What We Learned From Retail Bankruptcies in 2017

Prominent bankruptcies in 2017 were concentrated in the retail sector. In this segment, the Motley Fool Industry Focus cast looks at a few of the many brick-and-mortar chains that tapped out this year to provide some insight for investing in the sector as we move into 2018.

A full transcript follows the video.

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This video was recorded on Dec. 19, 2017.

Vincent Shen: Let's talk about some bankruptcies next. Brick-and-mortar retailers have closed thousands and thousands of stores this year as the squeeze from e-commerce and intense, increasing competition from traditional retailers has pushed some companies over the edge. Notable bankruptcy filings in 2017 in the consumer and retail space, we have about two minutes, which ones do you want to hit, Asit?

Asit Sharma: I want to hit mall-based clothing retailers. This year, The Limited, Vanity, Gymboree, Wet Seal are just a few examples. And there's a theme here: fashion is fickle. Fashion is extremely hard. And these tended to grab the headlines, especially for Limited. If you start peeling the onion and looking in deeper, you'll note a pattern. Payless Shoes and HHGregg -- which, Payless Shoes is a clothing retail, it's a shoe retailer, and HHGregg is an appliance retailer -- what this is, companies which don't have a strong niche vs. price and/or are in fashion and based in malls got hit this year. But it wasn't the end of the world. The retail apocalypse wasn't really about Amazon destroying every retail company. It took out the weak in 2017. We talked recently on the show about Canada Goose, which has a clicks and bricks business model, as an example of how you survive in this future dominated by Amazon.com.

Shen: You mentioned Toys R Us during the segment when you were talking about the Hasbro and Mattel deal that has not quite happened yet. True Religion is another one, Gander Mountain another example. Among all these, those themes, declining foot traffic, especially for the mall-based stores, these various store closures, they're looking to create leaner operations. And some, like The Limited, have transitioned entirely to online only businesses. I would not be surprised to see that trend continue on in 2018.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Asit Sharma has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Hasbro. The Motley Fool has a disclosure policy.