With the recession appearing to worsen and consumer spending grinding to a near-halt, retailers continued to struggle in February. The month began with clothing company Chico’s FAS Inc. announcing the elimination of 180 positions. The Fort Myers, Fla.-based chain also said it may have to close up to 25 stores due to weak sales. The job cuts represented about 11 percent of its workforce at its headquarters. The company expects the cuts to save about $15 million over the next year.
Pier 1 Imports, meanwhile, said this month it may have to terminate its leases on up to 125 underperforming stores if its landlords deny requests for lower rents. The Fort Worth, Texas-based company said it may execute early termination agreements on the stores if rental reduction negotiations are unsuccessful. Negotiations should be completed by the end of May.
Hingham, Mass.-based women’s clothing retailer Talbots Inc. also announced it would have to close 20 stores and lay off about 370 employees after a disappointing fourth quarter and fiscal year. The layoffs -- which represent about 17 percent of the company’s workforce -- are expected to save Talbots about $22 million in fiscal 2009.
For other retailers, bankruptcy appeared to be the only option. Fortunoff, the jewelry and housewares chain based in Purchase, N.Y, filed for Chapter 11 bankruptcy protection on Feb. 6. The company is expected to hold liquidation sales this spring. Bruno’s Supermarkets, which operates 66 supermarkets in Alabama and Florida, also filed for protection under Chapter 11 this month, citing the tighter credit market and the soft economy.
Finally, Richmond, Va.-based menswear chain S&K Famous Brands Inc. filed for Chapter 11 protection on Feb. 12 after reporting profit losses over the past year. The company has struggled with the tight credit markets and the slowdown in consumer spending that has accompanied the now more than year-long recession.
Real estate investment trusts were also feeling the slowdown in February. New research from Real Point LLC released this month showed that mall owners General Growth Properties Inc., Kite Realty Group Trust and Macerich Co. are being forced to accept lower rents from their remaining tenants as vacancies pile up. The data suggested that more tenants were invoking co-tenancy clauses that allow retailers to pay less when big anchors like department stores shut down.
It wasn’t all bad news during the month. The Commerce Department reported that retail sales in January rose 1.0 percent. That ended a string of six straight months when sales declined. Wall Street analysts had expected sales to drop 0.8 percent so the increase was a pleasant surprise. Much of the boost came from sales of cars and sales at general merchandise, or “big box,” stores. Sales at department stores still dropped.
In perhaps the most interesting news of the past few days, Microsoft Corp. revealed plans to open its own line of stores. Any news of new retail concepts in this environment is welcome news. And given Apple’s success, it seems worth it for Microsoft to experiment. Still, it’s difficult to imagine people gravitating to Microsoft stores in the same way that they do with Apple Stores. There’s a whole culture around Apple that just doesn’t exist for Microsoft. On the flip side, Microsoft does have the Xbox and video game stores–at least anecdotally–seem to be faring alright so far during this recession.
In addition, RadioShack Corp. has quietly opened a new concept store in the Dallas area. It’s called Point Mobl and it sells portable devises in an upscale decor of white fixtures and clean glass with no sign of the Fort Worth-based consumer electronics company.
Although most clothing retailers have cut back on growth as sales have slowed, some retailers are continuing to open new locations. Swedish clothing store chain H&M said early in February that it will create between 6,000 and 7,000 new jobs during the year by opening 225 new stores around the world. The company was able to beat Wall Street’s expectations in its fourth quarter, reporting a 14 percent rise in pre-tax profits.
Wal-Mart Stores Inc., which has seen its sales rise as more consumers hunt for bargains, said this month it would try to open as many as five new stores in Chicago. There is now just one Wal-Mart in Chicago. The announcement came before the Bentonville, Ark.-based company reported Feb. 17 that its same-store sales, or sales at stores open at least a year, grew 2.8 percent in its fourth quarter which ended in January. The company also beat Wall Street profit estimates for the period once one-time costs were stripped out of the results. The company also said that traffic grew both in the quarter and the year.
Goodlettsville, Tenn.-based Dollar General Corp. has also been benefiting from the downturn in the economy since it offers its goods at discounted prices. The company said earlier this month that it would open 450 new stores during this fiscal year. That’s more than double the company’s new store openings in 2008. The company also said it will remodel or relocate approximately 400 stores this year. Same-store sales in its fourth quarter, which ended in January, jumped 9.4 percent.
Here’s a rundown of the announcements so far when it comes to bankruptcies, liquidations and announced closings.
Bankruptcies and Liquidations:
- Jan. 7, Goody's liquidates, closing 287 stores
- Jan. 8, Against All Odds files for bankruptcy protection, operates 64 stores overall, plans to close West Coast stores
- Jan. 13, Shane Co. files for bankruptcy, operates 23 stores
- Jan. 14, Gottschalks files for bankruptcy, operates 58 stores
- Jan. 16, Circuit City to Liquidate, closing 567 stores
- Feb. 6, Fortunoff, operates 20 stores
- Feb. 6, Bruno's, operates 66 stores
- Feb. 12, S&K Famous Brands, operates 136 stores
- Feb. 17, Innovation Luggage, operates 10 stores
Potential Bankruptcies & Liquidation Impact: 1,231 stores
- Jan. 8, New York & Co., 50 stores
- Jan. 8, Macy's, 11 stores
- Jan. 9, Supervalu, 50 stores
- Jan. 13, Cost Plus, 26 stores
- Jan. 20, Yankee Candle, 28 Illuminations stores
- Jan. 21, Filene's Basement, 11 stores
- Jan. 22, Phillips-Van Heusen, 175 stores
- Jan 22, Brown Shoe, up to 35 Famous Footwear stores
- Jan. 26, Home Depot, 48 stores
- Jan. 29, Starbucks, 200 U.S. Stores (plus 100 international)
- Jan. 29, Chico's, up to 25 stores
- Feb. 9, Talbots, 20 stores
Total Closings: up to 679 U.S. stores
Potential Impact of All Announcements to Date: up to 1,910 U.S. stores