The Black Friday Ten: Retailers Who May Not See 2009

http://www.247wallst.com/2008/11/the-black-frida.html

Here is a list of ten companies which may well not make it if their sales drop by double digits this holiday season compared to last:

1. Bon-Ton Stores (BONT) trades at $1.13, down from a 52-week high of $15.06. That probably says all that needs to be said, but there is more. Over its last three fiscal quarters BONT has lost $82 million. In the latest quarter, same-store sales were off over 8% and total revenue was down 7% to $725 million. The company has interest expense of $25 million. BONT says that its revolving credit facility will get it through any cash crunch. Maybe. With long-term debt of $2.5 billion and $374 million in accounts payable, there is not much margin for error. The company needs an outstanding holiday season.

2. Dillard's (DDS) is a retail operator that really is in trouble. It has 318 stores, which makes it a relatively small operation in a world dominated by outfits like Sears (SHLD) which has more than 3000 locations. Dillard's stock is at $3.75, down from a 52-week high of $23.11. S&P dropped the company's credit rating recently and said, "The rating change reflects our belief that the company will be more challenged than previously expected by the current weak economic environment in the U.S., and that credit metrics will deteriorate more than we had originally projected." In October, the firm's sales dropped more than 9% to $406 million. Dillard's points to its revolving credit facility with JP Morgan as its lifeline. In the last quarter, the company lost $38 million. It made $45 million in debt services payments and has long-term debt of $807 million. In other words, no dry powder. It recently cut staff.

3. Talbots (TLB) is another struggling operator. It recently announced that it would try to sell its J. Jill brand. This operation has 383 of Talbots 878 stories. It would be an understatement to say a company would part with that much of its operation if it did not need the money. And, TLB does. Its shares are at $2.68, down from a 52-week high of $17.97. Research house Friedman, Billings, Ramsey recently predicted that the chain would cut its dividend to save money. In the last quarter, TLB lost $15 million. Revenue fell from $414 million in the period a year ago to $357 million in the most recent quarter. Talbots has $212 million in long-term debt. It can't afford to have sales fall another $50 million this holiday quarter. Recently, it improved working capital agreements.

some pretty venerable retail names there.

"It seems there are lots of stores that are closing due to the 'recession' and the fact that people are not shopping. If you have any 'gift cards' from these stores, make sure you use them, or you will lose them! Watch those store money cards and gift cards . . . and credit slips! Stores that informed the Security Exchange of closing plans between October 2008 and January 2009. PLEASE PASS THIS ON TO ALL YOUR FAMILY AND FRIENDS."

It's then followed by a long list of major national and regional retailers and a notice of their status, such as "Talbots closing down all stores; J. Jill closing all stores; GAP closing 85 stores..."

It's scary, especially in light of the Steve & Barry's debacle.

It's also filled with half-truths, enough that it's already crept into Urban Legend status (go to snopes.com).

For starters, the creator of this scare piece cites the "Security Exchange" as being informed about the closing by the retailers. There is no "Security Exchange." If the writer meant the federal Securities and Exchange Commission the SEC they really missed the mark. So I'd be real wary about believing anything else in this hoax.

Let's fill in some of the holes, particularly regarding chains that are operating stores in Central New York.

The e-mail says J. Jill is "closing all stores." In fact, Talbots Inc., the owner of J. Jill, is trying to sell that chain. It didn't mention closing J. Jill (and yes, Talbots did close some of its underperforming divisions, including Talbot Kids, but that was before the fall economic meltdown).

The e-mail says Gap or GAP, as the e-mail creator calls it is closing 85 stores. It is. But folks, it has 2,677 stores and continues to open new ones.

The e-mail says Pacific Sunwear is "closing stores." It is. It previously announced it was closing its d.e.m.o. stores because the spinoff was unsuccessful. No Pacific Sunwear stores were closed.

The e-mail says Macy's is closing nine stores. These, too, were previously announced, after Macy's acquired May Department Stores and Macy's still has more than 800 outlets.

It also cites a few other retailers as going-out-of-business: The Sharper Image, Wickes Furniture, Levitz . . . well, these, too, were previously announced, and as with Steve & Barry's, their trouble preceded the economic meltdown. There's no news here.

And on and on.

I'm not saying you shouldn't be careful about buying gift cards. You should always be careful about that. But you should also be careful about what you read on the Internet.

OK, including Store Front . . .

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Store Front also runs Sunday and Wednesday in The Post-Standard and the Store Front blog,

http://www.syracuse.com/business/index.ssf?/base/business-14/1227261645229820.xml&coll=1

Edit to add.
Here is the Snopes.com link: http://www.snopes.com/politics/business/storeclosings.asp

it points out which stores are doing poorly and may not make it if things continue to go down hill. The snopes article may not be true but I think we could likely see a large number of stores close. If the Christmas shopping season is as bad as some think it will be, some chains may need to close down next year. The retailers count on holiday shopping for a large percentage of their revenue and without this income, some stores might not be able to keep going.

Is it depression, yet?

Nine years ago when I held a job as a programmer at a company called First Data in Tulsa, every year, the company would give us tickets to go to a Dillard's event where they would stay open late on a Sunday for people with tickets to do their shopping. They would have free pictures with Santa for the kids, carolers, small bands playing Christmas tunes, and at least a dozen people walking around with h'or dourves.

That Dillards is gone now. It tried to survive by selling more wholesale clothing that wasn't very good quality, but that didn't last long. I believe it only just recently became the headquarters for an inbound tech support company. The JCPenney's on the other side went under before it. It's now home to some offices for Coca-Cola. For the longest time, the biggest "store" was a branch of the Tulsa Library which moved in while its regular building was being renovated. Another part of it has become a daycare center. The last time I walked through it, the only place open in it was just... a "store" with all the merchandise thrown haphazardly onto tables.

Hmmmm... What's changed since 10 years ago? Some event that happens every 4 years... hmmmm.

Oh, yeah, First Data is gone from Tulsa as well.

TlalocW

to the casualty list.

One of my sisters was a casualty of theirs years ago when they bought out Joseph Horne. Her position was a duplicate of someone's they already had on their staff, so they got rid of my sister.

I wonder if any of the management who made that decision is still there. If so, well...

like Williams-Sonoma, Saks, and Eddie Bauer. Cost Plus closed their store near my house about a year ago so it's not surprising they are doing badly. There aren't nearly as many Rite Aids around here as there use to be...we have more Walgreens and CVS. I don't think Michigan even as any Dillard's so if they closed, there wouldn't be much of an effect here. Hopefully things won't get so bad that all these stores completely go away.

near me they bought up all their competitors Eckerd's stores. They kept them open under the old name for a couple of years while they went nuts building new stores which they jammed pack with other cheap crap. The stupid thing was they moved the new stores from the main shopping plaza to stand alone operations. Well that means less traffic when you have to fight traffic to get to them. At one point we had 3 open Rite Aids all within walking distance of each other. I still haven't figured out what their business sense was with that. Now they have new competition Walgreen's which took up slack. All the previous grocery plazas that had Rite Aid or Eckerd stores now opened their own in-house pharmacy's. I use my neighborhood RX it easier, they know you & in most case the Dr's too.

$1 to $2 less that other outlets. It's very good for an under $10 wine.

they are closing stores here in Iowa.

I don't know enough about why the department store model has fallen into disfavor, but it has. I thought high gas prices would bring back customers looking to consolidate their shopping trips, but there is something deeper going on. Overall reduction in merchandise quality? An inability to match discounts offered by specialty retailers? Too many malls with too many stores that make department stores redundant as a destination?

I'm not surprised by Pier 1 or Cost Plus. I think their audience for low-priced, trendy housewares has changed its tastes and migrated to Target and Ikea.

I am surprised by Williams-Sonoma. I thought they were high-end enough to keep an upscale target. Apparently not.

All the clothing retailers surprise me somewhat. Have people cut their apparel purchases so deeply, or has the proliferation of online choices made that big a difference?

Williams-Sonoma used to be the only source for high-end gourmet items, but now they're readily available online and in discount stores.

The clothing retailers mentioned in the article have issues with quality and selection. Talbot's just isn't what it used to be. It used to be a reliable source for good-quality professional clothes, but now it's hit or miss. I've bought tops there for work that were useless after the first washing (and I followed the washing instructions - I'm careful about that). Dillards has lousy selection. Just mind-bogglingly poor buying decisions. I can never find anything there for work or weekends. Chicos has nothing but drapy slinky clothes that aren't appropriate for 90% of women to wear to work. I can get the same quality clothes and better prices and selection at discount stores like TJMaxx and Steinmart.

When I shop for clothes, I don't want to have to wade through a lot of overpriced trendy items. I hate to shop and have to dress professionally for work. I want to find basic suits and separates in stylish clothes at a good value. I don't mind paying for quality but I hate to spend $50 for a top that falls apart in the first wash. And I don't want to have to wear three layers to cover my boobs - why is this so hard for buyers to understand?

Rite-Aid bought all the crummy Eckerd Drugstores around here and made them even crummier. They're not clean, the lighting is poor, and the selection is hopeless.

I feel terrible for all the people losing their jobs. The CEOs and boars of these stores should be the ones being fired. They are clueless. Utterly clueless about how to run a successful business.

I have exactly the opposite view of them. I find them to be nothing more than a buyer of factory seconds and over production lots of "foreign" goods. They take crap that most Americans see as "trendy" and mark it way up beyond what it is worth but pass it off as rustic/worldly/arts&crafts garbage. The prices at Pier 1 are outrageous.