David Wertheimer: January 2009 Archives

• In central Pennsylvania, Good's Furniture and Flooring is closing all its furniture stores, with liquidation sales just underway. Good's dates to 1959 and is under second-generation management.
  
• Olender Mattress in Schenectady, N.Y., which traces its history to 1902, has to close one of its three locations. "This is nothing new for us," says the store's owner, noting the chainlet survived the Great Depression and other economic crises.
• Eighty-year-old Peerless Furniture in Michigan is closing its two stores. Peerless, which began as a mattress manufacturer in 1924, calls its decision "responsible."
• In Massachusetts, Lebow Men's and Boy's Clothing is closing after 81 years. The store, which prided itself on its personalized service, has been unprofitable for some time.
  

In its quarterly earnings announcement, women's retailer Chico's noted it may close up to 25 stores as part of a financial retrenchment. No details were revealed, however, and specifics of the store closings were not disclosed.

Hip infant retailer Babystyle very quietly closed its business last week. Parent company Right Start seems to have laid off its employees, and local stores had unexplained going-out-of-business sales, but never made an announcement. It took tips and inquisitive bloggers to break the news.

Babystyle, which sold maternity, baby and kids' merchandise, has a simple message on its website that says operations have been "suspended." Tiny Ride, another Right Start brand, is reportedly affected as well. No official word is yet available as to whether Right Start is itself going out of business, although some rumors suggest an acquisition or bankruptcy is possible. Right Start bought Babystyle and Tiny Ride in 2008.

Starbucks is closing 300 more stores to deal with slower sales. The announcement comes just six months after the coffee chain announced 600 store closings and a focus on business essentials. Two hundred of the new stores are in the United States, the rest international.

Starbucks, which is fighting mightily to maintain its growth and profitability in the wilted economy, has embarked on numerous initiatives in recent months to boost its brand image. The company has offered free coffee in exchange for pledging five hours of volunteering or voting in the presidential election.

A pair of major American brands announced store closings last week that were hidden within press releases about layoffs:

• Phillips-Van Heusen is closing 175 stores over the next two to three years in a restructuring move. The company, whose brands include Calvin Klein and Bass, did not specify which stores or lines would be affected.
• Cardmaker American Greetings is closing 60 stores out of 415 nationwide. These are happening quickly; some are slated to close by the end of February. Financially, the company's credit rating just reached junk level, which is a bad sign for the long-term health of the chain overall.

Regional value-and-convenience retailer Pamida is closing 11 of its 215 stores. Pamida cited "a negative drain on earnings" coming from the locations being shuttered. Pamida, which operates mostly in smaller towns, gets hurt whenever a Wal-Mart opens, and the economy's shift toward greater consumer value is forcing the closings.

As a small-town retailer, Pamida's news is indicative of the hyperlocal focus discussed here recently. View the store closing information as reported in Sioux City, IA; Norwalk, OH; southeast Iowa; and Park Rapids, ND.

Home Depot has decided to shut down EXPO, its high-end interior decoration chain. The company is closing all 34 stores as well as five YardBIRDS stores, a small-store format it launched earlier this decade. Home Depot CEO Frank Blake called EXPO "not a strong business" and a resource drain. Home Depot does have 12 store openings planned for 2009 in a modest recessionary expansion.

As the main writer and journalist of Timely Demise, I've found a pair of interesting trends in the reporting of bankruptcy and store-closing information. Most interesting is the local angle that gets brought to national news.

Take, for example, Circuit City's impending shutdown. Nationally, this news affects 567 remaining stores, more than 30,000 employees and several billion dollars in lost shareholder value. But the spin on the closings often has a local, even hyperlocal, sensibility. It's almost as though the national news is not as significant as the neighborhood impact of said news. Which, in some ways, it may not be--but when doing research from a national perspective, the narrow focus is striking.

Consider these headlines from around the country, all taken from the same basic story, that Circuit City is closing its doors (links redacted to minimize redundancy):

• Call 4 Action: Gift Card For Circuit City? Use It Now
• Circuit City closings include 19 stores in Mass.
• The Source by Circuit City Stores in Canada Not Included in US ...
• Circuit City stores closing, 13 in area
• Woodland Hills Firm Leads Circuit City Closure Efforts
• Circuit City closing US stores, 7 in NH
• Both Toledo Circuit City stores closing
• Circuit City's collapse deals blow to Lake's economy
• Circuit City closing - another loss for Westland
• Closing sale jams Circuit City in LB
• Circuit City Closure Worries Cheyenne
• Circuit City's Waco location part of national closure
• Circuit City plans to close its Visalia store by the end of March
• Circuit City pulls the plug; 50 jobs lost here

Some of these headlines are borderline bizarre. Waco's Circuit City "part of national closure?" How could it not be?

But others are more understandable. Local news is important at its level, and presenting the local angle gives a story like Circuit City's a logical context. A stay-at-home mom in Toledo may not pay attention to Circuit City's business doings, but she knows the neighbor's son works at the one down the road. And now it's closing? Well, that's news.

The other trend I've noticed runs counter to this positioning. For some outlets, the news trickles out at an amazingly slow pace, doing a disservice to the local constituents its purportedly helps.

Goody's announced several weeks ago its intent to liquidate. I posted the news here January 6, the day it broke. A full two weeks later notable news outlets near Goody's stores were first sharing the same information.

I find this both confusing and disconcerting. Confusing because the news isn't hard to find; I have a handful of Google Alerts and friends with Bloomberg terminals that provide the bulk of my sourcing. Goody's is not a store I know well, yet I was aware of its liquidation within hours of the news breaking.

Which leads to the disconcerting part: people reliant on local news aren't getting useful information in a timely manner. No wonder the Internet is a potential death knell for local news. It's not because it's easier or more interesting--it's because the Internet is simply doing a better job.

Hartmarx, the maker of clothing brand Hart Schaffner Marx, filed for Chapter 11 bankruptcy due to the increasingly common refrain of reduced demand and poor credit availability. The company noted sharp dropoffs at luxury price points. Hartmarx, which possesses licenses for brands such as Pierre Cardin, hopes to continue operations during bankruptcy proceedings.

Multi-chain retailer Brown Shoe announced plans to close as many as 35 Famous Footwear stores and reduce factory activity. The company, which manufactures Dr. Scholl's and other products, has experienced lower store traffic as well as reduced orders from resellers.

Candle and gift retailer Yankee Candle is eliminating its Illuminations retail chain as part of a corporate restructuring. Illuminations, a candle and home decorating line, was purchased by Yankee Candle in 2006. The Illuminations brand name may continue in wholesale and catalog options.

Yankee Candle is also closing one additional store under the Yankee Candle name. Plans for new store openings are not affected.

Discount retailer Filene's Basement is blaming non-negotiable rents as a main driver behind 11 store closings. The number of closings is unusually high; Filene's Basement has 36 stores, and the closings are nearly one-third its total.

Filene's Basement has had an up-and-down history prior to this announcement. It has had as many as 56 and as few as 14 stores over the past 15 years, and dealt with a bankruptcy filing in 2000.

An excellent article on chron.com Monday explores what changes consumers will notice at retail as the recession alters the shopping landscape.

Among the expected trends: thinner racks of merchandise, with fewer unique items, in order to manage inventory; responsive staff with a customer-service mentality; lower price points on mid- to high-range items; and more private and promotional events.

Nationwide, companies and analysts are acknowledging the wholesale shift retailers are experiencing. Lower demand forces smaller product orders, which reduces inventory but also profits and expectations. The effects will be felt well beyond the current recessionary period.

The Milwaukee area is losing its 82-year-old Harry W. Schwartz bookstores due to unavoidable market changes. The stores acknowledge changes in consumer habits, such as e-books and the Internet, as well as the current economic conditions plaguing other businesses. Interestingly, its management believes single-location specialty bookstores may thrive in the future, whereas the small-chain model of Harry W. Schwartz is not relevant in the current environment.

Its stores are gone, but the licensing deal is complete. The Sharper Image brand transformation is underway. A consortium of private-equity firms is managing a transition intented to leverage the Sharper Image equity despite the failure of its retail business. The plan is to offer relatively affordable products at popular stores like Bed Bath & Beyond while maintaining the aspirational nature of the Sharper Image name.

Shaper Image, which closed its retail outlets in June, first sold its name to Homedics under the licensing agreement now underway.

Jeweler Christian Bernard, which filed for bankruptcy in December, has had its liquidation plan approved and is reopening its stores to clear out merchandise. The company closed all its doors when it filed Chapter 7 the day after Christmas.

One of the most difficult things to manage in the Great Recession of 2008-09 is the flow of misinformation. With communications vehicles so ubiquitous, rumors spread like wildfire, and quasi-accurate reports have to be corrected and amended continuously.

Last fall, the nation's email inboxes filled repeatedly with a list of struggling retailers and a warning not to buy gift cards at uncertain stores. Some of the items in the email were as much as a year old, but they sounded good, and the email looked authoritative enough, so it spread quickly.

This winter, rumors abound about stores and locations. The latest trend? Gossip that businesses are doomed, like this mall in Michigan that insists it's not going out of business.

The high degree of uncertainty makes its way up the chain, too. AccountingWeb published two opinion pieces for retailers on the same day this week. Their titles? What advice are retailers getting in these tough times? Close the doors and What advice are retailers getting in these tough times? Keep going!

"Keep going" is what everyone is, or should be, trying to do. The question, of course, is how hard it will become to do so.

Legendary auto company Checker Motors, which once made cars like the Checker Cab, filed for bankruptcy protection due largely to declining sales at General Motors. Checker, which in recent decades has focused on stamped and welded car parts, is planning to reorganize and continue operating.

ARG Enterprises, owner of Black Angus Steakhouse restaurants, cited its locations as a primse factor in a bankruptcy filing announced this week. Black Angus has 69 outlets in seven states that are "some of the areas hardest hit by the mortgage crisis," according to an ARG executive. Buyouts and store closings are not yet formalized.

Having failed to find a buyer, Circuit City is expected to announce its liquidation today in a court hearing. The company appears to have hired a liquidator and completed an asset auction. Circuit City has already closed around 20 percent of its stores as part of its previous bankruptcy filing.

The popular and successful B.R. Guest restaurant chain announced a series of closings as part of a restructuring effort (not, it should be noted, a bankruptcy). "In order to keep our business strong and competitive, we have no choice but to scale back and streamline our company," said president and founder Stephen Hanson.

In New York, B.R. Guest's hometown, the company closed Fiamma, Level V, and this writer's favorite, Ruby Foo's on the Upper West Side. Fiamma and Level V are being converted into event space and a new restaurant, respectively. Blue Water Grill in Chicago is also closing.

The New York Times' Diner's Journal Blog interviewed Fiamma chef Fabio Trabocchi after the announcement. Trabocchi reported sales declines of 25 to 30 percent since the start of the financial crisis.

Nortel Networks filed for bankruptcy protection in the face of declining sales. Nortel is the first major tech company to go bankrupt in the economic crisis and a potential bellwether. The company, which is based in Toronto, made the filing in Delaware but is seeking protection in Canada as well.

Gottschalk's, a department store chain that dates to 1904, filed for bankruptcy and is considering options that include selling the business. The San Francisco-based retailer has 58 stores in the western United States. Gottschalk's expects to continue normal business operations during its restructuring.

It's probably not a whole lot of fun at the Javits Center this week, where the National Retail Federation is having its annual meeting. One of the more interesting takeaways is the forecast for post-recession retailing given by several respected analysts. Among them: more one-stop shopping, less retailer loyalty, changes in locations from lease renegotiations and a bargain-hunting atmosphere that may last until 2010.

New York magazine has an article in this week's issue on the increase in bankruptcy filings for businesses in the nation's largest city. The angle: many of the chapter 11 filings, rather than reposition the filer for a restructuring, are instead precursors to going out of business. "There is not financing available for the reorganization process," says a lawyer in the article. A music studio and car dealership owner are quoted as wondering how they can possibly stay open.

Family-owned jewelry chain Shane Co. filed for bankruptcy protection. Shane has 23 outlets across 14 states and has been in business since the early 1970s. Little specific information is available yet.

Women's apparel manufacturer and retailer Searle Blatt filed for bankruptcy protection last week, alongside an affiliate company called Tom Jones Inc. The company, which has been open since the 1960s, operates seven well-known stores in New York, Tom Jones Inc. Searle Blatt cited the economy's impact on debt as the reason for the filing. Searle has not yet determined whether store closings will be an outcome of the filing.

Home goods retailer Cost Plus is closing 26 stores and cutting back its media plan in 2009. The moves are a reaction to weak holiday sales. Cost Plus is expected to be fiscally sound as a result of the move, which is an upbeat note in the economic environment.

Merisant Worldwide filed for Chapter 11 bankruptcy today, shortly after its credit rating was downgraded to junk status. Merisant produces Equal, the blue-packeted artificial sweetener, and other products. The privately-held company has not disclosed whether the filing will affect manufacturing or distribution.

The New York Times posted a thorough report on "dismal" 2008 holiday retail figures and the coming fallout. Sales were down 2.2% nationwide, a striking drop for an industry that is usually up 3 to 6 percent annually. Many retail chains posted same-store declines of 10% or greater.

Several analysts quoted in the article expect the next few months to be worse than the holiday season, as consumers have less compelling reasons to shop than they do before the holidays. One analyst says, "Even the best of breed are closing stores. That inventory will need to be liquidated into a market where consumers have no desire to spend." The article goes on to speculate on further store closings and retailer bankruptcies by chains with unmanageable debt loads, and that sell-in by manufacturers will be lower in 2009 as retailers stock less merchandise.

Not all the news was bad: Buckle, Aeropostale (previously noted) and Hot Topic all posted strong sales increases. But when an article ends with a quote about a "blanket of gloom," it's hard to be upbeat.

Update, January 14: the official government figures for December 2008 put the decline at 2.8%, the worst on record. Mind you, the "record" only goes back 15 years or so, but it's still a confirmation of the bleak retail environment this past holiday season. (via TD correspondent Josey Miller)

Britain is suffering from the economic downturn in similar fashion to the US. Music retailer Zavvi announced 22 store closings today, citing financial investment--and not consumer demand--as the driving force. Yesterday, retailer Marks & Spencer (similar to Macy's in the US) announced it was closing 27 stores and laying off staff; the century-old chain Woolworth's shut down all its operations this week after a final holiday-season sale. While this page is focused on America's retailers, similar stories are playing out daily across the pond.

The occasional store closing by a large chain retailer is part of the normal course of business. Three big names announcing double-digit closings is not:

• Macy's is closing 11 stores in assorted locations around the country. The retailer calls this a normal adjustment but the move is getting significant press.
• Women's apparel chain New York & Co. is closing up to 50 locations over the next five years beginning in 2009.
• Grocery store Supervalu is closing 50 stores in 2009 alone. A brand of Albertson's, the chain closed 25 stores (which they consider normal) in 2008, so the '09 plans represent a doubling of the closures.

French intimates producer and fashion distributor SIL Group is liquidating all its assets in obeyance of a court order. The company, which is owned by Eminence, another French firm, distributed brands such as Sonia Rykiel, Christian Lacroix, Cacharel, John Galliano and Kenzo. TD is still investigating the impact this will have on these brands' manufacturing and distribution.

Update: the full WWD report (linked above) notes that the brands mentioned above are all scrambling to find solutions for spring distribution, and are considering everything from new licensing deals to producing their own items. None of the brands are conceding spring sales at this point.

Gift and entertainment retailer Blue Tulip is closing all its stores this month as part of a Chapter 11 bankruptcy filing. The chainlet, which operated 24 stores, cited the economic downturn as the usual culprit.

Flatware maker Oneida is closing all 20 of its retail outlet stores in the United States. Oneida, a global leader in flatware dating to the 1880s, will exit the flatware business entirely following inventory clearance sales. The company is instead focusing on its other, more profitable divisions and the marketing of imported flatware.

I've established some Timely Demise social media outlets to give easier access to TD.

Timely Demise on Twitter gives direct links to stories as they publish. It also covers retail on a bit more macro level; those interested in economic and real-estate news, and not just brands, will enjoy the TD Twitter feed. This blog remains focused on more tangible changes to the retail landscape.

Timely Demise on Facebook is, so far, just a fan page and republishing outpost. Users on Facebook can read TD posts there instead of here. Maybe the site will get a few outspoken fans as well. (Facebook account required for link.)

Timely Demise welcomes the community aspect in both areas--direct messages and replies are always welcome. See you there.

No official announcement has been made by the company, but Rex is closing a good number of its store this winter, which is garnering attention in local markets. Stores in Pensacola and Tallahassee, Florida; Indiana, Pennsylvania; and Enid, Oklahoma are all entering liquidation sales. Rex was considering a retail restructuring last month but has not issued word on whether these store closings are part of a larger plan. The company sells synthetic fuels and ethanol in addition to operating its 100-plus-door retail electronics chain.

Update, January 13: The Rex in Albany is closing as well.

The unfortunately named men's retailer Against All Odds filed for bankruptcy protection "in the best interests" of all parties yesterday. The 14-year-old company has 70 stores across the country.

Contrary to earlier reports, Goody's Family Clothing is liquidating assets next week, just months after reorganizing. The company, which was in Chapter 11 from June to October, was unable to quell its lenders and continue operations.

Goody's is owned by the same holding company as KB Toys and Whitehall Jewelers, all of whom have ceased operating in the past five months.

Legendary crystal and ceramics manufacturer Waterford Wedgwood was placed into administration and receivership in the United Kingdom and Ireland yesterday. The move, similar to chapter 11 bankruptcy in the United States, reflects stock market conditions and a failed round of fundraising for a planned restructuring.

Waterford Crystal, which dates to 1783, has been operating in its modern guise since 1947; Wedgwood (which traces its own history to 1759) was purchased by the previous Waterford Glass Group in 1986. The company's US and other subsidiaries are not currently affected by the moves in the UK and Ireland. Three US firms are discussing financial options for the company today.

Kira Plastinina, a teen fashion label launched with much fanfare in 2008, lasted only seven months before filing for Chapter 7 bankruptcy last week. Plastinina, a 16-year-old designer, was financially backed by father. He reportedly suffered significant losses in the credit crisis and dropped his backing for the brand's United States stores.

KP Fashion rapidly opened 12 stores and had a high-profile debut, with celebrities garnering interest in the label. In line with the bankruptcy filing most of the outlets have already closed.

Fashion house Bill Blass shut down and is liquidating alongside a Chapter 7 bankruptcy filing. The company ceased operating last week and laid off all employees. Parent company NexCen recently closed a $10 million licensing deal for the Bill Blass name, so the brand will likely continue to exist, despite the closure of the legendary couture company.