Some retailers didn’t survive the holidays, and spring could be littered with still more casualties.
Retail bankruptcies soared in 2008, claiming high-profile victims like Linens ‘n Things, Circuit City, Sharper Image and Steve & Barry’s. But with sluggish sales and tight credit threatening their liquidity, an even greater number could be headed for insolvency this year, industry experts predicted.
Regional chains could be the most vulnerable, insiders said. During Christmas week, for example, sources said Goody’s Family Clothing – a Knoxville, Tenn.-based discount chain that operates 287 stores across the Southeast – hosted a conference call with suppliers, pleading for looser credit terms.
“They were asking for significant concessions in order to help them stay in business,” said an executive at one apparel manufacturer, who in turn decided to stop shipping merchandise to Goody’s. “It was impossible to be on the call and not feel that the risk was substantial.”
Goody’s – owned by New York hedge fund Prentice Capital Management – was hit by dismal holiday sales after it emerged from Chapter 11 in October. Now, the chain is negotiating with lenders to avoid liquidation, sources said.
Apparel makers likewise are concerned about Bon-Ton Stores, which operates a number of midprice department stores across the Northeast and Midwest. The chain, however, recently maintained that it expects to have more than enough cash to meet the obligations under its massive debt load.
In addition, some large specialty chains could be at risk, insiders say. This year, eyes will be on struggling firms like Pier 1 Imports, Borders and Quiksilver.
To gauge how rough this year will be, industry experts say retailers’ December sales reports will be the next big clue. Due from most major chains on Thursday, they’re not expected to be pretty.
Collectively, retailers this December will register a rare decline of at least 1 percent, according to the International Council of Shopping Centers. That’s the weakest holiday showing by retailers since the trade group began compiling monthly records 38 years ago.
The consequences will be dire, said the trade group’s chief economist, Michael Niemira. Bankruptcies in 2008 decimated the nation’s stores, resulting in the closure of 13.5 percent, or 148,000, of the more than 1.1 million stores, Niemira estimated.
What’s more, Niemira predicts an additional 73,000 stores will close in the first half of the year.
In addition to persistently sluggish home sales, a key catalyst for the carnage will be increasing unemployment, which most economists expect will continue to rise in 2009 as more firms cut spending and file for bankruptcy.
While 15 percent of Americans were worried about their jobs in early November, that figure recently doubled, said Britt Beemer, president of America’s Research Group, a retail consulting firm.