A growing number of bankruptcies among US retailers is set
to prompt thousands of store closings, the New York Times
will report on the front page of its Tuesday edition.
"The consumer spending slump and tightening credit markets
are triggering a wave of bankruptcies in American retailing,"
with ensuing store closures "expected to remake suburban
malls and downtown shopping districts across the country,"
writes Michael Barbaro for the Times.
Barbaro notes that over half a dozen store chains have filed
for bankruptcy in recent months amidst "mounting debt
and plummeting sales" and warns that financial troubles
are "quickly spreading to bigger national companies."
(Article continues below)
The Times articles comes amid a slew of reports underscoring
America's economic woes. Even presumptive Republican presidential
nominee Sen. John McCain, who only months ago panned talk
of a recession, admitted today that he thought the country
was now in one.
Even relatively well-off retailers face troubles. Added Barbaro
in the article, such store chains who can avoid bankruptcy
"are shutting down stores to preserve cash through what
could be a long economic downturn."
Excerpts from the Times article, available in full at this
link, follow...
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The surging cost of necessities has led to a national belt-tightening
among consumers. Figures released on Monday showed that spending
on food and gasoline is crowding out other purchases, leaving
people with less to spend on furniture, clothing and electronics.
Consequently, chains specializing in those goods are proving
vulnerable.
...
"You have the makings of a wave of significant bankruptcies,"
said Al Koch, who helped bring Kmart out of bankruptcy in
2003 as the company's interim chief financial officer and
works at a corporate turnaround firm called AlixPartners.
"For years, no deal was too ugly to finance," he
said. "But now, nobody will throw money at these companies."
Because retailers rely on a broad network of suppliers, their
bankruptcies are rippling across the economy. The cash-strapped
chains are leaving behind tens of millions of dollars in unpaid
bills to shipping companies, furniture manufacturers, mall
owners and advertising agencies. Many are unlikely to be paid
in full, spreading the economic pain.
...
In most cases, the collapses stemmed from a combination of
factors: flawed business strategies, a souring economy and
banks' unwillingness to issue cheap loans.
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