• Moody's identified 13 retailers at the highest risk of defaulting or filing for bankruptcy in 2021.
• Apparel and department store retailers, they said, remain the most at-risk.
• Men's Wearhouse, Talbots, Belk, and Party City all made the list.

Apparel and department stores are the most at risk for defaulting on their loans in 2021, analysts with Moody's Investors Service said in an April 7 report.

After a brutal year in 2020, in which dozens of retailers filed for bankruptcy, more filings could be coming, but not as many as last year, the analysts said.

Apparel stores accounted for about half of defaults in 2020, and the sector is still "in the eye of the storm," as it confronts long-term pressures, like declining mall traffic, the analysts said.

Although the 2021 forecast "marks a vast improvement over the prior year, it is still historically high relative to prior recoveries, pointing to significant ongoing risk for an industry not yet out of the woods," the report said.

Read more: Experts say brick-and-mortar retailers could rebound post-pandemic - but only if they channel the e-commerce boom back to their physical outposts

The analysts identified 13 stores at the highest risk of defaulting, and most of them are apparel stores.

Rite Aid

Rite Aid, the US pharmacy chain with 2,500 stores in 19 states, struggled amid the pandemic as fewer people came down with colds or coughs as they sheltered at home. The company cut its full-year forecast for 2021, and it has $1.5 billion in outstanding debt rated high risk. Moody's said its competitive disadvantage and near-term maturities are putting it in danger of default.

Party City

"Debt-strapped" Party City eased its heavy burden last year when it announced a bond restructuring, Moody's said. While the party retailer is still at risk of default because of ongoing challenges from low demand, the risk isn't "immediate," the analysts said.

Talbots

Women's clothing store Talbots is among apparel retailers at risk. The company is facing sector challenges, as many consumers have turned away from malls amid the pandemic. Talbots doesn't have much cash on hand, and it's debt is coming due soon, analysts said.

Belk

Belk, a private apparel retailer with locations in 16 states, already marked the first bankruptcy of 2021. The Charlotte, North Carolina-based department store chain has struggled like other apparel retailers amid the pandemic. Plus, it has a lot of debt and not a lot of cash on hand.

Men's Wearhouse

Men's Wearhouse was among the long-struggling companies that defaulted in 2020, along with retailers like J.C. Penney and J. Crew. The formal apparel retailer was hit hard during the pandemic as people stayed at home and opted to wear comfy clothes instead of formal wear. Moody's said the company's outlook is currently stable, though it's still at risk amid continued sector challenges.

Nieman Marcus

Neiman Marcus was also among retailers that filed for bankruptcy in 2020, as it was under "inexorable" pressure from the pandemic. The department store chain was "one of the highest-profile companies to succumb to bankruptcy" in 2020, analysts said, but it "emerged from Chapter 11 in September after shedding more than $4 billion of debt." The company's debt rating remains below investment-grade, however, keeping it at risk of default.

J. Jill

J. Jill, owned by Jill Acquisition, restructured its debt in 2020, giving the company "additional time to recover from coronavirus-driven disruption in the apparel retail industry," Moody's said at the time. Though the women's apparel retailer still has risky debt on hand with weak liquidity, Moody's rated it at stable.

Shoes for Crews

Shoes for Crews, owned by SHO Holding, extended the deadline for its debt maturity last year during the pandemic. Still, the maker of slip-resistant, safety footwear for workers is at risk of default, as it faces the continued challenges of the apparel industry and is strapped with debt.

Outerstuff

Outerstuff, the maker of major league sports apparel for youth, is one of the several retailers facing challenges as an apparel store. The private company is at risk of default as it has an "unsustainable capital structure at current levels of performance, small revenue scale, narrow product concentration primarily in licensed children's sports apparel in North America with a small, but growing, adult and international presence, and reliance on licensing arrangements from several sports leagues for a significant majority of revenue," Moody's said in a March 26 analysis.

Nine West

Nine West, owned by Premier Brands Group Holdings, filed for bankruptcy in 2018. It reduced debt and emerged from bankruptcy in 2019 and sold its Anne Klein trademark. Still, the retailer is at risk of default because of a drop in revenue during the pandemic, and "it will take some time for the company to demonstrate a sustainable turnaround in light of the ongoing challenges in key segments of its wholesale customer base and the overall global apparel environment," Moody's said in a March 29 note.

Service King

Midas Intermediate Holdco, which owns Service King, has a lot of debt, and the bill is coming due. The Richardson, Texas-based car repair company has $1.1 billion in debt rated below investment-grade, Moody's said.

99 Cents Only stores

Dollar-store chain 99 Cents Only, which has 350 stores in four states, had distressed exchanges in 2017 and 2019. The discount retailer is at risk because of a competitive disadvantage and operational and execution issues, Moody's said.

Boardriders

Boardriders, the maker of popular surfing, skateboarding, and snowboarding apparel brands like Billabong and Roxy, went bankrupt in 2015, and now it's at risk of default again as the company faces sector challenges and a lot of debt amid the continued pandemic, Moody's said. In the future, though, the analysts expect the company will see benefits from its acquisition of Billabong.