The retail landscape in the U.S. is increasingly a place of the haves and have-nots.
On one side are flourishing retailers like Walmart (WMT) and Amazon.com (AMZN) that are investing in a range of new services and technologies, to . Then there , the national toy chain that said last week it is moving to liquidate, and Claire's Stores, the seller of teen apparel and accessories that .
The upshot: A number of major retailers, including some of the best-known brands in the business, are at risk of defaulting on their debt in the next year, according to Moody's Investor Service.
It's important to note such a default doesn't mean a business is destined to go bankrupt -- some distressed companies are able to renegotiate with their lenders and, in time, regain their competitive edge. But high debt levels and dwindling sales -- or both, in some cases -- are at the very least a red flag.
"Running a retailer with high balance sheet leverage is really tough, especially now," said Charlie O'Shea, an analyst at Moody's. The industry "has changed so much since the Toys 'R' Us buyout that if you don't have a fair amount of financial flexibility -- and that's not a profile that a leveraged retailer has -- you are going to have a tough time out there."
In part, that's because any hint of financial troubles can spook a retailer's suppliers, making manufacturers hesitant to send products to a struggling store for fear they won't receive payment. When speculation about Toys "R" Us' financial health arose last fall, vendors started demanding cash up front. That can create a vicious circle, with shoppers snubbing stores because of lack of inventory or poor selection, which can then lead to lower sales and less money to pay vendors as well as lenders.
"Lack of supplier support is what led it to file for bankruptcy in the first place, and not getting that support back is what made it difficult for Toys "R" Us to survive," said Mark Fischer, director of credit research at Reorg Research.
Here's a look at several prominent retailers that Moody's and other analysts say are struggling with high debt and weak growth:
Employment: 140,000 U.S. workers
The department store, an icon of American retail dating to the 19th century, has been mentioned as a potential bankruptcy candidate for several years, with analysts citing its $4 billion in debt and shrinking sales. And Sears (SHLD) has remained afloat by closing stores, selling off assets and receiving loans from its CEO, billionaire Edward Lampert. The seeds of the company's problems can be traced to Lampert's engineering of Kmart's $11 billion acquisition of Sears Roebuck in 2004.
Business isn't improving for the company, which last week reported that same-store sales declined almost 15.6 percent for the fourth quarter. Moody's rates Sears' debt as "Ca," denoting debt that is "highly speculative" and "likely in, or very near, default," according to a recent report by the investor advisory firm.
Sears, along with the other companies mentioned in this article, did not immediately respond to a request for comment.
The century-old department store may be known for luxury and brand-name clothing, but it's struggling with a less glamorous side of the business: $4.7 billion in debt.
Like Toys "R" Us, Neiman Marcus was loaded up with debt in a leveraged buyout. Private equity firm Ares Management and the Canada Pension Plan Investment Board bought the high-end retailer in 2013 for $6 billion, leaving it loaded with debt.
Neiman Marcus reported earlier this month that its fiscal second-quarter revenue rose 6.2 percent, which it said signaled a stabilizing business.
Despite that pick-up in sales, Moody's rates the company's debt "Caa2," which indicates poor quality and a high credit risk.
The purveyor of preppy clothes launched in 1983, building a loyal clientele through its catalog business. It later expanded into retail locations and went public in 2006.
In 2011, it sold to two private equity firms for $3 billion. But the preppy icon seemed to lose its edge, failing to woo shoppers with designs that the New York Times at the time called "curiously blank and directionless."
The retailer, which had $1.53 billion in debt as of January 2017, averted bankruptcy last year through a debt swap, according to The Wall Street Journal. J.Crew's recent financial results also have been weak, with third-quarter sales sliding 12 percent.
PetSmart has a lot of kibble to sell to make sure it can make its debt repayments. The pet supply store has more than $4 billion in debt, which stems from a leveraged buyout in 2015 from a group of private equity firms and its purchase of online retailer Chewy.com.
But its debt investors were put off by what Reuters reported were sluggish third-quarter results at its bricks-and-mortar stores, which slipped 1.5 percent.
Chewy.com was seen as a bright spot, but last year one of its suppliers -- Blue Buffalo Pet Products -- decided to also start providing some of its products to rivals such as Target.
Debt holders have not been pleased, with Bloomberg noting in December that its bonds have been among the worst performers for recently issued junk debt.