The year 2020 was a grim one for retail.
As of December 17, 51 retail companies had filed for bankruptcy, the highest total for a single year since 2009, according to S&P Global.
With the COVID-19 pandemic continuing to ravage the US, industry experts aren't expecting retailers' struggles to end anytime soon. Government-mandated shutdowns loom across multiple states as cases rise across the country. And even once the pandemic subsides, it may take some time for consumers to feel comfortable returning to shopping in-person.
As the Chief United States Bankruptcy Judge for the Southern District of Texas, David Jones has presided over a number of marquee cases in the last several months, including the restructuring of JCPenney and Neiman Marcus.
Read more: Inside JCPenney's messy 6-month bankruptcy saga: How infighting and egos almost destroyed the company's shot at coming out of bankruptcy alive
In a recent interview with Insider, he said he was "a little afraid" of what 2021 would look like for the industry.
"I think that there is a whole pent-up problem that at some point has to be dealt with," Jones said, adding that after looking at the debt structures of certain companies, he has wondered how they are still surviving.
Some companies have benefited from forbearances from their primary lenders during the pandemic, he said.
But, eventually, the bill will come due.
Jones predicts that more businesses will be forced into bankruptcy around June, based on publicly available information about forbearances. He pointed to real estate investment trusts, which count many retail brands in their portfolios, as one sector that could see a lot of action.
In 2020, two REITs — CBL Properties and Pennsylvania Real Estate Investment Trust — filed for bankruptcy on the same day, November 2.
This after Coresight Research estimated in August, that about 25% of the country's malls would close in the next three-to-five years. REITs that have a large number of retail tenants that have themselves filed for bankruptcy are particularly vulnerable.
"I just have to believe that there are others if people aren't paying rent," Jones said. "At some point, you've got to make your mortgage payments just like anybody else. And so that creates a problem at some point."
Many mall operators have had to compromise with tenants that have not been able to pay full rent due to the effects of prolonged shutdowns last spring.
The closures of anchor stores like JCPenney, Neiman Marcus, and other department stores could prove particularly dangerous for mall operators, Jones said. Anchor stores typically take up a larger footprint of the mall and are meant to attract more foot traffic than other stores.
"If you don't get traffic down on that end of the mall, the smaller shops that depend on that traffic start to decline, or the leases end, or they terminate them and they file bankruptcy," Jones said. "And so it just grows."
