Bed Bath & Beyond seemed as if it'd remain a cornerstone of brick-and-mortar retail for decades to come.
The brand, founded in 1971, sold merchandise that people like to touch and see before they buy.
Sheets, bedding and bath towels aren't immune from online disruption, but physical retailers have an advantage when it comes to items that touch people's skin. Nonetheless, the company had been stumbling for years and was liquidated earlier this year. (The former Overstock.com has bought and taken on its name.)
DON'T MISS: Beloved retailer closes its doors (for now)
Bed Bath & Beyond wasn't the only big retail name we lost this year. Christmas Tree Shops, which it once owned, closed its doors for good on Aug. 12. While it was not a national player, the brand had a cult-like following in New England where it began. But that was not enough to save it.
Not every Chapter 11 has turned into a Chapter 7 liquidation. David's Bridal was saved at the last minute and will continue operating most of its stores. That's a major relief for thousands of brides who had ordered but not received their wedding dresses.
Two other big-name retailers run a real risk of filing for bankruptcy, according to a leading index that tracks the short- and long-term health of public and privately held retailers.
Image source: TheStreet
Watch these two major retailers
Rapid Ratings uses two metrics to track the health of retail companies. The Financial Health Rating index uses a 0-100 scale that looks at a company's short-term estimated probability of default. The Core Health Score is a longer-term view of a company's overall health.
Having an FHR or a CHR under 40 shows that a company is at high risk for default while a score under 20 is a major red flag.
In a May reading of those numbers, only Mattress Firm had both numbers under 20 (a 19 in each case) while Wayfair (W) -) had an FHR of 19 and a CHS of 29.
“Financial corporate health is a good deal like physical health. Healthy companies are in the best position to withstand a shock,” Rapid Ratings Chief Executive James Gellert told Forbes, adding that his company’s ratings are measures of financial health and not credit ratings.
Mattress Firm had filed for an IPO but has pulled the offering, citing the current economic environment.
It's important to note that Rapid Ratings has access only to the financial information companies share publicly. Both these retailers could have financial moves planned that are not yet publicly known.
Neither Wayfair nor Mattress Firm immediately returned a request to comment.
More bankruptcies are likely to come
The end of cheap credit and easy access to venture capital for any company calling itself a high-growth technology-driven business has put a lot of digital-native companies at risk.
RetailDive in March reported a list of 11 digital-native companies that were at risk for bankruptcy. That list included digital stalwarts like Boxed and RealReal. (REAL) -) (Boxed filed Chapter 11 in April.)
Wayfair was on that list as well.
"Take Wayfair for example. The retailer, by design, sells a broad range of offerings in an effort to attract a wide consumer base. The problem is, so does Overstock. And Amazon. And Target. And Walmart. And a large swath of other major retailers," the website noted.
A Chapter 11 filing, again, does not mean the end; it gives a company breathing room and an opportunity to reorganize. And as we saw with Bed Bath & Beyond, even liquidation does not mean the brand name will disappear.
Bankruptcy risk is an assessment based on known financial data. A company that's having short-term issues could well end up avoiding such a filing.
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