We, as a country, have already watched several big-name retailers go out of business. Mervyns, especially, comes to mind. Mervyns was a department store that sold products for low prices. Where are they no? Non-existent.

The retail industry is probably the most vulnerable right now. Customer analytics shows consumers are spending less and less of their valuable income on non-necessity items. Retailers spend over 10 years in an atmosphere that encouraged consumers to get into debt.

Now, consumers can’t get the same financing they could a few years ago. American families have had to cut back in every aspect of their lives, including unnecessary spending.

Large financial lenders have had to cut back their lending to retailers as well. Wachovia, GE Capital and CIT Group (some of the retail industry’s biggest lenders) have had to tighten their lending terms. Their reasoning is to reduce the exposure to nationwide retailers. These terms have made it much more difficult for retailers to “find capital to reorganize under bankruptcy-court protection.”

So, what does this all mean? There are likely to be a lot more retail liquidations in the coming months.

Circuit City Stores filed Chapter 11 bankruptcy protection in November. On January 9, the electronics superstore said that it faced possible liquidation if an acquisition or cash infusion deal didn’t work out.

Goody’s Family Clothing recently announced that it will be liquidating all of its remaining 287 stores. This announcement came just three months after it “exited” bankruptcy status.

Against All Odds USA, a clothing chain, also announced that it will enter Chapter 11 protection. It will enter this protection in hopes of being sold or being reorganized.

Standard and Poor’s recently reported that nine major U.S. retailers and restaurants face a significant risk of default. Among these are Loehmann’s Holdings, Duane Reade Holdings and Finlay Enterprises. One year ago, S&P had only six companies on its list.

Michael Henkin, managing director and co-head of the restructuring group at Jeffries said, “A lot of retailers survived through the holiday season because they built up their inventories in the summer before anyone, like their vendors, knew it would be this bad. But now you will see a lot of filings.”

Loehmann’s President, Robert Glass, said, “We have sufficient cash to sustain our operations, and pay the interest on (our) notes. Our parent has put money into the business, and has continued to be very, very supportive.”

Many of the retailers that are in grave danger of being liquidated say that they are “comfortable” in their current position. But, the fact of the matter is that many of these companies will be out of business by the end of 2009.

This entry was posted on Tuesday, March 10th, 2009 at 10:44 am and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.