April 2009 Archives

Beleaguered auto manufacturer Chrysler filed for Chapter 11 bankrupty protection today in a move encouraged by the Obama administration. The bankruptcy filing is intended to rapidly clear Chrysler's debts and smoothe a path to a partial acquisition by Italian automaker Fiat.

Chrysler, which received billions of dollars from the United States government, then asked for more to stay afloat, is now conceding an inability to meet its obligations. Chrysler will idle its production lines for an extended period while the company restructures. In an interesting twist, the reorganized company will become majority owned by its employees via an independent trust controlled by the United Auto Workers union's healthcare fund. Fiat and the US government will own the rest.

No announcements have been made at this time regarding Chrysler's product lines or dealer network.

In a cost-cutting maneuver, Jones Apparel is closing 225 stores nationwide. The company, which sells women's apparel in a range of brands, did not specify the closings, and forecast them over an 18-month period. Jones plans on continuing its new-brand growth while simultaneously working to cut costs.

Luxury jewelry maker Doris Panos filed for bankruptcy under credit pressure. The company, which has been in business since 1993, creates high-end merchandise often sported by celebrities and profiled in fashion magazines. Doris Panos is sold at Neiman Marcus and other specialty outlets.

The economic downturn is hitting local stores especially hard. Saddest among those affected are the decades-old establishments suddenly facing bankruptcy or liquidation. Recent news affects a pair of stores with particularly long histories:

• Up in Troy, N.Y., residents are girding for life without a hardware store, as Trojan Hardware is closing up shop. Trojan, the last hardware store in town, has been operating since 1915 and occupied a site that has sold hardware since the Civil War.
• And in Dallas, Siegel's liquor store, which has touted a famous neon sign since the 1950s, is closing after 50 years in business. (Timely Demise notes with a smirk that the sign seems to be more lamented than the store itself.)

Timely Demise fine-tuned its navigation last week to show categories for each entry on the site's home page. This should make it easier for you to drill into the archives, now that we're up to nearly 250 entries. (Aside: wow, 250 entries? We launched barely eight months ago. That's pretty busy for such a niche topic.)

I'm debating doing this for the RSS feeds, too--email me if you think this would be worthwhile.

Multichannel retailer iFloor, which filed for bankruptcy in December, has returned as a pure-play ecommerce site. The new entity, simply called iFloor.com, is being operated by a Chinese firm that bought iFloor's assets. The new owner is planning on being exclusively online for the time being, as iFloor's stores all closed before the takeover. Before bankruptcy iFloor had at least 35 brick-and-mortar stores along with its web presence.

Good news! (We couldn't believe it either.) H&M, home of many trendy clothing items under $10, is taking advantage of current consumer tendencies to bargain shop. The world's third-largest fashion chain (based on revenue) just announced plans to open 225 new stores in 2009. Their first Beijing location opens today, one of five or six upcoming China posts. Other regions they're targeting for new stores include the Middle East and Japan—bringing their total number of venues to just under 2,000.

All locations of sports card and memorabilia store BC Sports have closed for good. The chain had more than 50 stores across 12 eastern states as recently as last week. BC Sports' parent company filed for bankruptcy last fall, and announced plans to close roughly a quarter of its stores, but the entire chain has shut down instead.

Struggling discount retailer Filene's Basement has been sold to a liquidation and turnaround specialist. Officials noted "uncertainty" for its 25 doors but no announcement of store closings or liquidation has been made.

Filene's Basement has had difficulty all year; in January it closed 11 stores in a restructuring move.

For what it's worth, Timely Demise is a fan of Filene's Basement (so say many of the clothes in the TD closet) and is rooting for a turnaround and not a liquidation.

A-Boy Supply, a plumbing and hardware retailer in and around Portland, Washington, is closing four of its six locations in June. The company cites general profitability concerns as the driver of the closings. A-Boy has been in business since 1960 and once had as many as nine locations.

The economic downturn is hitting local stores especially hard. Saddest among those affected are the decades-old establishments suddenly facing bankruptcy or liquidation. Recent news affects several notable stores with long histories:

• In Westchester County, New York, Chappaqua's Second Story bookstore is closing after 37 years in business. Its owner, a former president of a national booksellers' association, is retiring and not selling the business. Second Story counts Bill and Hillary Clinton among its patrons.
• In the Denver suburbs, Andrisen Morton is closing its women's store after 30 years in business. Its men's outlet remains open, but the women's business has been declining since the recession picked up steam.
• And if you're trying to practice your way to Carnegie Hall, Joseph Patelson won't be able to help you anymore. The longtime sheet-music retailer is closing its doors after six decades in business.
  

Women's Wear Daily is reporting (subscription required) that Stila Cosmetics, which has been struggling in recent weeks, has been acquired by a private equity concern. Stila, which was owned by Estee Lauder until 2006, temporarily closed its website (and perhaps the entire company) in late March. The sale of Stila would presumably allow the brand to continue operations and pursue new initiatives.

Block Corporation, a holding company for numerous apparel brands, filed for Chapter 7 bankruptcy this week. The move is usually a precursor to a corporate liquidation. Block Corp owns licenses for 18 well-known brands including Izod, Van Heusen, Panama Jack, Geoffrey Beene, Hobie, Timberland and Botany 500. Detailed information has not been released.

In a sure sign of the recession's impact, a huge mall owner has filed for bankruptcy. General Growth Properties filed for Chapter 11 protection in what the Wall Street Journal is calling "one of the largest real-estate failures in U.S. history." General Growth is the nation's second-largest mall operator, behind Simon, and owns 200 malls including Boston's Faneuil Hall.

The bankruptcy filing is not supposed to affect mall operations or sales. But it could have an impact on consumer confidence, and shoppers may shy away from General Growth's malls, leading to a latent sales decline at the stores within them. The bankruptcy proceedings could take years due to the size of the company's holdings.

Timely Demise read two interesting articles in yesterday's New York Times. First, the news: retail sales fell in March, as did producer prices, as a temporary bump in spending pulled back. While a few chains posted sales gains, the overall retail industry fell 1.1%, suggesting continued weakness but not market contraction.

More curious was the Times' coverage of bankrupt stores resuscitated as brands. Several companies are being leveraged for their well-known identities despite the failure of their store-level businesses. Among them: Sharper Image, which sold its name for a hefty sum to use on a new line of gadgets; as well as Linens 'n Things and Bombay.

Furniture chain Z Gallerie has filed for bankruptcy. The company said the move would strengthen the business and that it had enough cash to continue operations. Z Gallerie closed 21 of its 78 stores last this winter in response to the sales slowdown.

Ultra Diamonds' parent company Ultra Stores filed for bankruptcy protection due to the now-expected liquidity and economic concerns. The company has defaulted on some loans but stated it had financing to temporarily continue operations. Cost-cutting maneuvers have been underway since the 2007 holiday season, long before the economic crisis hit.

Ultra Diamonds runs the jewelry counters at such stores as Filene's Basement and Burlington Coat Factory and has 181 locations.

Fatburger's California and Nevada subsidiaries filed for bankruptcy and are in need of loan restructuring. Indications are their Fatburger locations, 32 in all, will stay open during the proceedings. The bankruptcy affects more than a third of all Fatburger stores.

Several stores formerly profiled on Timely Demise are in the news today.

Pier 1, which announced up to 125 store closings in February, has closed 22 stores so far, 20 of them through lease negotiations.

Aeropostale, which has strong sales results in recent months despite the economy, issued another strong sales report, despite the Jimmy'Z store closings announced recently.

Advantage Rent-a-Car, which filed for bankruptcy in December, has been purchased by Hertz, which reportedly gives the acquiring firm a brand for budget-minded renters.

And in New Jersey, the recently bankrupt Marty's Shoes chain has been brought back to life. Its former CEO and original owner have purchased the Marty's brand out of bankruptcy and opened stores in four locations. An ecommerce site is operational, and plans are to open nearly 20 stores.

Updated April 10.

When the going gets tough, the tough pilfer.

High unemployment is giving people with less pocket money more free time to roam around stores. ... The recession also is creating a perfect environment for organized shoplifting gangs to flourish. That's because it's easier than ever to fence stolen goods such as designer jeans, flat-screen TVs or fashionable handbags.

Shoplifting increased by as much as 15 percent nationwide in 2008 and is thought to be rising in 2009. The Atlanta Journal-Constitution says theft is up in many counties across Georgia, as are gray-market sales and pawn shop traffic.

Five of the six Ethel's Chocolate Lounges are closing by the end of April. The high-end chocolate store and "hangout," an experiment from confectionary giant Mars Inc., has been operating in the Chicago area since 2006. Ethel's chocolates will continue to be available online, and its eight Las Vegas stores remain open.

Youth cosmetics manufacturer Jane & Company filed for Chapter 11 bankruptcy due to poor liquidity. Jane reportedly has $25 million in annual sales from items like its "Makeover in a Box." The company, which sells its products at mass-market level, is restructuring its debt and plans to continue operations while seeking a buyer for the business.

The economic downturn is hitting local stores especially hard. Saddest among those affected are the decades-old establishments suddenly facing bankruptcy or liquidation. Recent news affects regional chains with long histories:

• In Charleston, Luden's is closing its doors. As its website states, "established in 1867 as a ship's chandler, J.J.W. Luden's is the oldest retail establishment in Charleston." Its owners cited an expiring lease as the main factor in the decision to close, along with economic conditions. (Timely Demise finds this odd--Luden's surely endured many other expired leases and tough years over the past 142 years.)
• Specialty retailer The End Result in State College, Pa. is closing after 38 years. Downtown State College has seen numerous retailers depart in recent months, like many town centers, although its economy is buoyed somewhat by Penn State students.

In Alabama, Big 10 Tires filed for bankruptcy protection, citing insufficient operating funds. The tire retailer has 104 retail stores across three southern states. Big 10 Tires plans to keep its doors open while negotiating rent and debt relief.

In New York, old-world gourmet retailer Balducci's is closing both its locations by the end of April. The grocery store, which dates back 63 years to the Greenwich Village, gave up its original location in 2003. Balducci's has since expanded to eight locations throught the northeast, none of which have been reported as slated to close.

This weekend's New York Times consumer-economy article is about overcapacity in the nation's restaurants. Stores-to-customers ratios have actually been in decline since 2005, leading to significant overcapacity that is making a difficult economy even worse. Forecasters are expecting as many as 20,000 net restaurant closings in the next few years as consumers' spending adjustments solidify.

It's not the happiest tidbit, and Timely Demise isn't typically about unemployment, but our friend Norm Elrod and his Jobless and Less blog got profiled in the New York Times today. We'd rather see Norm gainfully employed, of course, but hey, small victories count too.

If only tenure existed for textile companies: After 120 years as a community staple in Pennsylvania's Columbia County, Bloomsburg Mills is closing its doors on May 31st, hurt by economic forces and imports. Bloomsburg Mills started as a silk weaver in 1889. It has been a high-quality manufacturer of fabrics used by a variety of industries now acquired elsewhere.

Please join me in welcoming Josey Miller as a Timely Demise contributor. She'll be posting occasional items alongside me and guestblogger Choire (who's around here somewhere, I'm sure). Welcome, Josey!

In response to poor corporate performance, Rite Aid is closing up to 117 stores in a cost-cutting maneuver. The pharmacy and grocery chain will eliminate underperforming stores and locations with another Rite Aid nearby.

This news isn't all that drastic: Rite Aid has 4,874 locations nationwide, so the 117 store closings are not an abnormal number. But the closings' announcement in association with stock performance may underscore the effect the economic slowdown is having on sales.

Wholesale retailer Costco has decided to close its Costco Home stores in a reaction to the lagging economy. Home furnishings has been an underperforming market and the company has shifted away from this expansion strategy.

Costco Home only has two outlets, in Tempe and in Kirkland, Washington. The Costco Home conclusion does not affect Costco's 554 warehouse locations.

Saks, the retailer that helped create the deep-discounting trend last fall, is seeing more shifts in its business. The luxury retailer has begun altering its mix downmarket in order to carry products with more budget-minded appeal. It is also expanding its Off Fifth outlet stores and producing more merchandise to sell directly via outlets.

Saks Chief Executive Officer Stephen Sadove, noting "an evolution of what the consumer wants," is moving to more value-oriented merchandise, including budget lines from high-end brands. While the specialty retailer holds out hope that exclusive, high-end items will still sell, Saks is acknowledging the changes present.

Update: Scrolling through department store archive news, this development is happening in similar ways at Saks' competition. Nordstrom is lowering prices in order to accommodate new shopping patterns, although it's compensating by raising its credit-card interest rates. And Neiman Marcus is encouraging its designers and buyers to look for value as they prepare collections this year. Neiman, similar to Nordstrom, is hoping to keep shoppers at full price, just on lower-ticket items for now. Said a Neiman VP, "We have to get the customer to buy [at] full-price ... [so] you won't get this discounting nonsense."

Amid a "bleak book environment," Borders is planning on closing most of its Waldenbooks locations to cut its corporate costs. The company, which had been stratetgically closing Waldenbooks stores since 2007, is now moving toward a drastic reduction--as much as 80 percent of the current total.

Waldenbooks will have 50 to 60 doors when the closings are complete, down from 300 today, and 564 as recently as 2007. Borders stores are concentrating on high-volume areas, like children's and health and wellness books, while aggressively cutting costs.

This one slipped by: the mail-order BMG Music Service closed its membership in March. The company would not comment on long-term plans to maintain or shut down the service. Surprisingly, existing members are still receiving information and (ostensibly) making purchases.

BMG was the last remaining music subscription service, having acquired Columbia house in 2005. Parent company Bertelsmann then sold the business to Direct Brands last year. The bmgmusic.com website directs people to a website called yourmusic.com, while columbiahouse.com still appears to be accepting new members.

After a long bidding battle, the Gottschalk's department store chain will be liquidated and all 58 stores will close. Gottschalk's filed for bankruptcy in January and explored a sale and other options before resorting to the liquidation. The action ends a 105-year-old California-based business; the stores will be closed by July.