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Retail sales — reflecting consumer spending at stores, restaurants and websites — fell 0.3 percent in May, the biggest decline since January 2016, the government reported yesterday, according to the Wall Street Journal. While much of that reflected less spending on gasoline — the average price for a gallon fell in May — Americans cut spending broadly. Sales suffered at big-box stores, car dealerships, electronics retailers and restaurants. The decline may have been a blip — sales are still up 3.9 percent this year compared with the same period in 2016. But many economists are puzzled that consumers aren’t shelling out more, given the stability in the labor market and solid household finances. Read more. (Subscription required.) 

To see U.S. retail spending since 1992, view yesterday’s ABI Chart of the Day. 

Sears Canada Inc. today raised doubts about its ability to continue as a going concern, saying cash and estimated cash flows from operations were not expected to be enough to meet obligations over the next 12 months, Reuters reported. The retailer also reported a 15.2 percent decline in first-quarter sales, continuing a trend of declining sales since it was spun off from parent Sears Holdings Corp. in 2013. Sears Holdings has a nearly 12 percent stake in Sears Canada.

After years of struggling to compete with Amazon, brick-and-mortar retailers have been closing hundreds of stores amid declining sales, Money magazine reported today. Analysts are even predicting that one-quarter of America's malls could close within the next five years. A report released last week by Moody's Investors Service indicates that the situation is worse for retailers now than it was during the doldrums brought on by the financial crisis. The new report gives ratings of Caa or worse—defined as "subject to very high credit risk"—to 22 major retailers. That's up from 19 when a similar report was issued in February, and it tops the high (also 19) recorded during the Great Recession.

As retailers close bricks-and-mortar stores at an accelerating pace, shopping-center landlords like Starwood Capital are facing a vexing question: What to do with all this empty space? Their solutions are varied but all have a common element: reducing, or even eliminating, retail from the equation, according to a Wall Street Journal commentary today. Some landlords plug empty spaces with churches, for-profit schools and random enterprises while they figure out a long-term plan. Others see a future in mixed-use real estate, converting malls into streetscapes with restaurants, offices and housing. And some are razing properties altogether and turning them into entertainment or industrial parks.

Between 250 and 650 retail stores, including Ann Taylor, Dress Barn, Loft, Lane Bryant, Justice, Dress Barn and Catherines stores are closing over the next two years, according to parent company Ascena Retail Group, UPI reported on Friday. Chief Executive David Jaffe said that 250 locations will definitely close down, and another 400 will close their doors unless the company can negotiate lower rents at those locations. The locations are closing over the next two years and also include Justice, Maurices and Catherines. It's unclear how many of each specific brand are expected to close, though 250 locations will definitely close. Up to 400 others are also being considered for shuttering. Jaffe said the retail group is encountering "persistent traffic decline" at its brick-and-mortar stores.

Women’s clothing retailer BCBG Max Azria Group LLC announced bankruptcy deals worth $165 million to sell off its core businesses, which would live on as a going concern, the Wall Street Journal reported today. Marty Staff, BCBG’s interim acting chief executive officer, said that the proposed transactions were “the best possible outcome for customers, vendors, business partners and our employees who are the lifeblood of the company.” Marquee Brands LLC and Global Brands Group Holding Ltd. emerged as willing purchasers after a marketing process in which nearly 60 interested financial and strategic buyers signed confidentiality agreements to assess the value of the retailer’s assets. Subject to bankruptcy court approval, Marquee would buy BCBG’s intellectual property assets for $106 million in cash, while Global Brands would pay $23 million cash to operate wholesale and e-commerce operations and up to 22 standalone store locations. The proposal also includes a royalty-sharing agreement that provides BCBG lenders with an interest in Marquee’s use of the purchased intellectual property. The transactions’ implied value is roughly $165 million, according to bankruptcy documents.

Gymboree Corp. filed for chapter 11 bankruptcy protection Monday after retaining a turnaround firm last month to assist with its operations, the Wall Street Journal reported. The children’s apparel retailer, which also announced the departure of Chief Financial Officer Andrew North, has been in discussions with lenders since the beginning of the year as it grapples with a heavy debt load, much of which stems from Bain Capital’s $1.8 billion leveraged buyout of the retailer in 2010. In conjunction with the filing, the company said that it secured commitments for up to $308.5 million in additional financing. Public filings show Gymboree has some $1.043 billion in outstanding debt, of which about $872 million is due in less than a year. Gymboree worked with turnaround firm AlixPartners LLP prior to its bankruptcy filing, and Liyuan Woo, a director at AlixPartners, will serve as interim CFO until a permanent replacement is identified.

In an industry reeling from bankruptcies, vacant storefronts and plummeting sales, Nordstrom is one of the few department store chains to show promise, the New York Times reported today. The higher-end clothing retailer invested in its e-commerce business early on and was judicious about not opening too many new stores, avoiding many of the pitfalls that are driving other retailers to ruin. But even from a position of relative strength, Nordstrom is struggling to navigate a broad upending of the retail industry, as shopping malls lose their appeal and more customers choose to buy goods online. Members of the family that founded Nordstrom in Seattle a century ago — and who still own a substantial portion of its shares — said yesterday that they were exploring ways to shift the company into private ownership. The move reflects optimism that a private equity firm or a sovereign wealth fund would be willing to invest in a large retailer, after many major investors got burned in debt-fueled buyouts that went bust.

The list of U.S. retailers with troubled financials that could make them potential bankruptcy risks, now totals 22, according to Moody's Investors Service — topping the 19 recorded at the peak of the Great Recession, USA Today reported today. Confronting a major shift to online shopping Sears Holdings, Neiman Marcus Group and others on the list face a "perfect storm," senior Moody's retail analyst Charles O'Shea said yesterday. The ranks of distressed firms and retail sector defaults are likely to grow during the next 12 to 18 months, the ratings agency predicted in a separate report issued on Wednesday. Nonetheless, the companies on the distressed list represent just 16% of the retailers analyzed by Moody's. "The majority of retailers remain fundamentally healthy," O'Shea said in a statement issued with the report.

The owner of the Joe's Crab Shack casual dining chain filed for chapter 11 protection yesterday amid falling sales, and plans to sell the company for at least $50 million to a private equity firm, Reuters reported. Ignite Restaurant Group Inc., which also owns the Brick House Tavern + Tap chain, has been closing weaker locations and began to pursue a sale of the business last year, according to court documents. However, as operations continued to worsen through early 2017, interested bidders withdrew their proposals and Ignite began to consider bankruptcy, according to a court filing by Jonathan Tibus, the company's acting chief executive officer. Ignite filed with the U.S. Bankruptcy Court in Houston a proposal to sell its assets to Kelly Investment Group, a private equity firm. Other interested buyers will be invited to challenge the Kelly bid at a court-supervised auction, according to court documents.