Jim Cramer: Retailers Are Going to Drop Like Flies

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This isn't the first time that we've heard about J.C. Penney possibly filing for bankruptcy.

The company may be preparing itself to file for bankruptcy as soon as next week, sources told Reuters. They said the company intends to shutter about 25% of its 850 stores.

The company is in talks with investment firms KKR, Ares Management, Sixth Street Partners and Apollo Global Management for a deal in which they would take on some of the company’s debt in exchange for a controlling equity stake, sources told Bloomberg.

That would be part of the Chapter 11 bankruptcy filing, which could come next week, they said. The lenders might provide as much as $500 million in financing for J.C. Penney, so it could continue to operate during bankruptcy proceedings.

So, with J.Crew and Neiman Marcus filing for Chapter 11, how should investors approach the retail sector?

In the video above, Jim Cramer says unless retail can receive rent forgiveness from landlords and more measures, he expects many companies to "drop like flies." 

Catch his full take on the retail sector in the video above.

And don't miss Cramer's monthly members call for members of Action Alerts PLUS. For the first time ever, it'll be streamed live right here on Street Lightning. Watch it live at 11:30 A.M. on Thursday.

You can follow Jim Cramer and Katherine Ross on Twitter at @JimCramer and @byKatherineRoss.