Nightmare on Main Street
| Sat Dec. 27, 2008 10:03 AM PST
NIGHTMARE ON MAIN STREET....From the Wall Street Journal, this is as gruesome a statistic as I've seen yet:
Corporate-turnaround experts and bankruptcy lawyers are predicting a wave of retailer bankruptcies early next year, after being contacted by big and small retailers either preparing to file for Chapter 11 bankruptcy protection or scrambling to avoid that fate.
....AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010....Recent changes in the bankruptcy code make it more difficult for retailers to emerge from bankruptcy reorganization....Lawrence Gottlieb, a New York bankruptcy attorney at Cooley Godward Kronish LLP says that only two retailers have successfully emerged from bankruptcy proceedings since the amendments to the code were passed.
A quarter of all major retailers may be in either Chapter 11 or liquidation next year? Holy cow.
Continues Below
Continued From Above
Comments
Submitted by psychedelic santa (not verified) on Sat Dec. 27, 2008 10:43 AM PST.
I think a lot of businesses were already barely holding on for the Christmas seasaon and, judging by the small crowds downtown around here pre-Christmas, I expect a lot of businesses to close shop by Spring.
Howard
It ain't gonna happen. The ones who voted for the Bankruptcy Bill have high incomes and guaranteed jobs. Even if they lost their legislative spot in the last election, there are plenty of opportunities for lobbying or other mischief for them to do.
And I don't know where Joel's comment is heading, but I know I've felt that the last months of the Bush Admin is the Revenge of the NeoCons. Who was that guy who wanted to "drown government in a bathtub." With the amount of debt Bush is running up, he may accomplish that.
To be fair, the 25% figure comes from Michigan, surely the hardest hit by the recession/liquidity crisis.
OTOH, small merchandise-retailers, like one or two-person shops, are not part of the statistical aggregate. In states where internet sales are not taxed, they're facing a two-pronged assault - recession and unequal price-competition.
It will be Sears and J C Penney's, but not Neiman Marcus (thanks to Palin, the RNC, plus the AEI crowd that got theirs on backs of taxpayers $ 700 billion dollar rich people bailout).
Yeah, Wal-Mart sail though it, don't you know. Republicans couldn't ruin these country fast enough could they?
Kevin, Since AlixPartners LLP has been doing this kind of forecasting for several years, what is their track record? Do they have a history of being too optimistic, or pessimistic, or are their predictions chaotic and poorly correlated with the observed data? And at what level of accuracy (10%, 25%, 50%, factor of 2, 3, 5?)
Submitted by Christopher (not verified) on Sat Dec. 27, 2008 1:13 PM PST.
Seems to me this is going to hit the mall more than Main Street. I'm here in Eastern Tennessee at Christmas as the mall is dead, the chain stores are dead. But the independents in the rejuvenated downtowns? Full of people. Stores are overflowing. Now, the condo sales that will help these stores survive by giving them a year round audience? Well that might be where the problem is. No one can even sell their homes to move downtown. And many, including many retirees, seem to want to do just that.
Submitted by Jerry (not verified) on Sat Dec. 27, 2008 2:42 PM PST.
We make concrete countertops,modernist furniture and serious entry doors in our 2 person shop.I'm keeping us going on a line of credit but I'm afraid to restock materials in the quantity purchases that are required by the suppliers.If my line gets canceled chock up two more guys that actually make real products here in the USA on the street.No unemployment,no bailout...just two more loser looking for work.
Anon @2:56-
It will be Sears and J C Penney's, but not Neiman Marcus (thanks to Palin, the RNC, plus the AEI crowd that got theirs on backs of taxpayers $ 700 billion dollar rich people bailout).
In reality, it was actually the Democrats who supported and passed the "$700 billion rich people bailout"- while the Republicans in both the House and Senate were mainly in the opposition.
Were you conscious during the last twelve months? The Repub Congress was the only entity voting against the "bailout" that passed in our Democrat-controlled Congress.(and Sarah Palin didn't even get to vote!)
We have what free trade economists call a "comparative advantage" in being hunter-gatherers.
1. Convert all wealth producing factories to retail malls. Spend all our savings on Chinese goods.
2. Max out on credit cards to continue buying Chinese goods.
3. Increase national debt so we can buy more consumer goods instead of paying taxes.
4. Increase lending risk to squeeze out the last drop of consumer credit.
5. Banks go broke. No money and no credit--retailers go broke. Service economy moves to hunter-gatherer economy. Anarchy. Borders collapse. Mexican drug cartels and NRA vie for power. Effete PC libs enslaved. Bush emerges from retirement and becomes dictator-for-life with the help of remnants of army.
Some Financial Guy (no way I'll recall his name) I've heard on the radio a couple times in the last year, but prior to the mega-meltdown, notes we're vastly overbuilt in retail space--with each new mall, strip mall and big-box center essentially draining existing retail spaces. I seem to recall his claiming we're overbuilt about three to one. I can believe it.
As far as I can tell a lot of the supposed choice we're offered as consumers is illusory. I simply can't tell whether I'm in a Staples or Office Depot or Office Max, even if they're fiercely battling over my meager wallet from adjacent malls. And as job creators retail is crappy, with generally poor wages for everybody except upper management.
Little wonder retail is in such bad straits, not that a raft of chain failures is going to be helpful, but it seems inevitable even without the current economy.
These retailers aren't getting cash flow because of banks (I'm guessing).
Conservatives complain about poor people having a dependence on government assistance, but isn't this a clear case of businesses having a dependence on banks?
It seems we need some other new kind of financial entity which can compete with banks to assist businesses. I have no idea what that might be, but if banks won't loan, then what is a retailer to do?
Also, consider this, what if non-bank banks like Wal-Mart become the primary 'banker' for many people and traditional bank assets drop? What if a new kind of non-bank card develops which doesn't require that we hand over our paychecks to banker dopes who are irresponsible? What if we could just maintain our wealth (heh) on a plastic card which is as secure as our current bank or credit cards? Would we continue to put money into bank accounts?
I suspect technologies and the world trade revolution is going to change our financial way of life in dramatic ways.
