Record retail bankruptcies will happen by fall, former Toys 'R' Us CEO warns

Gerald Storch argues Fed fighting inflation by taking 'stake to the heart' of consumers

Former Toys 'R' Us CEO Gerald Storch warned on Wednesday that in the fall "we’re going to see record bankruptcies in retail" for small businesses and some chains. 

He stressed that he believes mom-and-pop stores will experience a "decimation" of mom-and-pop stores on Main Street, but that "those chains that have been struggling for years strategically and never got it right" are also "going to have big problems as we round the bend here after the holidays." 

"So it’s going to really bite as we get to holidays and beyond," the retail expert told "Cavuto: Coast to Coast" on Wednesday.

 Storch noted that the pullback in consumer spending "is coming in from the bottom up" starting with lower income Americans and then the middle class. 


He pointed out, however that "oddly enough the luxury consumer has not been hit yet." 

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"Usually when the stock market pulls back, luxury sales do too," Storch noted. "That hasn’t happened yet, but we fully expect it to happen." 

Neiman Marcus Group CEO Geoffroy van Raemdonck also noted while speaking with "Cavuto: Coast to Coast" last week that recent market volatility has not impacted sales so far as the company continues to see healthy growth. 

He noted that customers who spend more than $10,000 a year account for almost half of the company’s sales despite economic headwinds, including high inflation. 

Markets have been turbulent in recent weeks as concerns over Federal Reserve rate hikes amid high inflation continue to worry investors.

Last week, Fed officials said that the central bank will raise rates by another 75-basis points as a way to try to tame persistent inflation, which currently sits at 40-year highs

Going out of business

Former Toys 'R' Us CEO Gerald Storch weighs in on consumer trends amid inflationary pressures and rising rates.  (iStock / iStock)

It was revealed last week that U.S. consumer confidence slid again in July as higher prices for necessities, including food and gas exacerbated a financial strain for millions of Americans.

The Conference Board said last week that its consumer confidence index fell to 95.7 in July from 98.4 in June, mainly a result of worries over the current economic conditions, including inflation. The data marks the lowest reading since February of 2021.

Storch argued on Wednesday that the Fed is fighting inflation by taking a "stake to the heart" of American consumers "because that is the only tool they have." 


He argued that the central bank’s actions to raise rates, will in turn "make things too expensive and, therefore, finally the economy will slow down." 

"So they’re kind of killing the patient in order to cure the patient," he continued, adding that "there is no soft landing here, it [inflation] is not transient, and it is not good." 

The Associated Press contributed to this report.