More Retailers Announce Bankruptcy, Store Closings Amid Economic Downturn
- May 02, 2008
Linens ‘n Things today became the latest retailer to file for Chapter 11 bankruptcy protection as the faltering economy begins to take its toll on consumer spending. The bedding and home furnishing company’s announcement came the same day the Walt Disney Co. said it planned to retake control of the Disney Store chain in North America and close about 100 stores.Both announcements came one day after Home Depot said it was closing 15 U.S. stores and scaling back expansion plans.Linens ‘n Things recently reported a fiscal 2007 loss of $242.1 million. The Clifton, N.J., company said in its bankruptcy filing that it would close 120 stores, almost a quarter of them in California, as part of its restructuring. It currently has about 590 stores across the United States.Disney said today it would once again operate the Disney Stores, which had been run by Children’s Place Retail Stores of Secaucus, N.J., since 2004. Children’s Place and two subsidiaries had filed for Chapter 11 bankruptcy protection in March. Children’s Place will focus on its core brand. Meanwhile, Disney plans to close 98 U.S. stores and two in Canada.Atlanta-based Home Depot said Thursday it would close 15 underperforming stores–two in Indiana, Ohio and New Jersey; three in Wisconsin; and one each in Kentucky, Louisiana, Minnesota, North Dakota, New York and Vermont. While the company said it still planned to open 55 new stores, including 36 in the United States, during the current fiscal year, it also stated it will not open approximately 50 U.S. stores that had been in the pipeline for several years. Officials said aggregate new store capital spending would be cut by about $1 billion over the next three years.“We will invest in our core retail business, in this case our existing stores, which drive our most profitable sales,” Frank Blake, chairman & CEO, stated in a press release.An April 16 report from the International Council of Shopping Centers noted that the number of reported store closing announcements in the first quarter of 2008 have already approached or surpassed some first-half year totals of previous years. Twenty-eight retails chains announced 2,122 stores closings in the first quarter, according to ICSC tracking. Most of the store-closing announcements, 803 or 37.8 percent, came from apparel companies like Charming Shoppes, which said it would close 150 stores among its Fashion Bug, Lane Bryant and Petite Sophisticate Concept brands. Other apparel retailers planning to shutter stores are Pacific Sunwear; Ann Taylor, looking to close 78 of its Lofts brand stores; and Talbots, which said it was closing 78 Talbots kids and mens stores. “That (2122) is a very high number for a first quarter,” ICSC research analyst John Connolly told CPN today.The ICSC projects the trend to continue throughout the year, perhaps reaching 6,500, the highest number of store closings since 2001. But Connolly noted that that the number of closures are not high compared to the total number of stores. For example, the 803 apparel store closings would represent 0.6 percent of the total number of apparel retail establishments.Some retail experts believe the number of retail bankruptcies could reach levels not seen since the 1991 recession. Other retailers that have already gone into Chapter 11 bankruptcy are cataloger Lillian Vernon Corp. and Sharper Image Corp, which plans to close at least half of its 184 stores. Stores that served niche markets, like Wilsons Leather stores, which are going out of business, will be harder to find as many consumers head to discount retailers like Wal-Mart and Target seeking bargains.Vacancy rates in the retail market are expected to jump this year to as much as 10 to 12.5 percent, according to some estimates. Areas of the county hit hardest by retail vacancies are also being affected by the housing downturn, including Las Vegas, Phoenix, Florida and parts of Southern California. A recent report by Property & Portfolio Research Inc. of Boston stated retail net absorption in 2008 should reach only 3.7 million square feet compared to 60 million square feet last year. The research firm noted that “dwindling demand and heavy supply” will combine to create the rising retail vacancies.