Retailers Dealing with Woes Through Bankruptcy, Cutbacks

Retailer bankruptcies have been rife in recent months, with a variety of chains filing for bankruptcy protection in the wake of debts that are hard to refinance, slumping sales or both. Furniture stores Levitz and Wickes, the upscale electronics chain Shaper Image, housewares seller Fortunoff, and the catalog retailer Lillian Vernon are among the recentwave of belly-up retailers–and they won’t be the last, say observers, as the economy remains sluggish.The last time there was such a high number of retailer bankruptcies in such a short period was during the recession of the early 1990s, when such major names as Allied Stores, Southland Corp., Ames Department Stores and the Circle K Corp. filed for protection or reorganization. Kmart, the largest retailer ever to file, did so in 2002, however.Hard times are affecting restaurant chains as well. Denver-based Vicorp Restaurants Inc., which owns Baker Square, filed for Chapter 11 protection early this month, closing 56 of its 306 company-ownedrestaurants.Other chains may not go into bankruptcy, instead closing stores to shore up their financial strength. The International Council of Shopping Centers estimates there will be 25 percent more store closings among retailers in 2008 than 2007–5,770 this year, compared with 4,603 last year.Yet another strategy may be reflected in yesterday’s announcement by Blockbuster Inc. that it wants to take over Circuit City Stores Inc.; a stab at synergy through the combination of two retailers. The prospect of that particular combination has gotten a tepid response among industry observers.Not every retailer is scaling back, however–at least not in terms of the number of location. This week restaurant chain Baja Fresh Mexican Grill unveiled its strategy for dealing with leaner times without having to close many locations.According to the company, Baja Fresh plans to continue to open “multiple locations” of a new prototype in places such as New York City, Boston and Atlanta. The new locations will feature a new smaller and less expensive footprint and will aim to increase their speed of service.Reply