COVID-19 had a massive effect on the American economy. There was the first wave, when many retail and location-based businesses failed amid the shutdowns. The extent of the pandemic would go much further than that, however. As the government resorted to extraordinary measures, such as zero interest rates, to manage the slowdown, it led to unintended consequences.
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Three years out from the start of the pandemic, we’ve seen a variety of businesses fail in other industries such as banking. While the ultimate fallout from the pandemic remains to be seen, these seven names are among the toll of companies that didn’t make it through the past few years in one piece:
— Bed Bath & Beyond (ticker: BBBYQ)
— First Republic Bancorp (FRCB)
— SVB Financial Group (SIVBQ)
— J.Crew
— Tailored Brands
— JCPenney
— Hertz Global Holdings Inc. (HTZ)
Bed Bath & Beyond (BBBYQ)
Bed Bath & Beyond is one of the more recent COVID-19 failures. The home goods retailer had kept holding on until 2023, but its run came to an end recently. After years of having heavy operating losses, Bed Bath & Beyond ran out of cash. It attempted to raise additional funds, but its financial moves were exhausted by April. Bed Bath & Beyond filed bankruptcy that month and the stock was delisted from its primary stock exchange.
While meme stock traders had bet heavily on Bed Bath & Beyond, it ultimately led to folks getting taken to the showers. Though Bed Bath & Beyond’s ultimate fate remains to be seen, shares have collapsed to nearly zero amid the firm’s recent bankruptcy filing.
First Republic Bancorp (FRCB)
On first glance, it might seem odd to blame the recent bank failures on the pandemic. However, the collapse of the major regional banks is directly tied to COVID-19. In response to the crisis, the Federal Reserve slashed interest rates to unusually low levels to try to help stimulate the economy. In doing so, the Fed opened the door to substantial side effects. Some banks made poor investment choices amid the low interest rate environment. First Republic Bancorp, for example, locked up a great deal of its capital in low-yielding government bonds, leaving it unable to adapt once interest rates began to soar. JPMorgan Chase & Co. (JPM) ultimately gobbled up the remains of First Republic at the beginning of May once the lender was unable to manage its finances any longer.
SVB Financial Group (SIVBQ)
First Republic was far from the only bank to fail amid the recent interest rate volatility. Indeed, a sizable number of regional banking firms went down in the aftermath of the pandemic. Soaring interest rates were a blow to SVB Financial Group, the parent company of Silicon Valley Bank. SVB had a unique business model, lending primarily to young startups, entrepreneurs and early-stage businesses. Silicon Valley was the go-to bank for firms such as biotechnology and green energy companies in California. Alas, the firm mismanaged its balance sheet, taking on way too much duration risk with low-yielding government bonds. Once interest rates soared, depositors pulled their funds and forced SVB into its ultimate decline. The Federal Deposit Insurance Corp., or FDIC, ultimately shuttered SVB in March.
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J.Crew
In addition to banks, the other hardest-hit sector in recent years has been retail. During the worst of the pandemic, people were forced to stay at home for months on end, which put more than a few struggling retail companies over the edge. For firms that didn’t have a sufficient e-commerce channel, 2020 was an extinction-level event. J.Crew was one such example. With sales plummeting at the onset of the pandemic, J.Crew collapsed under the weight of its nearly $2 billion in debt. Private equity ultimately had to step in to acquire the firm, leaving it far smaller and less prosperous than it was prior to 2020.
Tailored Brands
The owner of Men’s Wearhouse and Jos. A. Bank, Tailored Brands was another one of the iconic retailers felled by the pandemic. In 2019, demand for suits and work wear was high. Since then, however, patterns have shifted. With Zoom Video Communications Inc. (ZM) and the rise of teleworking, there simply isn’t the same demand for formal wear as in the past. It remains to be seen if the office work culture will ever come back to where it was prior to the pandemic. In any case, it’s too late for Tailored Brands, which was forced into restructuring amid the economic upheaval.
JCPenney
The collapse of the American shopping mall hit department stores particularly hard. As shopping patterns have shifted online, people simply don’t have the same interest in large mall retailers as in the past. JCPenney was one such example. The brick-and-mortar retailer had already been under the weather long before 2020, but the pandemic ultimately did the venerable firm in, forcing it to make hard choices to address its debt load. Mall owner Simon Property Group Inc. (SPG) acquired JCPenney to try to keep some of its stores operational. However, with just 667 stores left, the post-bankruptcy JCPenney is merely a shadow of its pre-pandemic self.
Hertz Global Holdings Inc. (HTZ)
The meme stock phenomenon has taken off over the past few years. Traders have united on social media outlets such as Reddit group WallStreetBets to trade tips and evaluate investment opportunities. One of the oddities of this has been meme traders’ focus on companies on the brink of bankruptcy, and Hertz briefly became just such a case. Its shares skyrocketed even after filing for bankruptcy in May 2020. The stock bounced from 56 cents to more than $5 at one point. While Hertz did have to restructure, the rise in used car prices and demand for rented vehicles allowed the company to exit bankruptcy on a strong footing in 2021, and its stock once again trades on the Nasdaq.
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7 Companies That Went Bankrupt Due to COVID originally appeared on usnews.com
Update 05/12/23: This story was previously published at an earlier date and has been updated with new information.
