer’s balance sheet, all those potentially millions of dollars of lease liabilities weren’t included in the liabilities. That is now changing. It already went into effect for public companies. And for private companies, it’s soon to go into effect. So what that does then is it requires the liability to be on the balance sheet. You also get to put a corresponding asset on the balance sheet to reflect the right to use of that asset, meaning if that asset is productive store, you’re going to get the profits that that lease generates. So it’s not just the liability, you also put a corresponding asset on the books, but that changes the thinking a little bit for companies with loans and are based on various financial metrics tied to the financial statements. So that’s one aspect.

David Berliner:
I think the other aspect is to try to avoid these longterm leases. I think with all the changes going on in brick and mortar, people are realizing that there’s not as much of an advantage as there might’ve been years ago to pieing up on very longterm leases. The department stores years ago would have up to a hundred-year lease or many big tenants would have 20 years or more with options. So today you’re seeing many more leases that are more like five years and even less. And we’re also seeing a renewal of this popup store phenomenon where these empty storefronts, landlords are willing to rent them out for short periods of time, the so-called pop-up concept in order to attract tenants to the malls and spaces to provide the foot traffic. And it adds a sense of excitement for customers as they come through. So that’s some of the changes that we’re seeing and I think that those kinds of things will continue.

Julia Raymond:
Those are two good points. You said the changes with lease liabilities is on the balance sheet for retailers and then also are for the landlords.

David Berliner:
Yeah, and the Barneys if you’re following that bankruptcy as an example, their Madison Avenue location in New York. Now that it’s been acquired, and you mentioned it before it was kind of a bad result for Barneys and that they weren’t able to really get a buyer that was looking to continue the company as a going concern and they had basically sold their intellectual property to a company that’s not really interested in running the store. So most of the stores are going to close. But in this Madison Avenue store they’re planning to evolve that into a pop up retail experience and they’re hoping to bring together kind of an electric mix of boutiques, art and cultural installations, and other exhibits into this place, try to create excitement and make it a destination for customers to want to go. So it’ll be interesting to see how that works out.

Julia Raymond:
Oh, very interesting. And if they actually will move forward with having a Barneys brand pop up inside of Saks, which I think was mentioned as a possible plan.

David Berliner:
And I’ve always thought this pop up concept was very interesting because you take Halloween as an example and you see around Halloween the classic popups where you have the stores that open usually right after labor day and they sell Halloween costumes and Halloween decorations right through October 31st and then they shut down. So these are businesses that almost all of their sales occur in that two months of the year. And by having a pop up, they’re not paying rent and employee costs for all the other months, yet they can capture virtually all of their sales in that two month period. So it’s a very interesting concept for a product that’s sold very seasonally and doesn’t really require you to be selling that product all year round.

Julia Raymond:
Sure. That’s a great example. And it’s like Cyber Monday is the big day for a lot of eCommerce companies. I think it was almost 350% more sales occurred on that single day than any other day for most eCommerce retailers this year. So it’s an interesting thing. So it sounds like you are on board with the popups.

David Berliner:
Yeah, I think it’s a way to use some of the excess space. I think, if you had the ability to rotate, then there’s almost like there used to be years ago in the malls where they had the different carts in the hallways. That’s kind of what these are where you would have temporary things for a few months and it would add some excitement and change. So I think that is something, it brings … it also enables retailers to test out a location. So if it turns out that it’s just a really good location, then they negotiate to stay longer.

David Berliner:
So they’re not committing first, pre-building the store, and then finding out that location doesn’t work, which I’ve seen in many of the retail cases I’ve done over the years where companies have expanded into locations that they thought were going to be big hits and they turned out to be just the opposite. That can be a huge financial burden then because you’ve now signed the longterm lease. You put all this construction money into fixing up the location to be the way you want it and now you don’t have the customer flow. So the pop up allows you to … you don’t usually spend a lot of money on the pop up. You usually just throw out some racks and get in there. But if you have a very good result, then that might justify, “I’m going to a location in that area.”

Julia Raymond:
Of course. So financially potentially a smart move to test fast, fail fast, learn fast, all of the above. And I wanted to kick off the last question here with specific to your expertise area in the retail, bankruptcy, and restructuring landscape. What changes or trends do you see on the radar for 2020 and beyond this new decade we’re in?

David Berliner:
Well, I think we’re going to see a continuation of what we’ve seen the last couple of years. We talked earlier that this year there were about 10 retail bankruptcies from companies that were mostly exclusively apparel or footwear. And I think that includes Forever 21 Avenue, Barneys New York, as we just mentioned, Charming Charlie Diesel, Payless, we talked about, Fullbeauty brands, Charlotte Ruse, Gymboree. I think we’re going to see a continuation of shakeout in certain of the retail areas like apparel and in certain other areas. Credit Risk Monitor who monitors these bankruptcy filings, they’ve reported that they have 28 retailers that they have on their watch list, our risk for bankruptcy in 2020, and half of those are companies that sell apparel.

Julia Raymond:
Wow.

David Berliner:
And apparel stores are one of the most distressed parts of retail since again, as we mentioned before, it’s really saturated with oversupply and over-stored. So they’re going to continue … department stores and doing it, a lot of the specialty apparel stores, they’ve been doing it by closing the stores. And then the other trend that’s really hurting them is also what we talked about before, that consumers are spending less money now on apparel and apparel sales are shipping online and that has eroded the margins of the brick and mortar stores and can contribute for this over supply issue. And the other emerging trends in apparel are out there that we’re going to, I think, begin to see in the next few years that is these trends toward wrinkle resale and even sustainability, particularly among younger consumers are adding further pressure to retailers. And again, the distressed retailers can’t handle these kinds of pressures, they just don’t have the financial resources to deal with. Now, rental resale, sustainability type issues that these younger consumers are demanding.

David Berliner:
So in order to continue to rationalize the number of stores, to bring it down to really what is the right number to have to be sustainable and profitable, I think we’re going to continue to see retailers are likely to continue closing stores in 2020. I just don’t think it will be at the level we’re seeing this year. I think it’ll start to taper off, but we’ll still see. And it’s not going to be just the distressed retailers that are closing stores. I think we’re also seeing in a strategic repositioning, even by the stronger retailers. The healthy retailers are looking to maximize the profitability and as they see stores beginning to underperform, in the past there was the incentive to keep stores open because that’s what wall street wanted, but I think now people realize that it makes much more sense to close underperforming stores and put back financial capability elsewhere.

David Berliner:
And the problem as we also discussed as many of these stores that will close in the next couple of years are likely to be in B and C malls. So we’re going to see more impact on some of the shopping malls in the next couple of years. Retailers that are struggling now going into 2020, just like we saw last year in the last December, they’re going to have very little room to maneuver if the recession were to occur or a sales like last year slump off this December, then I think you’ll see some bankruptcy filings in the first quarter of next year because of that if that’s what happens.

David Berliner:
On the other hand, the news coming out on the economy’s been pretty positive. The jobs number just came out yesterday or today, that the US created 224,000 new jobs in November, which is a good sign. Unemployment’s still very low. Interest rates are very low. So, again, yes, we have the risk of tariffs and we’ll get to that in a minute, but other than that the positive economic factors seem to indicate that a recession is unlikely in the next few months. But retailers still need to be cautious about what might occur and I think the ongoing trade [inaudible 00:35:22] with China are likely to continue and they’re going to continue to happen if impact on the economy, especially if the additional tariffs that are slated to go into effect December 15th do occur. One thing that has been interesting this year because of the tower for risk, a lot of retailers started bringing in inventory earlier, and so they really have a lot of high levels of inventory this year.

David Berliner:
If those goods don’t sell, if the holiday season does start to slack off and retailers are not unable to sell off all that inventory, then what they’re going to do, like every January, you’re going to see big sales and that could have an impact on profitability if retailers have to slash prices to move the goods. And obviously, if there are any additional tariffs, they’re just going to have an adverse impact on the economy and particularly on retailers in 2020 as they feel the effects of the higher prices. One other interesting thing that I do think could have an impact in the next couple of years is the level of consumer debt. While the economy’s doing well, no one’s really focusing on it right now, but consumer debt is at an all-time record. The [inaudible 00:36:38] needed $4 trillion for the first time ever according to the federal reserve and the largest component of that is mortgage debt, which also reached the record in the first half of this year, $9.4 trillion.

David Berliner:
So you’re having a lot of consumers that have a lot of mortgage debt and in addition to that, consumers are now spending about 10% of their disposable income on non-mortgage debt, including credit cards, auto loans, student loans. All these debts are tied to interest rates. So now that interest rates are low, people can afford it and it’s not really putting a crimp on their wallets. But if interest rates do start to increase again, and that comes right out of their pocket, and now they have to pay the interest on that, and that takes money away from what could otherwise be spent on retailers. So I do think this rising debt burden could put pressure on consumers and ultimately lead to reduced spending. It’s just a matter of when that might happen depending upon the way interest rates go.

David Berliner:
So in short, looking forward to next year, I would expect to see some additional bankruptcy filings in the retail area. Maybe not to the extent that we’ve seen in 2019 in the first half where we had so many. So I think it’ll be a slower pace, but I do think with this heightened store closure that will continue, but again, not at the pace you mentioned before, targeting 12,000 closures this year. I think we’ll see the number get next year, but still be a reasonable number.

Julia Raymond:
And I love everything you just said. That was a great recap. I think you said five or six different things. The shakeout of certain apparel retailers, especially footwear as well. And then you said there are 28 retailers on the watch list that might have potential bankruptcy’s and then you mentioned the consumer behavior, buying less apparel, buying more online, and some trends with the resale and rental market. And then just restructuring. Even companies that are doing well you said might consider some restructuring next year, which then brought us to trade disputes and some rising consumer debt concerns that could obviously impact retail in 2020 and beyond. So really good points, clearly laid out. So thank you so much. It’s been a joy to have you on the show, David.

David Berliner:
Thank you. It’s a pleasure to be on.