A Rash of Retail Stores Are Expected To Fold in 2009
Thursday, January 08, 2009SUSIE GHARIB: As Paul just mentioned, Wal-Mart disappointed investors with a smaller than expected sales gain in December. But that was much better than most of the nation's chain stores which posted sales declines. Many mall retailers are struggling to survive. And as Erika Miller explains, analysts expect thousands of stores will be shuttered this year.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Chances are you'll see more signs like these in the coming year. Many retailers are struggling to turn a profit in the midst of a deepening recession and tight credit conditions. Retail expert Howard Davidowitz predicts 200,000 stores will close by year end -- the most in 35 years. He believes virtually every store at the mall is at risk.
HOWARD DAVIDOWITZ, CHAIRMAN, DAVIDOWITZ & ASSOCIATES: They're all in trouble. The mall stands for discretionary. Discretionary is under water. Living standards in America will never be the same and it's going to change the way America shops indefinitely.
MILLER: Big names like Circuit City, Linens 'N Things and KB Toys have already filed for bankruptcy. The question is who's next?
DAVIDOWITZ: There are a number of retailers at risk this second. Gottchalk's, the department store in Fresno, life is at risk. Bon-ton department stores -- life at risk, anchors of malls-- very scary.
MILLER: The common problem is falling sales and rising debt. That's the reason some analysts are also watching Williams Sonoma and Pier One. Citi's Kimberly Greenberger says Talbots is in the worst shape of the specialty apparel firms. Her company has done business with Talbots over the past year.
KIMBERLY GREENBERGER, RETAIL ANALYST, CITIGROUP: They are in the process of trying to sell off their J. Jill division. And if they are successful, there might be some proceeds there that could help patch them through, but they are certainly having a rough go of it.
MILLER: On the flip side, analysts see a few stores that will weather the storm just fine, perhaps picking up market share as other merchants close. They include discounters like Wal-Mart and Costco as well as the Dollar Store. But even outside that arena, analysts see other potential winners, the Gap and Urban Outfitters
GREENBERGER: They've got great balance sheets. They're very, very conservative with their capital spending and they manage inventory incredibly, incredibly well.
MILLER: Citi has done business with Gap and Urban Outfitters over the past year. The pain in retail is sure to spread to other industries. When a store goes out of business, it often leaves behind unpaid bills to shipping companies, mall owners and advertising agencies, not to mention suppliers. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
